Is Job Stability in the US Falling? Reconciling Trends in the Current Population Survey and Panel Study of Income Dynamics

Is Job Stability in the US Falling? Reconciling Trends in the Current Population Survey and Panel Study of Income Dynamics
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  IZA DP No. 35 Is Job Stability in the United States Falling? David A. JaegerAnn Huff Stevens    D   I   S   C   U   S   S   I   O   N    P   A   P   E   R    S   E   R   I   E   S Forschungsinstitutzur Zukunft der ArbeitInstitute for the Studyof Labor March 1999  Is Job Stability in the United StatesFalling? Reconciling Trends in the Current Population Surveyand Panel Study of Income DynamicsDavid A. JaegerAnn Huff Stevens Discussion Paper No. 35March 1999 IZAP.O. Box 7240D-53072 BonnGermanyTel.: +49-228-3894-0Fax: +49-228-3894-210Email: This Discussion Paper is issued within the framework of IZA’s research area Mobility    and Flexibility of Labor Markets.  Any opinions expressed here are those of the author(s) and notthose of the institute. Research disseminated by IZA may include views on policy, but theinstitute itself takes no institutional policy positions.The Institute for the Study of Labor (IZA) in Bonn is a local and virtual international researchcenter and a place of communication between science, politics and business. IZA is anindependent, nonprofit limited liability company (Gesellschaft mit beschränkter Haftung)supported by the Deutsche Post AG. The center is associated with the University of Bonnand offers a stimulating research environment through its research networks, researchsupport, and visitors and doctoral programs. IZA engages in (i) srcinal and internationallycompetitive research in all fields of labor economics, (ii) development of policy concepts, and(iii) dissemination of research results and concepts to the interested public. The currentresearch program deals with (1) mobility and flexibility of labor markets, (2)internationalization of labor markets and European integration, (3) the welfare state andlabor markets, (4) labor markets in transition, (5) the future of work, and (6) general laboreconomics.IZA Discussion Papers often represent preliminary work and are circulated to encouragediscussion. Citation of such a paper should account for its provisional character.  IZA Discussion Paper No. 35March 1999 ABSTRACT Is Job Stability in the United States Falling? * Reconciling Trends in the Current Population Survey and Panel Study of Income Dynamics Documenting trends in job stability over the past twenty-five years has become acontroversial exercise. The two main sources of information on employer tenure, the PanelStudy of Income Dynamics (PSID) and the Current Population Survey (CPS), have generallygiven different pictures of the degree of job stability in the U.S. economy. This paperexamines whether the PSID and CPS yield systematically different results with respect tocomparable measures of job stability. Both data sets show an increase in the fraction ofmale workers aged 30 and over with tenure less than ten years beginning in the late 1980s.There is little evidence in either data set of a trend in the share of employed individuals withone year or less of tenure. The two data sets provide nearly identical results for the 1980sand 90s while in the 1970s they give results that are somewhat less comparable. We arguethat this is probably the result of changes in the CPS tenure question following the 1981survey. The effects of this change and the choice of ending year and variable definition inPSID-based studies are the most likely explanations for the disparate findings in theliterature.JEL Classification: J23, J63Keywords: Job stability, U.S economyDavid A. JaegerDepartment of EconomicsHunter College/CUNY Grad School695 Park AvenueNew York, NY 10021-5085USATel.: +1 212 772-5435Fax: +1 212 772-5398email:   *   The authors thank Charles Brown, Lawrence Kahn, Henry Farber, David Neumark, Daniel Polsky,seminar participants at the City University of New York Graduate Center, the Federal Reserve Bankof New York, and the Board of Governors of the Federal Reserve as well as participants at theCornell-Princeton Policy Conference on Layoffs, Employment Stability and Job Changing and theRussell Sage Conference on Changes in Job Stability and Job Security for helpful comments. Theyalso thank Bob McIntire and Anne Polivka for insightful discussions regarding the tenure questions inthe Current Population Survey  - 3 - The degree of job stability in the U.S. economy is of substantial concern among workersand policy-makers and has important implications for a variety of economic applications.Documenting trends in job stability over the past twenty-five years has become a controversialexercise, however. Press reports continue to emphasize deteriorating job stability, while supportfor this assertion from empirical economic studies has been limited. One reason for continuingambiguity in the literature concerning trends in job stability is an apparent sensitivity of empiricalresults to the specific data source used. While results that differ across presumablyrepresentative and widely-used data sets are always a matter of concern to empirical researchers,the enormous attention recently paid to job stability makes resolution of this issue of more thanmethodological interest. This paper aims to resolve one area of ambiguity by examining whetherthe Panel Study of Income Dynamics (PSID) and the Current Population Survey (CPS) yieldsystematically different results with respect to comparable measures of employer tenure.The suspicion that different data lead to different conclusions about trends in job stabilityarises both from a review of the growing literature on this topic, as well as from specificreferences within that literature. Several PSID-based studies report an increase in job mobilitysince the 1970s, while most CPS-based work finds no overall trend through the late 1980s.Marcotte (1995) and Gottschalk and Moffitt (1994), in particular, note that the conclusions of studies based on the PSID seem to differ systematically from those using the CPS. Examinationof the conclusions of other studies in this area supports the notion that a relationship existsbetween findings and the data used.Despite this pattern, there has been no attempt to produce a  4 directly comparable set of results between the PSID and CPS. 1  It is not possible, moreover, toreconcile the inconsistencies solely with reference to existing research. The available studiesutilize different measures of job stability, have different sample coverage, and focus on severaldifferent time periods, all of which make it difficult to judge whether the different conclusionscan be explained by the specific details of each study. Because panel data such as the PSID areoften necessary to answer questions relating to the consequences of job instability, it is importantto know whether the PSID can produce results consistent with the CPS when changes to thesurvey are handled appropriately.Our results suggest that, during the 1980s and 1990s, the two data sets produce similarmeasures of the level of and trends in employer tenure. We find little evidence in either data setof a reduction in the share of workers with employer tenure of one year or less between 1983 and1996. We find, however, an increase in the share of workers with tenure of less than ten yearsbetween 1983 and 1996, concentrated among older male workers toward the end of the period.Including the 1970s in our analysis produces greater differences in trends across the twodata sets. In the 1970s, the incidence of low tenure in the PSID is generally smaller than in theCPS. We argue that this is probably the result of changes in the CPS question following the1981 survey that may have caused low tenure rates in the 1970s to be overstated relative to thosein the 1980s. Evidence from similar question changes in early years of the PSID is quiteconsistent with this hypothesis.Our primary focus in this paper is on cross-sectional tabulations of the fraction of workerswith employer tenure below a fixed cutoff of either one year or ten years. This focus ismotivated by our desire to have the simplest possible measures of workers’ attachment to anemployer that will be directly comparable across the two data sets. One drawback of focusing on
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