Robert G. Valletta

The COVID-19 pandemic upended the U.S. economy and labor market. We explore potential paths for the official unemployment rate through 2021. Our analyses rely on historical patterns of monthly flows in and out of unemployment, adjusted for unique features of the virus economy. The possible unemployment trajectories vary widely, but absent sustained hiring activity on an unprecedented scale, unemployment could remain substantially elevated into 2021. After adjusting the unemployment rate for unique measurement challenges created by virus containment measures, we find that unemployment has followed a fast recovery track during the first six months of the pandemic.

Given past estimates of wage increases associated with workplace computer use and higher usage rates among more skilled workers, the diffusion of computers has been interpreted as a mechanism for skill-biased technological change and consequent widening of the earnings
distribution. I investigate this link by testing for direct effects of rising computer use on the distribution of wages in the United States. Analysis of data from the periodic CPS computer use supplements over the years 1984-2003 reveals that the positive association between workplace computer use and wages declines at higher skill levels, with the notable exception of a higher return to computer use for highly educated workers that emerged after 1997. Over my complete sample frame, however, the net association between rising computer use and the distribution of wages was quite limited. For broad groups defined by educational attainment, rising computer use was associated with rising between-group inequality that was offset by falling within-group inequality, suggesting that computers have exerted a “leveling” rather than a “polarizing” effect on wages.

The Beveridge curve depicts the empirical relationship between job vacancies and unemployment, which in turn reflects the underlying efficiency of the job matching process. Previous analyses of the Beveridge curve suggested deterioration in match efficiency during the 1970s and early 1980s, followed by improved match efficiency beginning in the late 1980s. This paper combines aggregate and regional data on job vacancies and unemployment to estimate the U.S. aggregate and regional Beveridge curves, focusing on the period 1976-2005. Using new data on job vacancies from the U.S. Bureau of Labor Statistics, the help-wanted advertising series that formed the basis of past work are modified to form synthetic job vacancy series at the national and regional level. The results suggest that a decline in the dispersion of employment growth across geographic areas contributed to a pronounced inward shift in the Beveridge curve since the late 1980s, reversing the earlier pattern identified by Abraham (1987) and reinforcing findings of favorable labor market trends in the 1990s (e.g., Katz and Krueger 1999).

We assess labor market effects of the CARES Act $600 UI supplement. We start with direct empirical analyses of labor force transitions using monthly CPS data and imputed UI benefits. The results show moderate disincentive effects of the supplement on job finding. We rationalize this result in a dynamic model of job acceptance decisions that yields a reservation level of UI benefits at which a recipient is indifferent between unemployment and employment at their prior wage. Calculations based on the model confirm that only a small fraction of recipients of the enhanced UI benefits were likely to reject job offers.

We assess the effects of the historically unprecedented expansion of U.S. unemployment insurance (UI) payments during the COVID-19 pandemic. The adverse economic impacts of the pandemic, notably the pattern of job losses and earnings reductions, were disproportionately borne by lower-income individuals. Focusing on household income as a broad measure of well-being, we document that UI payments almost completely offset the increase in household income inequality that otherwise would have occurred in 2020 and 2021. We also examine the impacts of the $600 increase in weekly UI benefit payments, available during part of 2020, on job search outcomes. We find that despite the very high replacement rate of lost earnings for low-wage individuals, the search disincentive effects of the enhanced UI payments were limited overall and smaller for individuals from lower-income households. These results suggest that the pandemic UI expansions improved equity but had limited consequences for economic efficiency.

People with disabilities face substantial barriers to sustained employment and stable, adequate income. We assess how they and their families fared during the long economic expansion that followed the Great Recession of 2007-09, using data from the monthly Current Population Survey (CPS) and the March CPS annual income supplement. We find that the expansion bolstered the well-being of people with disabilities and in particular their relative labor market engagement. We also find that applications and awards for federal disability benefits fell during the expansion. On balance, our results suggest that sustained economic growth can bolster the labor market engagement of people with disabilities and potentially reduce their reliance on disability benefits.

wp2021-05_appendix.pdf – Supplemental appendix

We examine how a key provision of the Affordable Care Act—the expansion of Medicaid eligibility—affected health insurance coverage, access to care, and labor market transitions of unemployed workers. Comparing trends in states that implemented the Medicaid expansion to those that did not, we find that the ACA Medicaid expansion substantially increased insurance coverage and improved access to health care among unemployed workers. We then test whether this strengthening of the safety net affected transitions from unemployment to employment or out of the labor force. We find no meaningful statistical evidence in support of moral hazard effects that reduce job finding or labor force attachment.

The fraction of the U.S. workforce identified as involuntary part-time workers rose to new highs during the U.S. Great Recession and came down only slowly in its aftermath. We assess the determinants of involuntary part-time work using an empirical framework that accounts for business cycle effects and persistent structural features of the labor market. We conduct regression analyses using state-level panel data for the years 2003-16. The results indicate that structural factors, notably shifts in the industry composition of employment, have held the incidence of involuntary part-time work slightly more than 1 percentage point above its prerecession level.

Wage gaps between workers with a college or graduate degree and those with only a high school degree rose rapidly in the United States during the 1980s. Since then, the rate of growth in these wage gaps has progressively slowed, and though the gaps remain large, they were essentially unchanged between 2010 and 2015. I assess this flattening over time in higher education wage premiums with reference to two related explanations for changing U.S. employment patterns: (i) a shift away from middle-skilled occupations driven largely by technological change (“polarization”); and (ii) a general weakening in the demand for advanced cognitive skills (“skill downgrading”). Analyses of wage and employment data from the U.S. Current Population Survey suggest that both factors have contributed to the flattening of higher education wage premiums.

Many Unemployment Insurance (UI) recipients do not find new jobs before exhausting their benefits, even when benefits are extended during recessions. Using Survey of Income and Program Participation (SIPP) panel data covering the 2001 and 2007 to 2009 recessions and their aftermaths, we identify individuals whose jobless spells outlasted their UI benefits (exhaustees) and examine household income, program participation, and health-related outcomes during the six months following UI exhaustion. For the average exhaustee, the loss of UI benefits is only slightly offset by increased participation in other safety net programs (e.g., food stamps), and family poverty rates rise substantially. Self-reported disability also rises following UI exhaustion. These patterns do not vary dramatically across household demographic groups, broad income level prior to job loss, or the two business cycles. The results highlight the unique, important role of UI in the U.S. social safety net.

wp2014-06 – FRBSF Working Paper 2014-06

We examine the implications of changing demographics and employment conditions for workplace health, along with the policy implications of these shifts. Health patterns in the adult population have mimicked labor market patterns to some degree, with rising inequality and variation in health outcomes and insurance coverage accompanying rising inequality and variation in employment conditions and wages. We present data and discuss the research that establishes these links, and we assess the potential impact of policy responses to the evolving work and health landscape. Some provisions of the Affordable Care Act may help mitigate rising inequality in income and health, notably the expansion of insurance availability. On the other hand, the Act’s encouragement of wellness programs has uncertain potential to help contain the rising costs of employer-sponsored health benefits.

In response to the recession of 2007–2009, the maximum duration of U.S. unemployment insurance (UI) benefits was extended to an unprecedented 99 weeks. We exploit variation in the timing and size of the UI benefit extensions across states to estimate their overall impact on unemployment exits, comparing the most recent and prior extension episodes. We find a small but statistically significant increase in labor force attachment due to extended UI in both periods with little or no impact on job finding. Despite these small estimates, extended benefits can account for a substantial share of the increase in long-term unemployment.

wp2013-09.pdf – FRBSF Working Paper 2013-09

Unemployment Insurance benefit durations were extended during the Great Recession, reaching 99 weeks for most recipients. The extensions were rolled back and eventually terminated by the end of 2013. Using matched CPS data from 2008-2014, we estimate the effect of extended benefits on unemployment exits separately during the earlier period of benefit expansion and the later period of rollback. In both periods, we find little or no effect on job-finding but a reduction in labor force exits due to benefit availability. We estimate that the rollbacks reduced the labor force participation rate by about 0.1 percentage point in early 2014.

wp2015-03.pdf – FRBSF Working Paper 2015-03

Using data from a 2006 survey of California high school economics classes, we assess the effects of teacher characteristics on student achievement. We estimate value-added models of outcomes on multiple choice and essay exams, with matched classroom pairs for each teacher enabling random-effects and fixed-effects estimation. The results show a substantial impact of specialized teacher experience and college-level coursework in economics. However, the latter is associated with higher scores on the multiple-choice test and lower scores on the essay test, suggesting that a portion of teachers’ content knowledge may be “lost in translation” when conveyed to their students.

wp12-03bk.pdf – FRBSF Working Paper 2012-03

In response to the 2007–09 “Great Recession,” the maximum duration of U.S. unemployment benefits was increased from the normal level of 26 weeks to an unprecedented 99 weeks. I estimate the impact of these extensions on job search, comparing them with the more limited extensions associated with the milder 2001 recession. The analyses rely on monthly matched microdata from the Current Population Survey. I find that a 10-week extension of UI benefits raises unemployment
duration by about 1.5 weeks, with little variation across the two episodes. This estimate lies in the middle-to-upper end of the range of past estimates.

wp2014-13.pdf – FRBSF Working Paper 2014-13

A recent decline in internal migration in the United States may have been caused in part by falling house prices, through the “lock in” effects of financial constraints faced by households whose housing debt exceeds
the market value of their home. I analyze the relationship between such “house lock” and the elevated levels and persistence of unemployment during the recent recession and its aftermath, using data for the years 2008–11. Because house lock is likely to extend job search in the local labor market for homeowners whose home value has declined, I focus on differences in unemployment duration between homeowners and renters across geographic areas differentiated by the severity of the decline in home prices. The empirical analyses rely on microdata from the monthly Current Population Survey (CPS) files and on an econometric method that enables the estimation of individual and aggregate covariate effects on unemployment durations using repeated cross-section data. I do not uncover systematic evidence to support the house-lock hypothesis.

wp12-25bk.pdf – FRBSF Working paper 2012-25

This article presents the Economic Security Index (ESI), a new measure of economic insecurity. The ESI assesses the individual-level occurrence of substantial year-to-year declines in available household resources, accounting for fluctuations not only in income but also in out-of-pocket medical expenses. It also assesses whether those experiencing such declines have sufficient liquid financial wealth to buffer against these shocks. We find that insecurity—the share of individuals experiencing substantial resource declines without adequate financial buffers—has risen steadily since the mid-1980s for virtually all subgroups of Americans, albeit with cyclical fluctuation. At the same time, we find that there is substantial disparity in the degree to which different subgroups are exposed to economic risk. As the ESI derives from a data-independent conceptual foundation, it can be measured using different panel datasets. We find that the degree and disparity by which insecurity has risen is robust across the best available sources.

wp12-21bk.pdf – FRBSF Working Paper 2012-21

The U.S. unemployment rate has remained stubbornly high since the 2007-2009 recession, leading some observers to conclude that structural rather than cyclical factors are to blame. Relying on a standard job search and matching framework and empirical evidence from a wide array of labor market indicators, we examine whether the natural rate of unemployment has increased since the recession began, and if so, whether the underlying causes are transitory or persistent. Our analyses suggest that the natural rate has risen over the past several years, with our preferred estimate implying an increase of close to a percentage point above its pre-recession level. An assessment of the underlying factors responsible for this increase, including labor market mismatch, extended unemployment benefits, and uncertainty about overall economic conditions, implies that only a small fraction is likely to be persistent.

wp11-05bk.pdf – September 2011 version
wp11-05bkJanuary2011.pdf – January 2011 version
JEP-slides.pdf – Slides with updated results covering data through August 7, 2012

Since the end of the Great Recession in mid-2009, the unemployment rate has recovered slowly, falling by only one percentage point from its peak. We find that the lackluster labor market recovery can be traced in large part to weakness in aggregate demand; only a small part seems attributable to increases in labor market frictions. This continued labor market weakness has led to the highest level of long-term unemployment in the U.S. in the postwar period, and a blurring of the distinction between unemployment and nonparticipation. We show that flows from nonparticipation to unemployment are important for understanding the recent evolution of the duration distribution of unemployment. Simulations that account for these flows suggest that the U.S. labor market is unlikely to be subject to high levels of structural long-term unemployment after aggregate demand recovers.

EHSV_BPEA2011ReplicationFiles.zip – Zip file with Excel workbooks for replication purposes
EHSV_BPEAFall2011Slides.pdf – Presentation as given at Brookings Panel

We examine the effects of the most durable employer health insurance mandate in the United States, Hawaii’s Prepaid Health Care Act, using Current Population Survey data covering the years 1979 to 2005. Relying on a variation of the classical Fisher permutation test applied across states, we find that Hawaii’s law increased insurance coverage over time for worker groups with low rates of coverage in the voluntary market. We find no statistically significant support for the hypothesis that the mandate reduced wages and employment probabilities. Instead, its primary detectable effect was an increased reliance on exempt part-time workers.

wp09-08bk.pdf – Working Paper version

We apply a hedonic framework to estimate and simulate the impact of global warming on real estate prices near ski resorts in the western United States and Canada. Using data on housing values for selected U.S. Census tracts and individual home sales in four locations, combined with detailed weather data and characteristics of nearby ski resorts, we find precise and consistent estimates of positive snowfall effects on housing values. Simulations based on these estimates reveal substantial heterogeneity in the likely impact of climate change across regions, including large reductions in home prices near resorts where snow reliability already is low.

wp08-12bk.pdf – Working Paper version

We compare trends in earnings inequality in the United States, Germany, and Great Britain. Estimation of a heterogeneous growth model of permanent and transitory earnings variation reveals substantial convergence in the permanent component of inequality in these countries during the 1990s.

Comparative analysis of poverty dynamic–transitions and persistence–can yield important insights about the nature of poverty and the effectiveness of alternative policy responses. This manuscript compares poverty dynamics in four advanced industrial countries (Canada, unified Germany, Great Britain, and the United States) for overlapping six-year periods in the 1990s, focusing on the impact of government policies. The data indicate that relative to measured cross-sectional poverty rates, poverty persistence is higher in North America than in Europe. Most poverty transitions, and the prevalence of chronic poverty, are associated with employment instability and family dissolution in all four countries. However, government tax-and-transfer policies are more effective at reducing poverty persistence in Europe than in North America.

wp04-18bk.pdf – Working Paper version

Using semiparametric density estimation techniques, we analyze the effect of rising dispersion of men’s earnings and related changes in family behavior on increasing inequality in the distribution of family income in the United States. For the period 1969-1989, the growing dispersion of men’s earnings and changing family structure can account for most of the rise in family income inequality. By contrast, the increase in labor force participation by women offset this trend. Inequality grew at a slower rate in the 1990s than in earlier decades, largely because of stabilization in the relative earnings of men from low-income families.

During the past two decades, union density has declined in the United States and employer provision of health benefits has changed substantially in extent and form. Using individual survey data spanning the years 1983-97 combined with employer survey data for 1993, the authors update and extend previous analyses of private-sector union effects on employer-provided health benefits. They find that the union effect on health insurance coverage rates has fallen somewhat but remains large, due to an increase over time in the union effect on employee ‘take-up’ of offered insurance, and that declining unionization explains 20-35% of the decline in employee health coverage. The increasing union take-up effect is linked to union effects on employees’ direct costs for health insurance and the availability of retiree coverage.

The bootstrap and multiple imputations are two techniques that can enhance the accuracy of estimated confidence bands and critical values.
Although they are computationally intensive, relying on repeated sampling from empirical data sets and associated estimates, modern computing power enables their application in a wide and growing number of econometric settings. We provide an intuitive overview of how to apply these techniques, referring to existing theoretical literature and various applied examples to illustrate both their possibilities and their pitfalls.

We investigate the effects of employer-provided health insurance on the labor supply of married women. Because health benefits commonly are restricted to full-time workers, wives who prefer to work short hours hut have no alternate source of insurance may work long hours in order to acquire coverage for their families. We use dates from the April 1993 Current Population Survey Benefits Supplement, and we exploit variation in coverage under husbands’ health plans to estimate the magnitude of this effect. Our reduced-form labor supply models indicate a strong negative effect of husbands’ health insurance on wives’ work hours, particularly in families with children. This effect persists when we replace husbands’ insurance coverage with husbands’ offered insurance, and when we use a multinomial logit model that accounts for unobserved heterogeneity in family labor supply preferences.

Using data from a variety of different sources and straightforward econometric methods, we investigate the differences between union and nonunion jobs. Despite the substantial decline in union membership and
collective bargaining over the last 20 years, union jobs continue to differ from comparable non-union jobs in regard to readily observable nonwage characteristics. In general, union workers work fewer hours per week and fewer weeks per year, and they spend more time on vacation and more time away from work due to their own illness or the illness of a family member. They also are more likely to be offered and to be covered by employerprovided health insurance, more likely to receive retiree health benefits from their employer, more likely to be offered and to be covered by a pension plan, and more likely to receive dental insurance, long-term disability plans, paid sick leave, maternity leave, and paid vacation time. The size of some of these gaps, however, appears to have declined over time.

Among the factors that affect individual retirement decisions, previous research has identified the timing of social security payments, private pension eligibility, health status, and health insurance coverage as key determinants. In this chapter, we first review existing research on the links between retirement outcomes and these key determinants. We then examine the impact of the first three factors (excluding health insurance) relying primarily on data from the 1998 California Work and Health Survey. We also compare results from the California survey with results based on nationally representative samples from the Current Population Survey and the Health and Retirement Survey. The empirical results indicate substantial effects of social security, private pensions, and poor health on retirement decisions in California and in the nation as a whole.