Job Market Paper

Declining Teen Employment: Causes and Consequences with Jacob Wright 

Teen employment among high school students in the United States has fallen by more than 50 percent since the 1990s. In this paper, we study the causes and consequences of this decline by combining an empirical analysis with a quantitative general equilibrium framework. First, we provide causal evidence that attributes the majority of this decline to crowding out by adults, who were forced to compete with teenagers in low-paying service occupations due to successive recessions and structural change. To determine the consequences of this decline, we first causally estimate the impact of employment hours during teenage years on lifecycle wages. Teenagers who worked more and did not attend college earn significantly higher wages and face lower unemployment later in life. We then develop a general equilibrium model in which teenagers allocate time between human capital accumulation on the job or in school, and adults choose between "teen" and "non-teen" occupations. We estimate the model's parameters via indirect inference targeting the causal estimates from the data. The model shows that teenagers crowded out from work suffer substantial income and welfare losses, largely due to lost on-the-job learning. As a result, some teenagers substitute toward college attendance, mitigating part of these effects. A decomposition exercise shows that minimum wage levels play a key role in transmitting the impact of increased adult competition into falling teen employment. Finally, optional vocational training policies are effective in mitigating adverse effects for teens who have been crowded out of the labor market.

Working Papers

Worker Protection Policies and the Increasing Dispensability of Labor  

After a century of robust growth, average wages in the United States have stagnated for four decades. The causes of this stagnation and the effectiveness of policies designed to address it remain the subject of intense debate. Different literatures have emphasized rising competition faced by low-skill workers from automation, offshoring and imported intermediate inputs as key forces behind it. I argue that all these factors make workers increasingly dispensable, although to different degrees. Evaluating this rising substitutability requires a unified framework that captures several of these mechanisms simultaneously. I develop a tractable general equilibrium model with multiple sectors and innovation in which firms endogenously choose to automate, offshore, and import. I derive closed-form expressions for the elasticity of labor as a function of these channels, providing sufficient statistics for worker dispensability. I then show that as dispensability rises, the effectiveness of labor-market institutions, such as unions or immigration restrictions, declines. Calibrated to U.S. data, the model implies roughly a doubling of the elasticity between low-skill labor and the labor-saving inputs since the 1980s. To illustrate the policy implications, I analyze unions as a case in point. They raise wages for low-skill workers initially, but these gains vanish over time as labor becomes increasingly substitutable.

Automation, Worker Reallocation, and Welfare Implications 

The last 40 years have seen the emergence of labor replacing technologies, mostly displacing work in “routine-task” intensive occupations. Routine occupations typically lie in the middle of the wage distribution and make up a large part of the US labor force. This has led to public discussions about appropriate policies meant to help the adversely affected. To evaluate the macroeconomic implications of these policies, I develop a general equilibrium heterogeneous agent model that incorporates the empirically relevant margins of adjustment for workers: education, occupation and labor force participation choice. The model predicts heterogeneous welfare effects of automation, with workers that remain employed in routine jobs throughout the automation period suffering the biggest welfare losses. The model also emphasizes that welfare inequality is rising over time due to automation. Additionally, I contribute novel observations about the timing of worker reallocation. It takes new cohorts of workers to move labor from routine work to non-automated occupations (low skill and high skill).