Adjustment Costs, Inventories and Output

This paper analyzes the optimal adjustment strategy of an inventory-holding firm facing price- and quantity-adjustment costs in an inflationary environment. The model nests both the original menu-cost model that allows production to be costlessly adjusted, and the later model that includes price- and quantity-adjustment costs, but rules out inventory holdings. It is shown that the firm’s optimal adjustment strategy may involve stockouts. At low inflation rates, output is inversely related to the inflation rate, and the length of time demand is satisfied increases with the demand elasticity but decreases with the storage cost and the real interest rate.menu costs, quantity-adjustment costs, inventories, stockouts, output, inflation

Endogenous Monopsony and the Perverse Effect of the Minimum Wage in Small Firms

The minimum wage rate has been introduced in many countries as a means of alleviating the poverty of the working poor. This paper shows, however, that an imperfectly enforced minimum wage rate causes small firms to face an upward-sloping labor supply schedule. Since this turns these firms into endogenous monopsonists, the minimum wage rate has the perverse effect of reducing employment in small firms as well as what these firms offer their workers. Thus, if there are only small firms, the minimum wage rate makes all workers that would be employed in the absence of a minimum wage rate worse off.endogenous monopsony, minimum wage, noncompliance, small firms

Uniform and Nonuniform Staggering of Wage Contracts

This paper provides a model that can account for the almost uniform staggering of wage contracts in some countries as well as for the markedly nonuniform staggering in others. In the model, short and long contracts as well as long contracts concluded in different periods are strategic substitutes, which provides a powerful rationale for staggering. We show that for realistic parameter values, there is a continuum of possible equilibria with various degrees of staggering of long contracts. If the contracting cost is not too large, then the lowest possible degree of staggering decreases with the contracting cost and increases with monetary uncertainty.wage contracts, uniform staggering, nonuniform staggering, monetary policy shocks, strategic substitutability, contract duration

Noncompliance and the Effects of the Minimum Wage on Hours and Welfare in Competitive Labor Markets

This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.competitive labor markets, noncompliance, minimum wage, working hours, welfare

Noncompliance and the Effects of the Minimum Wage on Hours and Welfare in Competitive Labor Markets

This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.noncompliance, minimum wage, working hours, welfare, competitive labor markets

Welfare Reform and Lone Mothers Employment in the US

The Personal Responsibility and Work Opportunity Reconciliation Act (PRWORA) of 1996 represents a dramatic change in the US welfare state. One of its key goals was to move lone mothers, even those with young children, from welfare to work. Early evidence suggests that, in concert with a strong economy, progress has been made - welfare caseloads have fallen dramatically and the employment rates of lone mothers have increased substantially. In addition to the federal reforms, state level welfare reforms played an important role prior to 1996 and are playing an even more important role subsequent to 1996 as PRWORA gives states unprecedented flexibility in designing and implementing their welfare systems. In this paper, we examine some key state-level reforms, using evidence from selected states, to illustrate the three major types of policies used in the US to move lone mothers from welfare to work: mandating work (Michigan); making work pay (Michigan and Minnesota); and helping families with child care (Illinois). We conclude that each of these policies has a role to play in moving lone mothers from welfare to work, but that further policies are needed if the US is to also to do a better job of reducing child poverty.welfare, lone mothers, employment

Government Incentives to Change Employer Behavior

Through various incentive mechanisms, the U.S. government has sought to shape and change the ways in which American businesses operate in a wide range of industries. This fact sheet discuss a few examples of the ways the government can incentivize employer behavior through recognition and awards programs, and through government financing

Sources for Statistical Data on Flexible Work Arrangements

From the Department of Labor, the best survey for flexibility data comes from the Current Population Survey (CPS). The CPS is a monthly survey of 60,000 households that provides data on the labor force, employment, unemployment, and persons not in the labor force. The benefit of the CPS is that it is large, reliable, and the sample is carefully weighted to provide nationally representative estimates. It also has a significant amount of other data, including a large amount of information on employee characteristics, occupation and industry classifications, and work schedules. The drawbacks however, are that the questions on flexibility are limited in number and scope -- providing data that answers only a few of the questions on workers’ access to and use of flexible work arrangements. The use of work schedule data is particularly problematic because it is often unclear whether the schedule is directed by the worker, the employer, or a combination of both. This fact sheet provides information about several studies from nongovernmental sources that also provide useful information about flexible work arrangements

Short Term Time Off: What We Know

Short Term Time Off (STO) refers to job-protected time away from the workplace to address anticipated or unexpected needs of limited duration. STO may be scheduled or unscheduled, depending on the underlying need. STO enables workers to address both the routine and emergency situations that occur in everyday life. The need for STO may arise, for example, because a worker or worker’s child is sick or has a routine doctor’s appointment, because a worker has to wait for the plumber or apply for public benefits or go to court, or because a worker needs to attend a school conference or a religious event or finish a term paper. While all workers will need STO at some point, the need for STO is compounded by the changing demographics of our nation’s workforce