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Sports and exercise boost labor market performance and earnings

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Many public policy campaigns aim at encouraging people to be more physically active. Sports and exercise enhance physical and mental health, as well as soft skills like self-discipline, endurance, stress management, and team work. All of this can also boost an individual’s productivity and earnings in the labor market. An IZA World of Labor article by Michael Lechner therefore suggests including sports in active labor market programs.

Why do sports? The economist’s view

From a theoretical perspective, there are several reasons why exercising is beneficial. First, sports is (usually) enjoyable and thus yields an immediate reward. Second, there is also an investment motive. Exercise leads to better fitness and an improved physical appearance. This is no only relevant in the labor market but also, for example, in the marriage market.

Since doing sports is time-consuming, the resulting welfare effects are ambiguous: If sports and exercise crowd out other “non-productive” activities such as watching TV soaps or playing computer games, overall productivity gets enhanced. However, if people give up educational activities or even work hours to play sports, reduced earnings might outweigh positive productivity effects. And if physical training is too intense, it may hurt concentration and effectiveness on the job.

What does the literature say?

Almost all existing studies on the topic find a positive correlation between sports and labor market performance. There are, however, possible shortcomings when using surveys because people tend to overstate their activity levels, and surveys may not run long enough to establish causal links between exercising and labor market performance.

An experimental study for Sweden circumvents the problems of long-term impacts, positive selection, and measurement issues: 8,000 job applications were sent to employers, with information about different types of sports and exercise randomly added. The study showed that including a statement about being physically active increased call-back rates by two percentage points.

Using German panel data from the SOEP, researchers found that men who do sports at least once a week earn five percent more on average than men who do not. Women who were involved in sports at age 15 earn about six percent more later in life. Furthermore, a positive correlation between engaging in physical activity and moving from unemployment to employment for women with at least three years of work experience is established.

For other countries, similar results apply. The evidence for positive labor market effects of sports and exercise is strong, especially for earnings. Earnings effects range from about 4 to 17 percent.

What are the policy implications?

It is apparent that increasing the general level of physical activity is very likely to boost productivity among employees at all levels. Governments may also want to include among their active labor market policies encouragement of sports and exercise for unemployed people whose productivity is comparably low and whose participation in these activities is below optimum, in order to increase the re-employment chances for this group.

  • See selected press coverage in German language:
    BILD (Germany), Der Standard (Austria), Blick (Switzerland)
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When parents divorce, children’s personality development suffers

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Disruptions in family structure are suspected to impede the development of children’s personality, with far-reaching consequences for school performance and labor market success. An IZA paper by Tyas Prevoo and Bas ter Weel adds to the empirical evidence by investigating the effect of parental separation, divorce and death on personality development of British children.

The authors demonstrate that increases in favorable personality traits, such as self-esteem or internal locus of control (the extent to which individuals believe they can control events affecting them), are lower for children experiencing family disruptions during adolescence. At the same time, these children are more likely to develop behavioral problems. The effects on personality development are smaller when children are older at the time of the experienced disruption.

Parental divorce has as stronger impact than separation and even death of a parent. However, the effects differ by gender: The results suggest that boys are on average more negatively affected by parental death than girls, while girls seem to suffer more from a separation or divorce of their parents.

As another recent IZA paper shows, behavioral problems caused by family disruptions can affect other children through peer effects: According to the study by Jannie H. G. Kristoffersen, Morten Visby Krægpøth, Helena Skyt Nielsen and Marianne Simonsen, boys with divorced parents have a negative influence on their classmates’ test scores.

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New volume on gender convergence in the labor market

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For most countries in recent years women’s labor force participation has risen while men’s has fallen. At the same time, fertility rates declined, marriage rates decreased, and the average husband-wife age difference shrunk slowly but steadily. The number of single mothers rose, and women’s schooling levels surpassed men’s in some countries.

Along these trends, men’s and women’s wages and occupational structures have been converging. Research published in the new volume of Research in Labor Economics, edited by IZA Fellows Solomon Polachek and Konstantinos Tatsiramos together with IZA Director Klaus F. Zimmermann, investigates whether these trends are related, and whether we indeed observe gender convergence in the labor market.

One explanation given for the gender wage gap is the division of labor in the home. According to this argument, husbands specialize in market work whereas their wives specialize more in home activities, especially when they face family constraints such as the presence of children. As a result, husbands work a greater portion of their lives, invest more in human capital, and attain higher wages.

But why are husbands the breadwinners and women the homemakers?

One of the studies contained in the current Research in Labor Economics volume proposes a new explanation. The idea is that men have a comparative advantage in the market even at the very start of their marriage because they are typically older and more educated than their wives, and thus earn more even if there was no discrimination. Data from 200 countries indicate this is the case in all but San Marino. On average husbands are over two years older than their wives, but the age difference is as large as nine years, especially in less developed countries. The demand for children exacerbates these differences. Since women have limited years of fecundity, a high demand for children strengthens men’s demand for younger less educated wives. Over time, as fertility decreased, the husband-wife age gap narrowed, division of labor lessened, and the gender wage and occupational disparities diminished.

Long parental leave may reinforce the glass ceiling

Although the wage gap between men and women has been narrowing, there still remains a substantial difference. One important question is whether government policies are effective in reducing the gap. One such policy is family leave legislation designed to subsidize parents to stay home with newborn or newly adopted children. One of the RLE articles shows that for high earners in Sweden there is a large difference between the wages earned by men and women (the so-called “glass ceiling”), which is present even before the first child is born. It increases after having children, even more so if parental leave taking is spread out. These findings suggest that the availability of very long parental leave in Sweden may be responsible for the glass ceiling because of lower levels of human capital investment among women and employers’ responses by placing relatively few women in fast-track career positions. Thus, while this policy makes holding a job easier and more family-friendly, it may not be as effective as some might think in eradicating the gender gap.

The issues explored by the other eight studies in this volume include patterns in lifetime work, gender complementarities, career progression, and the gender composition of top management.

Immigrants and host countries benefit from liberalized access to citizenship

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Politicians, the media, and the public express concern that many immigrants fail to integrate economically. Research shows that the option to naturalize has considerable economic benefits for eligible immigrants, even in countries with a tradition of restrictive policies. An article by Christina Gathmann published in IZA World of Labor shows that the benefits of naturalization for first-generation immigrants are significant.

Citizenship results in higher wage growth, more stable employment relationships, and increased upward mobility into better-paid occupations and sectors. A better assimilation of immigrants in the labor market in turn also benefits destination countries through fiscal gains and better social cohesion. As such, liberalizing access to citizenship could be a key policy instrument toward improving the rate of economic integration of immigrants in the host country.

Germany is a case in point: In 2000, the country shortened the waiting period for immigrants to become eligible for citizenship from 15 to eight years of residence in Germany. The gains from easier access to citizenship are particularly apparent among immigrants from poorer countries and among women. In contrast to other countries like France, however, acquiring German citizenship seems to have no effect on labor market participation.

See also the German media coverage in DIE WELT.

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Female leaders increase workplace diversity by narrowing the gender gap in promotions

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Although women comprise 45 percent of the labor force across OECD countries, they continue to earn less than men on average and remain under-represented among business leaders. A new study by Astrid Kunze and Amalia Miller on private sector establishments in Norway shows that women with the same years of education, work experience, tenure and hours of work as men fall behind on the career ladder because they are less likely to be promoted than men.

The gap is substantial and, strikingly, holds not only for higher ranks and promotions into top leadership positions but also for low and middle ranks where promotions take place into a wider range of jobs including chief engineers, accountants, or logistics managers. This shows that firms should be concerned with the entire workplace hierarchy to accomplish the goal of a more equal representation of men and women in the workplace.

These findings hold when comparing across different workplaces or looking within the establishments over time, indicating that female progress up the career ladder is not caused by their working in establishments that offer fewer promotion possibilities overall or sorting into establishments that make it easier to combine having children and part-time work.

What can firms and policymakers do to reduce the gender gap in promotions?

The results of the study suggest that recruiting and retaining more women among the various ranks of bosses may be effective. In particular, the study finds that gender differences in promotion rates out of a particular rank are significantly smaller when there are more women in higher ranks at the same establishment.

This is consistent with positive spillover effects between women through, for example, mentoring, sponsorship or role modeling. The results further suggest that policies that increase women’s representation in top leadership positions have the potential to also increase representation among mid-level managers and can benefit female workers at all ranks of the organization.

But not all spillovers are positive. Having more women at the same rank within the same establishment actually decreases women’s promotion rates relative to similar men. One possible explanation is that an increase in female peers decreases the chances to receive mentoring resources from higher-ranking women; these resources tend to be scarce because of the paucity of female leaders. This would also suggest that gender diversity in firms can be fostered through policies that increase the proportion of women in leadership positions.

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The stress cost of children: Time matters more than money

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Stress can be viewed as reflecting the limits on time and money that life imposes. Numerous studies have measured the money cost of having a child (close to $250,000 per child according to recent U.S. estimates), and some others have measured how much parental time children take up. A new IZA paper examines a third dimension of the cost of children – how much additional stress on parents’ time and finances they impose.

Using data on families in the Australian HILDA Survey for 2001-12 and the German Socioeconomic Panel for 2002-12, Hielke Buddelmeyer, Daniel S. Hamermesh and Mark Wooden demonstrate that a birth substantially raises parents’ stress about time, that the effect lasts at least several years, and that it is much larger on the mother than the father. A birth also raises people’s stress about their finances, but those effects are much smaller than on time stress. In monetary terms, the stress cost of a child is very large.

When a child leaves the house as an adult, parents’ time and financial stress decrease, but that effect is much smaller than the increase in stress produced by having a small child in the household.

“The clear implication is for more sharing of parental responsibility for children between father and mother. Beyond that, countries need to offer more aid to new parents – not just money, but especially time off,” says Dan Hamermesh.

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Pour some sugar in me: Faster, better decisions with glucose

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Many factors influence the quality of decision making: importance, relevance, and even time of day can affect the degree to which we thoughtfully consider a decision. In a new IZA paper, Todd McElroy, David L. Dickinson and Nathan Stroh investigate how glucose, the brain’s fuel source for thinking, improves the quality and speed of decision making.

In an experiment, 138 glucose-deprived students were given a sugar drink or a placebo. After some time to allow glucose absorption, the participants had to complete a large set of decision-making tasks ranging from solving analytical problems to assessing social norms, risks, and own performance. The experimenters measured both response time and the quality of decisions.

The analysis shows that glucose enrichment did not improve decision making in the simpler decision tasks, but had a substantial effect on more complex decision making. Glucose-enriched participants also responded significantly faster to decisions than participants in the glucose-deprived condition.

These findings have many practical implications for future research and are especially relevant for technicians who make complex decisions that hinge on critically fast decision making. For example, consider air traffic controllers who must weigh multiple factors and make critical decisions quickly. The study suggests that both optimality and response time for this type of decision will be significantly affected by blood-glucose level.

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Savings and political turmoil: The case of the Tiananmen Square protests

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Cutting-edge macroeconomic research suggests that political uncertainty heavily influences private consumption. However, evidence on the individual level how households cope with uncertainty shocks is surprisingly scarce.

In a new IZA Discussion Paper, Rolf Aaberge, Kai Liu and Yu Zhu use the sharp increase in political uncertainty related to the Tiananmen Square protests in China. The event resulted in a change in political leadership and is widely regarded as marking the end of a period of rapid reform in China.

The political turmoil led to significant temporary increases in savings for the urban population in China, especially among older, wealthier, and more socially advantaged households. The average savings rate increased by 18 percentage points in the month of the uncertainty shock, mainly driven by reductions of the consumption of (semi-)durable goods.

These findings highlight the costs of political uncertainties: despite the temporary character of the Tiananmen Square incident, it led to long-run changes in household consumption. In situations of prolonged and ongoing political turmoil, the impact on household consumption is likely to be greater, offering an additional explanation of lacking economic growth in conflict-intensive world regions.

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How can host governments best engage with diaspora groups? IZA and RAND Europe analyze EU and US diasporas

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Policymakers increasingly see possibilities in interacting with diaspora communities to improve relationships with their countries of origin and as a means to foster governance and rule of law, and political and economic development in those countries.

A new IZA Research Report on “Mapping Diasporas in the European Union and United States: Comparative analysis and recommendations for engagement”, conducted for the European Commission collaboration with RAND Europe, provides an overview of diaspora communities in Europe and the US, with concrete recommendations for engaging with diaspora groups as a bridge to their countries of origin.

Key findings include:

  • The authors identified 339 diaspora groups from 24 selected countries of origin currently present in the European Union and the United States. Of these, 269 groups were sufficiently large to be included in the in-depth analysis, most of them located in EU-15 countries.
  • In comparison with the populations of their countries of origin, diaspora groups achieve better outcomes overall on a range of socioeconomic indicators.
  • The comparison with the populations of receiving countries offers a more complex picture.
  • Diasporas are increasingly seen as important partners for both sending and receiving country governments’ strategies aimed at improving political, security and economic outcomes.
  • Measured levels of engagement between diaspora organizations and their partners were positively correlated with the organizations’ measured level of satisfaction with that engagement.
  • Proactive communication is desired from actors wishing to engage with diaspora organizations.
  • Concrete ways to engage with individual diaspora groups need to take into account their characteristics and be tailored to specific contexts.

Interview with the authors of the Labor Economics textbook

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Authored by IZA Program Director Pierre Cahuc with Stéphane Carcillo and André Zylberberg, Labor Economics has long become the graduate-level textbook that combines depth and breadth of coverage with recent, cutting-edge work in all the major areas of modern labor economics. The second edition, now available, has been substantially updated and augmented.

In an interview with IZA Newsroom, the authors provide some insights into their work:

More than 1,000 pages and lots of supplementary material – looks like a lot of work… What was your main motivation behind this book?

We wanted to provide a comprehensive textbook that could be used both in graduate and introductory classes, with a strong focus on facts, a clear presentation of the main theories and empirical methods. And ten years after the first edition, serious updates were needed.

What are the key improvements over the first edition?

The second edition is more oriented towards empirical methods than the previous one, with dedicated sections in each chapter presenting key econometrics approaches and using a different reference paper each time. A companion website (www.labor-economics.org) provides the data and the Stata codes necessary to reproduce the main results presented in the book. This second edition also presents theories and evaluations of labor market policies and institutions in more detail, with three dedicated chapters. Important issues, such as discrimination, globalization and the effect of technological progress, are also given more attention.

Did you incorporate any user feedback in the second edition?

We surely did. For instance, discussing with students and colleagues we realized that the first edition of the book was somewhat too arduous and abstract when presenting empirical methods. That is why we decided to explain them in a more concrete manner, using seminal papers and explaining them step by step.

What do you believe to be the major trends in labor economics that have shaped and will further advance the discipline?

The development of empirical methods is probably what has contributed most to changing labor economics over the last decade, and we wanted to reflect this in the book. The identification of causal relationships is often a challenge in social sciences, but the field has developed various strategies that can be useful to other disciplines. This trend is likely to strengthen in the coming years with more and more good quality data becoming available, and also with the spread of a culture of evaluating public policies. The theory is also changing: the understanding of job search behavior, labor mobility and labor market dynamics has made important progress over the last decade. Our book also reflects these advances.

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For more information on the book go to the MIT Press page.