On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality. Version of January 13, 2006

In this paper, I develop and estimate a model of the labor market that can account for both the inequality in earnings and the much larger inequality in wealth observed in the data. I show that an equilibrium model of on-the-job search, augmented to account for saving decisions of workers, provides a direct and intuitive link between the empirical earnings and wealth distributions. The mechanism that generates the high degree of wealth inequality in the model is the dynamic of the ``wage ladder'' resulting from the search process. There is an important asymmetry between the incremental wage increases generated by on-the-job search (climbing the ladder) and the drop in income associated with job loss (falling off the ladder). This feature of the model generates differential savings behavior at different points in the earnings distribution. The wage growth expected by low wage workers, combined with the fact that their earnings are not much higher than unemployment benefits, causes them to dis-save. As a worker's wage increases, the incentive to save increases: the potential for wage growth declines and it becomes increasingly important to insure against the large income reduction associated with job loss. The fact that high wage and low wage workers have such different savings behavior generates an equilibrium wealth distribution that is much more unequal than the equilibrium wage distribution. I estimate the structural parameters of the model by simulation-based methods using the 1979 youth cohort of the NLSY. The estimates indicate that the micro-level search and savings behavior---estimated from the dynamics of individuals' labor market histories and wealth accumulation decisions---aggregates to replicate the cross-sectional inequality in earnings and wealth for this cohort

Access to Income Supports for Working Families in Chicago

A large number of eligible working families in Chicago do not participate in income support programs such as Food Stamps, the Child Care Subsidy, Medicaid, and KidCare. Participation rates in Medicaid and Food Stamps have declined since TANF reauthorization in 1996 as many former TANF recipients no longer receive the benefits they had before and to which they are still entitled. Low take-up rates for income supports mean that many low-income working families in Chicago are unable to provide the basic necessities for their families. These low rates also mean that local communities and businesses are not benefiting from the expenditures made possible by participation in income support programs. The Income Support Access Project was developed in conjunction with an initiative undertaken in 2001 by the Center for Law and Human Services (CLHS) to distribute information about income support programs to low-income participants at its Tax Counseling Project sites. Building on this initiative, the Center for Impact Research (CIR) undertook research in order to identify barriers to accessing income supports and ways to improve outreach and application support. The research involved surveying over 600 low income adults at tax service sites and job training agencies about their knowledge and experience of benefits programs. CIR also interviewed caseworkers at job training agencies as well as outreach workers and project directors. The findings and recommendations have been developed in consultation with the project working group whose members represent a range of Chicago-area community agencies and advocacy organizations

Self-Sufficiency and Safety: The Case for Onsite Domestic Violence Services at Employment Services Agencies

This report presents the findings of a two-year demonstration project that provided domestic violence services to participants in programs at employment services agencies, highlighting the challenges, service needs, and outcomes of low-income domestic violence survivors as they struggle to keep themselves and their children safe, become and remain employed, and attain self-sufficiency

Town of Pendleton and Pendleton Highway, Water, and Sewer Department Units, Teamsters Local 264

In the matter of the fact-finding between the Town of Pendleton, employer, and the Pendleton Highway, Water, and Sewer Department Units, Teamsters Local 264, union. PERB case no. M2011-269. Before: Peter A. Korn, fact finder

Linguistics and interdisciplinary initiatives at Colorado: Obstacles and opportunities

published or submitted for publicationis peer reviewe

Addressing Domestic Violence as a Barrier to Work: Building Collaborations between Domestic Violence Service Providers and Employment Services Agencies

The Kraft Domestic Violence Services Project began in October 2000 and continued through the end of 2002 at sites in Houston, Chicago, and Seattle. This national demonstration project investigated how domestic violence acts as a barrier to women's training and employment and the interventions that are effective for assisting women remain safe and employed. The Center for Impact Research (CIR) undertook the project's research component and provided technical assistance to the participating employment services agencies and domestic violence service providers. From its inception, this project was designed not only to provide direct services and build the capacity of participating agencies, but also to include a research component for documenting and sharing program and participant outcomes. Thus, the purposes of the project were twofold: * To develop a collaborative model of providing domestic violence services within a job-training environment to expand access to domestic violence services for low-income victims. * To develop a model for strengthening programs that assist low-income women attain economic self sufficiency by addressing needs of domestic violence survivors. This report summarizes the project learnings and best practice recommendations for integrating domestic violence services into employment services agencies. It discusses establishing and maintaining interagency collaborations, training of case managers, conducting screening and referrals, and ongoing delivery of domestic violence services within the employment services setting

Special section on human development as a critical voice in education: Editor's introduction

An introduction is presented in which the editor discusses various reports within the issue on topics including human development, the importance of economic context for young people, children's perspectives within school governance

Are Wealth Effects Important for Canada

Some analysts believe that a sharp rise in equity values was an important factor in the strong consumer spending between 1995 and 2000. Empirical evidence suggests, however, that consumer spending responds more to changes in housing wealth than it does to equity wealth. Pichette reports findings from an earlier study by Pichette and Tremblay (2003) which used a vector-error-correction model to determine the long-run relationship between various components of wealth and consumer spending. The study found that consumption does not respond significantly to a permanent increase in stock market wealth, while a permanent increase in housing wealth leads to a significant rise in consumption. These findings suggest important implications for monetary policy decision-makers, since movements in wealth will also affect aggregate demand and inflation.

On-the-Job Search and Precautionary Savings: Theory and Empirics of Earnings and Wealth Inequality

In this paper, I develop and estimate a model of the labor market that can account for both the inequality in earnings and the much larger inequality in wealth observed in the data. I show that an equilibrium model of on-the-job search, augmented to account for saving decisions of workers, provides a direct and intuitive link between the empirical earnings and wealth distributions. The mechanism that generates the high degree of wealth inequality in the model is the dynamic of the ``wage ladder'' resulting from the search process. There is an important asymmetry between the incremental wage increases generated by on-the-job search (climbing the ladder) and the drop in income associated with job loss (falling off the ladder). This feature of the model generates differential savings behavior at different points in the earnings distribution. The wage growth expected by low wage workers, combined with the fact that their earnings are not much higher than unemployment benefits, causes them to dis-save. As a worker's wage increases, the incentive to save increases: the potential for wage growth declines and it becomes increasingly important to insure against the large income reduction associated with job loss. The fact that high wage and low wage workers have such different savings behavior generates an equilibrium wealth distribution that is much more unequal than the equilibrium wage distribution. I estimate the structural parameters of the model by simulation-based methods using the 1979 youth cohort of the NLSY. The estimates indicate that the micro-level search and savings behavior---estimated from the dynamics of individuals' labor market histories and wealth accumulation decisions---aggregates to replicate the cross-sectional inequality in earnings and wealth for this cohort.labor search, savings, consumption, wealth inequality