Social Safety Net & Employment Research

Faculty Leads:

David Card, Class of 1950 Professor of Economics; Director of the Labor Studies Program at the National Bureau of Economic Research.

Hilary Hoynes, Professor of Public Policy and Economics; Haas Distinguished Chair in Economic Disparities; Co-Editor of American Economic Review.

Affiliated Faculty:

Frederico Finan, Associate Professor of Economics and Haas School of Business; Co-Director, Berkeley's Center for Economics and Politics; Research Associate, National Bureau of Economics Research.

Alexander Gelber, Assistant Professor of Public Policy; Faculty Research Fellow at the National Bureau of Economic Research.

Supreet Kaur, Assistant Professor of Economic.  

Patrick Kline, Associate Professor of Economics; Faculty Research Fellow at the National Bureau of Economic Research. 

Conrad Miller, Assistant Professor of Economics and Haas School of Business. 

Enrico Moretti, Michael Peevey and Donald Vial Professor of Economics and Haas School of Business; Editor in Chief, Journal of Economic Perspectives; Visiting Scholar, Federal Reserve Bank of San Francisco; Research Associate at the National Bureau of Economic Research.

Michael Reich, Professor of Economics and of the Graduate School; Chair of the Center on Wage and Employment Dynamics at the Institute for Research on Labor and Employment. 

Jesse Rothstein, Professor of Public Policy and Economics; Director, Institute for Research on Labor and Employment; Co-Director, O-Lab

Daniel Schneider, Assistant Professor of Sociology.

Social Safety Net & Employment Initiative

Over the past forty years inequality has steadily increased in the United States. Income and wealth are becoming ever more concentrated at the top of the distribution while the levels of wages, earnings and income for those in the middle and bottom of the distribution have stagnated or even fallen. The Opportunity Lab’s Social Safety Net and Employment Initiative focuses on understanding the causes and consequences of these fundamental trends in our economy. We also examine the role of taxes and social safety net programs in magnifying or mitigating the rise in inequality. Led by Professors David Card and Hilary Hoynes, the Initiative concerns topics such as intergenerational mobility, the gender wage gap, and the role of employers in local and national labor markets. Other topics concern the preferences for redistribution, behavioral effects of taxation, the effect of affirmative action policies on economic outcomes, and long-run effects of early life exposure to social safety net policies.

Research:

The Earned Income Tax Credit (EITC) is a major anti-poverty program that benefits both children and adults. It is a program with wide bipartisan support since, by providing a tax credit to lower-income working families in a way that incentivizes work, it both promotes greater labor force participation and supports the working poor. It currently does not provide much support for individuals or households without children, but there has been bipartisan support in the past for an expansion of the program to provide greater benefits to this group as well.

This paper presents evidence that job suburbanization caused significant declines in black employment from 1970 to 2000. I document that blacks are substantially less likely than whites to work in suburban establishments, and this spatial segregation is stable over time despite widespread decentralization of population and jobs. This stable segregation suggests job suburbanization may limit labor market opportunities for blacks. Exploiting variation across metropolitan areas, I find that job suburbanization is associated with substantial declines in black (relative) employment rates, yet unrelated to other significant structural changes in the labor market. Instrumenting for suburbanization using highway infrastructure yields similar estimates.

The idea that worker utility is affected by co-worker wages has potentially broad labor market implications. In a month-long experiment with Indian manufacturing workers, we randomize whether co-workers within production units receive the same flat daily wage or different wages (according to baseline productivity rank). For a given absolute wage, pay inequality reduces output and attendance by 0.24 standard deviations and 12%, respectively. These effects strengthen in later weeks. Pay disparity also lowers co-workers’ ability to cooperate in their self-interest. However, when workers can clearly observe productivity differences, pay inequality has no discernible effect on output, attendance, or group cohesion.

There is growing evidence that firm-specific pay premiums are an important source of wage inequality. These premiums will contribute to the gender wage gap if women are less likely to work at high-paying firms or if women negotiate (or are offered) worse wage bargains with their employers than men. Using longitudinal data on the hourly wages of Portuguese workers matched with income statement information for firms, we show that the wages of both men and women contain firm-specific premiums that are strongly correlated with simple measures of the potential bargaining surplus at each firm. We then show how the impact of these firm-specific pay differentials on the gender wage gap can be decomposed into a combination of sorting and bargaining effects. We find that women are less likely to work at firms that pay higher premiums to either gender, with sorting effects being most important for low- and middle-skilled workers. We also find that women receive only 90% of the firm-specific pay premiums earned by men. Importantly, we find the same gender gap in the responses of wages to changes in potential surplus over time. Taken together, the combination of sorting and bargaining effects explain about one-fifth of the cross-sectional gender wage gap in Portugal.

We evaluate a tracking program in a large urban district where schools with at least one gifted fourth grader create a separate “gifted/high achiever” classroom. Most seats are filled by non-gifted “high achievers,” ranked by previous-year test scores. We study the program’s effects on the high achievers using (1) a rank-based regression discontinuity design, and (2) a between-school/cohort analysis. We find significant effects that are concentrated among black and Hispanic participants. Minorities gain 0.5 standard deviation units in fourth-grade reading and math scores, with persistent gains through sixth grade. We find no evidence of negative or positive spillovers on non-participants.

Social Security Disability Insurance (SSDI) awards rise during recessions. If marginal applicants are able to work but unable to find jobs, countercyclical Unemployment Insurance (UI) benefit extensions may reduce SSDI uptake. Exploiting UI extensions in the Great Recession as a source of variation, we find no indication that expiration of UI benefits causes SSDI applications and can rule out effects of meaningful magnitude. A supplementary analysis finds little overlap between the two programs’ recipient populations: only 28% of SSDI awardees had any labor force attachment in the prior calendar year, and of those, only 4% received UI.