Hours vs. Employment: The Determinants of Labor Market Adjustment Since The Great Depression

Abstract

225 p.Thesis (Ph.D.)--University of Illinois at Urbana-Champaign, 1985.This thesis empirically investigates the determinants of three forms of quantity-side adjustment in the labor market--weekly hours, employment, and layoffs. We primarily focus on the role played by unionization and some of the non-wage labor costs that have become a quasi-fixed cost of employment. Although the effects of unionization and fixed employment costs have been researched previously, we analyze their potential effects in a time-series setting using monthly data from 1929-1982. We also explore the historical setting which gave rise to the spurt in unionization and development of employer-funded social insurance programs.A regression model is constructed and estimated for all three forms of labor input adjustment. The model controls for the effect of output demand levels and of occupational structure. We include interaction terms for unionization and quasi-fixed employment costs. Their inclusion allows us to analyze the union and fixed employment cost effect at three different points in the business cycle--their "total effect" in an average period, and two "cyclical effects" in a typical expansionary or contractionary period.The impact of fixed employment costs, such as contributions to social insurance funds, is to raise weekly hours and layoffs, and reduce employment levels--a clearly unintended effect of private and social insurance programs. The impact of unionization supports the exit-voice approach's prediction that unions actually encourage layoffs, although the assumed unions preference for layoffs subsides somewhat during relatively poor economic times. Unions are also found to reduce the flexibility of the work-week over the cycle.The implications for policy are that the extent of unemployment due to layoffs can be reduced through measures that would make social insurance contributions a strictly variable labor cost and those that would induce unions to favor work-sharing over layoffs.U of I OnlyRestricted to the U of I community idenfinitely during batch ingest of legacy ETD