Essays in Labor Economics

Abstract

This dissertation consists of a collection of three essays in Labor Economics, all studying the careers of young American workers. The first two essays, Chapter 1 and Chapter 2, analyze the early-career gender wage gap among recent cohorts of highly educated US workers. The third essay, Chapter 3, analyzes long-run changes occurred over the last four decades in the supply of overtime work among American employees. Chapter 1 provides an in-depth analysis of the evolution of the careers of Millennial American college graduates from labor market entry to five to ten years later. Using data from the National Longitudinal Survey of Youth (1997) I neatly reconstruct workers' careers from labor market entry and provide a variety of reduced-form evidence showing that gender differences in the wage gains that workers obtain when they change jobs determine a large portion of the early-career gender wage gap and of its expansion over years of experience. I show that these results are robust and hold irrespective of young workers' marital and parental status. In light of the results provided in Chapter 1, in Chapter 2 I study the contribution of the main determinants of wage gains from job changes to the early-career gender wage gap among highly-educated American workers. Specifically, first, I estimate a structural model of hedonic job search to estimate the extent to which men and women differ in terms of search frictions, of preferences for valuable amenities (flexibility and parental leave) and of the wage offers received conditional on the provision of amenities. Second, I use the model estimates to perform a series of counterfactual analyses and quantify the impact of search frictions, preferences and wage offers on the early-career gender wage gap and on its expansion due to job search and job changes. I find that young men and women share similar preferences for amenities. Compared to men, however, women are offered lower wages, and predominantly so in jobs that provide benefits. Since these jobs typically offer higher wages too, the gender pay gap expands as workers climb the job ladder to enter employment relationships that offer better wage-benefits bundles. The higher price that women pay for amenities explains 42% of the early-career growth in the wage gap that the model attributes to job search and job changes. The remaining portion is explained by the lower wages offered to women in jobs that do not provide benefits (25%) and by women's stronger search frictions (33%). In Chapter 3 I study the determinants of long-run trends in overtime work. I document that work hours have been increasing in the United States in the 1980s and 1990s and steadily declining in the 2000s and 2010s, and that these trends were predominantly driven by secular changes in the share of young, salaried employees working long hours (more than 40 hours per week) in relatively high-pay jobs. I then provide a model that explains the evolving long-run trends in overtime as an outcome of underlying changes in labor demand that affected the life-cycle wage gains that employees expect to obtain when supplying overtime work hours. I empirically test and validate the implications of the model, and show that long-run changes in the wage premia for working long hours can explain the rise and fall in overtime work that I document. Finally, I estimate long-run trends in persistent and transitory wage dispersion and show that persistent wage dispersion grew in the 1980s and 1990s and declined later on. To the extent that shocks to wage gains from working long hours result into an increase in the spread of permanent income across employees typically supplying different amounts of work hours, I show that a rise and fall in wage premia for overtime work reconciles the observed reversed-U shaped trend in both overtime work and persistent wage dispersion. These results are suggestive that, after surging in the 1980s and the 1990s, the “fortunes of the youth'” may have been declining later on, due to shifts in labor demand that flattened the life-cycle wage profiles that young, salaried employees can obtain when supplying long work hours. These results can also help reconcile recent evidence that the demand for skill and cognitive tasks and the college wage premium have been declining, while the age wage gap has been increasing. Conversely, the results I obtain question theories that explain long-run trends in US men's labor supply through secular increases in the marginal value of leisure due to improvements in leisure technology.