Hutchins Roundup: Income mobility, labor protection regulations, and more

Studies in this week’s Hutchins Roundup find that income  mobility has declined over the last two decades, labor protection regulations reduce the employment share of low-skilled workers, and more.

Family income mobility has declined significantly since the 1980s

Katharine Bradbury of the Boston Fed finds that families were less likely to move from one income quintile to another in the 2001-2011 period than they were in the 1978-1988 period with the decline in mobility particularly pronounced among the poorest 20 percent. Regardless of the measure of inequality or income used, the distribution of long-term family income – income averaged over 10 years to smooth year-to-year fluctuations – has become much more unequal in recent decades, she also finds, suggesting that income mobility has not been sufficient to offset the considerable rise in short-term inequality.

Labor protection regulations hurt low-skilled workers in OECD countries

Using data on 14 OECD economies during 1988-2007, Gilbert Cette of the Bank of France, Jimmy Lopez of the Université de Bourgogne, and Jacques Mairesse of ENSAE ParisTech conclude that labor protection regulations induce firms to substitute labor with physical capital and reduce the intensity of research and development. They also find that these regulations raise the employment share of high-skilled workers and reduce the share of low-skilled workers. The authors suggest that structural reforms to increase labor market flexibility could have a favorable impact on firms’ R&D investment and their hiring of low-skilled workers.

Employer skill requirements have fallen recently, reversing the trend observed during the Great Recession

Using data on 82.5 million online job vacancy postings during 2010-2014, Alicia Sasser Modestino of Northeastern, Daniel Shoag of Harvard, and Joshua Balance of the Boston Fed find that employers demanded fewer skilled workers as the labor market improved following the Great Recession. Specifically, a 1 percentage point reduction in the local unemployment rate is associated with a 0.27 percentage point reduction in the fraction of jobs requiring a bachelor’s degree and a 0.23 percentage point reduction in the fraction of jobs requiring five or more years of experience. They also show that this recent fall in skill requirements reversed as much as 20 percent of the increase in skill requirements that took place during the Great Recession.

Chart of the week: The number of unemployed persons per job opening has fallen

The number of unemployed persons per job opening has fallen

Quote of the week: “In light of all the events since the referendum, since the evening of the 23rd, I’m absolutely serene [about the judgments taken by BOE officials including the Monetary Policy Committee],” says Mark Carney, governor of the Bank of England

“We’ll see when we get all the data in but broad-brush, is growth running about half as much as it was prior to the referendum? That’s probably about right, given what we know right now. So we expected some bounce-back, there’s been a bit more, but we’re keeping it in perspective.”