ILO Research department seminar

The Wages of Non-Employment

Presenter: Mike Elsby, University of Edinburgh

“Rates of employment among low-skilled men have fallen dramatically over the last forty years. We use CPS and PSID microdata to document the sources of income through which those chronically out of work get by, and to estimate a broad measure of a replacement rate that accounts for a wide array of non-work benefits, and the potential earnings of partners or spouses. This allows an assessment of standard economic accounts for a rise in the rate of joblessness, which provide a sharp prediction: If the replacement rate rises over time, it will discourage work. Preliminary investigation suggests a striking result: if anything, there appears to have been a downward trend in the replacement rate, challenging the notion that an improvement in non-work payoffs is at the heart of the decline in employment rates.”