Job Quality and Effort

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Job Quality and Effort

• Andrew E. Clark (Paris School of Economics and
  IZA)
• http//www.pse.ens.fr/clark/

Masters Course 2009
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• THE BROADEST OF BROAD QUESTIONS
• Have jobs been getting worse?
• or
• Has job quality declined since the (mythical)
  golden age of the 1960s and 1970s?
• Nostalgia is a wonderful thing. But it is our
  duty to look at the facts, and then try to bring
  economic analysis to bear on them.
• So what has happened?

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• 1) There are now more jobs (or at least up until
  recently)
• Unemployment rates have mostly fallen in OECD
  countries.
• Something of an Anglo-Saxon phenomenon.
• 2) The characteristics of these jobs would
  broadly seem to be better than in the past.
• Which characteristics?

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• Wages have increased in almost all countries. One
  major exception is the US. Over the 1985-95
  period, real labour income in the first decile
  fell. But so did real labour income in the fifth
  decile (and the median I think).
• There was rising earnings inequality (see
  handout). This will reduce utility at a given
  level of mean income.
• Hours of work are trending inexorably downwards.

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• d) But have jobs become less secure? Five-year
  retention rates fell sharply 1980-95 in Finland,
  France and Spain. No strong movement elsewhere.
• But.
• RR is not the only important characteristic, the
  consequences of job loss need to be taken into
  account (chances of finding another job,
  unemployment benefits).
• Movement between jobs might allow better matches.

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Subjective evidence on job security from three
waves of the ISSP
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• Overall, good news might outweigh the bad.
• Unfortunately, work on the time series of job
  satisfaction workers evaluations of their own
  jobs dropped sharply from the 1980s and 1990s
  into the 2000s (see the handout from Francis
  Greens book). An exception is the US.
• Whats gone wrong? One idea is what individuals
  actually do when they are at work job content.
  This captures how hard they work, danger,
  interest etc.
• I will mostly concentrate on worker effort.

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• There is a small literature on accidents at work.
  Workplace accidents are found to be
• Higher (a little) for temporary rather than
  permanent workers.
• Unrelated to hours of work.
• Lower in unionised workplaces.
• There is also a more aggregate/macro literature
  that has looked at time series movements in
  accidents see Askenazys book.

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• The health-related consequences of work have
  worsened in Europe between 1990 and 2000 (see
  handout).
• The US was on the same trajectory until the early
  1990s since 1990 the number of accidents at
  work-related illnesses have dropped by 1/3.
• Why have the French and American experiences been
  so different in recent years?
• 1) Americans take worker health seriously
  (Ergonomics and training have long-run
  productivity payoffs).

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• 2) Government and unions take an aggressive
  stance on workplace safety. Information on safety
  violations made public. So workers wont work
  there, or will ask for higher wages, and
  insurance premia (private) rise.
• The latter rose from 1.4 of labour costs in 1985
  to 2.4 in 1994. Dropped back to 1.6 in 2001.
• In France the number of Inspecteurs de Travail
  has fallen. The results of investigations are not
  made public. There is thus less incentive to make
  workplaces safer (insurance is mutual, so we have
  the problem of the commons).

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• Worker Effort
• We tend to write production functions as
  QQ(N,K).
• We should probably write QQ(Nh,K), or better
  QQ(N,h,K), as workers and hours arent perfect
  substitutes.
• Even better, lets write QQ(N,h,e,K), where e
  shows the level of effort furnished by workers
  per hour of work. Firms profit rises with e
  worker utility falls with e.
• Effort is not contractable we are in the world
  of incentives

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• Could falling job quality be caused by greater
  worker effort?
• One way of looking at this is to trace out
  movements in overall job satisfaction, and then
  decompose them.
• See regression in handout, using BHPS data from
  1992-2002. This shows two regressions
• Pooled each observation treated as if it
  represented a different person presents a
  snapshot of average job quality in each year.
• Panel Follows the same individual from one year
  to another picks out within subject changes in
  job quality.

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• These regressions include standard controls
  age, sex, education, marital status etc.
• They also include a full set of year dummies
  (1992 is the omitted category). These plot the
  conditional movements in overall job quality.
• This falls pretty much monotonically, both in
  pooled and in panel regressions.

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Worse job content from greater effort?

• In an efficiency-wage framework, effort rises due
  to
• Higher wages (but higher wages raise utility)
• Higher unemployment (but endogenous.)
• Falling cost of monitoring
• Falling cost of firing shirking workers
• Greater cost of shirking for workers
• I concentrate on the last two.

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Employment protection and effort

• Consider absenteeism as an indicator of employee
  effort.
• You can be absent because youre sick, or because
  you shirk (pulling a sickie).
• Most popular sick days are Monday and Friday
• Sick days correlated with holidays and sporting
  events
• Public-sector sick rates are 44 higher than in
  the private sector
• Effect of a probationary period before permanent
  job Ichino and Riphahn (2005).

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Does Monitoring Work?
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Nagin et al., AER (2002).

• Employees are rational cheaters, and shirk more
  as monitoring falls.
• Experimental approach. Call-centre operators at
  16 sites, soliciting donations. Piece-rate pay
  rises with no. donations.
• Pledges cant be linked to individual callers
  no. of succesful calls self-reported by
  operators.
• Monitoring re-ring individual to check if they
  pledged (callback). This is expensive.
• Operators who cheat have pay docked, and may be
  fired.

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• Manipulate the call-back rate experimentally in
  four of the 16 sites.
• As EW theory would predict, the number of bad
  calls responds to the call-back rate.
• Heterogeneity in worker response. Those with
  positive attitudes respond less to monitoring.
• And attitudes are shown to be function of y,
  estimated from a wage equation the more others
  like me earn, the less positive are my attitudes,
  and the more responsive I am to opportunities to
  cheat.

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McVicar, Labour Economics (2008).

• Considers job-search effort by the unemployed,
  rather than work effort by the employed.
• Random variation due to the refurbishment of
  Benefit Offices in Northern Ireland.
• Subsequent periods of zero monitoring of the
  unemployed were associated with a 16 fall in all
  exits from unemployment.
• This effect particularly strong for exits to
  employment consistent with lower job-search
  effort.

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Temporary Jobs and Work Effort.

• Temporary employment is on the rise stepping
  stones to good jobs.
• So temporary workers have a greater incentive to
  supply effort (the rewards are greater).
• Engellandt and Riphahn, Labour Economics, 2005.
• Swiss LFS data.
• Effort measured by absenteeism and unpaid OT.
• Observe that P(Temp ? Perm) positively correlated
  with worker effort when Temporary. Workers
  assumed to prefer permanent to temporary jobs.
• Perm Temp
• Absence 1.2 0.8
• UOT 20.6 27.7

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• Extensions (to standard EW)
• What about the workers, who have been pretty mute
  so far?
• Think of a potential role for unions effort
  might be bargained over.
• Clark and Tomlinson (2001).
• Data from Employment in Britain, 1992.
• Measure discretionary effort
• How much effort do you put into your job, beyond
  what is required?
• Immodest replies (N2700)
• Effort
• None 3
• Little 6
• Some 23
• Lot 68

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Regression for Effort

• Econometrics shows that effort rises with
• Wage
• Liking hard work (slope of IC)
• Ease of dismissal
• Performance pay
• Effort falls with
• f) Male
• g) Unions
• These are multivariate results, so the union
  effect is conditional on wages.

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The Psychology of Effort
Any role for income comparisons e e(y/y)? I
feel hard done by (relatively) by my firm, so I
provide less effort. Clark, Masclet and Villeval
(2009) Survey data from the 1997 ISSP on
discretionary effort and a gift-exchange game in
the laboratory. Main Results 1) Field and
Experimental produce the same results 2) e
e(y/y) indeed 3) Rank matters more than ratio
(comparisons are ordinal) 4) The more I earned in
the past, the less hard I work today for any
given wage (habituation).
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Conclusion

• Job Quality fell from the 1980s/1990s to the
  early 2000s. Job content might have been the
  reason. Interpretations.
• Wages went up (but that doesnt reduce utility)
• Unemployment increased (but endogenous, and
  false)
• The cost of monitoring fell
• Easier to sack shirkers
• Consequences of shirking now more serious (more
  tournaments)
• Declining unionism
• A possible psychological role for effort (but
  this doesnt work..)

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So What?
Why do we care about job quality? Because it is a
measure of VE, the value of a job. And we worry
about this for social welfare reasons. But also
because it might help us to understand
labour-market behaviours. The value of a job is
relative to unemployment or inactivity. As VE
VU falls, employment becomes less attractive.
This can happen because job quality falls, or
because unemployment becomes less unpleasant (for
example, the social-norm effect).
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BHPS Results from Clark (2003)
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GSOEP Results from Clark et al. (2008)