Two Essays on the Labor Market

This dissertation contains essays which examine two aspects of the labor market that have undergone rapid changes in recent years. With dramatic increases in the fraction of workers having defined contribution pensions as their primary source of pension coverage, it is important to understand the role of these types of pensions on worker incentives and compensation. At the same time, the composition of displaced workers has seen many changes. In understanding how families cope with a job loss, one must examine the long-run impact of displacement. One chapter examines incentive differentials between defined benefit (DB) and defined contribution (DC) pensions and their impact on workers' compensation. Agency theories of DB pensions posit that deferred compensation can be used as a shirking reduction device. By withholding a portion of the worker's compensation, the firm will increase worker productivity, which in turn results in higher career compensation for pension covered workers. While DB pensions implicitly require workers to forgo current compensation, DC pensions do not impose these constraints on workers due to the portability of these plans. Since characteristics of workers with pensions are similar across different types of pension plans, DC covered workers offer a better comparison group than workers without pensions for testing these theories. Using both self-reported and administrative data from the Health and Retirement Study, this essay is unable to find support for the implication that workers with defined benefit pensions receive more career compensation. The other chapter examines the effect of a husband's job loss on the labor supply of his wife, an effect known as the 'added worker' effect. Unlike past studies which only focus on the effect of the husband's current unemployment status, this essay analyzes the wife's labor supply response in the periods before and after the husband's displacement in order to examine the long run adjustments to an earnings shock. Theoretical predictions for the timing and magnitude of the added worker effect are derived from a family life-cycle labor supply model and alternative predictions are obtained by including liquidity constraints and uncertainty in the analysis. Using the Panel Study of Income Dynamics, small pre-displacement effects are found along with larger effects which persist for many years after the initial displacement. The time path of the wives' responses differs by the type of displacement, possibly due to differences in the information wives acquire prior to the displacement.

Women's Studies (0453)

5026

ISBN 0-599-08469-3