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How health status affects individual time use

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Economics is the science on scarce resources. And what is more scarce than time in modern societies? A recent literature acknowledges this scarcity of disposable time of individuals and households and analyzes the interplay between time allocation and economic decisions and outcomes.

In a new IZA Discussion Paper, José Alberto Molina and J. Ignacio Gimenez-Nadal look at a new aspect of time use: They provide international evidence on how individual satisfaction with one’s health status affects the allocation of time to different daily activities. The researchers analyze daily diaries from six countries in which individuals report how they use their time.

Without claiming a causal interpretation, the authors find that a better health perception is associated with more time spent on paid work and less time devoted to sleep, body care and leisure. But unlike healthier Americans, who also spend more time on home production, Europeans do less housework when they feel healthier. In addition, the study reveals differences in how Europeans tend to allocate their time. For example, Germans invest less time in sleeping or leisure activities compared to other Europeans, but spend more on personal care.

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Tradable quotas as a new way to deal with refugee inflows

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How to handle the inflow of refugees to the European Union is one of the current hot topics in the media. Under the current regime, the share of inflows borne by EU member states is heavily skewed to a small number of receiving countries. As the recent public discussion shows, this unequal distribution gives rise to general resentment of immigration and negative attitudes towards asylum seekers in particular.

To achieve a fairer distribution of asylum seekers and refugees, Jesús Fernández-Huertas Moraga and Hillel Rapoport propose an innovative way to deal with refugees from crisis regions. In their new IZA discussion paper, they propose an EU-wide market for tradable refugee quotas.

Offering asylum to refugees with valid claims is considered an international public good, but for the particular receiving country it constitutes a significant financial burden. The authors show that a market mechanism could efficiently distribute immigrants to the country with the lowest costs (direct costs of accommodation and administration as well as social and political distress). Furthermore, a market mechanism could be designed to take into account preferences of the asylum seekers themselves (in terms of cultural and linguistic proximity).

The resulting solution could lead to a fair distribution of costs, which potentially would increase public acceptance and reduce the probability of social distress created by the increasing asylum-seeker flows.

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Do we have to be afraid of the future world of work?

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The current public debate in many developed countries about the future of paid employment is

Werner Eichhorst

characterized by strong feelings of uncertainty. Studies emphasizing the potentially deep and severe impact of globalization and automation have nourished fears of significant job destruction in the future. Furthermore, in labor markets that have become increasingly flexible, at least in certain areas of employment, issues such as precarity, unstable employment or low pay have gained attention, in particular in the aftermath of the recent global economic crisis.

At the same time, many of those who are employed perceive work as increasingly stressful and demanding, or psychologically overburdening due to ever growing pressure on performance and work intensification. So what can we expect from the future, based on an assessment of the current and most plausible future developments?

From past and current experience, we know that outdated, simple jobs are threatened by offshoring or outsourcing to foreign locations with lower labor costs, or by automation. Companies and sectors shrink or disappear. However, this process seems to be becoming faster and more radical, especially in the age of information and communication technology where opportunities of digitalization are constantly increasing, sometimes at an unexpected speed.

Thus, many see an expanding threat on a fundamental level to existing jobs and firms in developed economies and a massive imminent disruption of employment trends through the digital revolution. This process of the elimination of jobs on the one hand, with the creation of innovative new ones on the other, has long been known as creative destruction.

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Terrorist attacks also affect future generations

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Puerta del Sol in the center of Madrid. Meters away from here, a car bomb injured 12 people in 2000.

Terrorist attacks have detrimental effects not only on those directly affected as victims. The negative consequences also extend to future generations, according to a new IZA Discussion Paper by Climent Quintana-Domeque and Pedro Ródenas-Serrano. Unborn babies show a number of inferior birth outcomes if their mothers were exposed to attacks in their community during pregnancy.

The authors focus on bomb attacks committed between 1980 and 2003 by ETA, the Basque underground organization fighting for independence from Spain. Babies whose mothers had experienced a terrorist attack in their city of residence during pregnancy had a lower average birth weight. The risk of stillbirth also increased. The authors discuss stress and altered health behavior of expecting mothers as pathways. Their results highlight the social burden induced by violent conflict that goes far beyond direct effects through killings and destruction.

 

Active Labor Market Policy reduced crime in Denmark

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The fact that it has been difficult to document a consistent positive effect of the often huge public spending on activation of the unemployed does not imply that it is without consequences how unemployed individuals are spending their time and what they are being offered in terms of programs.

A new IZA discussion paper shows that Active Labor Market Policy (ALMP) in Denmark has reduced crime. The aggregate employment effects of ALMP in Denmark are generally believed to have been slim, but apparently there have been other positive effects to society: By studying welfare-policy changes, the authors find that more activation – mainly in the form of “workfare” – for the young unemployed resulted in a strong decline in the crime rate among the treated unemployed.

Moreover, the criminal activity was reduced in general, also during weekends, when the activation programs were closed, which indicated that the positive effect did not only come from “incapacitation”, i.e. the fact that young unemployed had less time to commit crimes because they had to participate in activation programs. These results imply a strong and potentially lasting crime-reducing effect of workfare and ALMP.

The paper was featured in DIE WELT (Dec. 23, 2014), view online version here.

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Girls benefit most from attending an elite school

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Parents have strong preferences for sending their children to the best schools available. There seems to be a general perception that graduating from a elite school equals winning a lottery in life chances. Empirical evidence though tells a different story, suggesting at best marginal effects on test scores and college outcomes. However, the impact on outcomes later in life is largely unexplored.

In a new IZA Discussion Paper Damon Clark and Emilia Del Bono analyze the effect of elite school attendance on tertiary education, income and fertility. In Aberdeen, Scotland, students in the 1960s were sorted into elite/non-elite schools strictly by a threshold in standardized test scores, giving no room for potential parental influence on the school choice. Comparing students just below and above this threshold provides a natural experiment to assess the effect of attending the elite school.

The authors find strong effects of elite school attendance on completed education for both men and women. However, the results suggest positive income effects of at least eight percent and negative effects on fertility only for women, whereas male later-life outcomes seem to be unaffected.

The researchers conclude that placing girls in an elite school environment with other high-achieving girls may change their perceptions of women’s role in society and their decisions regarding career, marriage and family. These results highlight the important effects of tracking school systems in the long run, a so far under-analyzed but highly important topic.

Should you come out in the workplace and would your employer care?

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According to a report by Nick Drydakis published by IZA World of Labor today, half of gay and lesbian employees do not reveal their sexual orientation in the workplace for fear of discrimination and harassment.

The report goes on to say that while out gay and lesbian employees are happier or more satisfied in their jobs they are less likely to be promoted than their heterosexual counterparts. The findings indicate that gay men often gravitate to more female dominated professions while lesbians frequently thrive in male-dominated work places. In either scenario, out gay and lesbian employees are more likely to be bullied than their heterosexual colleagues.

  • In the UK gay men earn 5% less than heterosexual men with the same skillset
  • In the UK lesbians earn 8% more than heterosexual women with the same skillset
  • Fewer than 20% of countries have adopted sexual orientation anti-discrimination laws in employment

Workplace harassment can have serious mental health consequences for the individuals who are bullied or harassed and detrimental effects on the firm’s smooth operation. Gay and lesbian employees who can be open about their sexual orientation in a safe and diverse workplace are more productive, creative, and loyal because they feel more comfortable and safe.

The report suggests that government intervention to introduce employment policies that are clear and that apply uniformly to all employees, regardless of sexual orientation, would reduce workplace dissatisfaction and boost job satisfaction. Prejudice, stigma and discrimination are minimized in workplaces that have written equality policies and gay and lesbian unions.

These findings imply that legislative protection constitutes only a small step toward improving the employment circumstances and general well-being of people who are gay or lesbian and highlights the need for other policy intervention.

Read coverage e.g. in Daily Mail, The Mirror, The Telegraph and Management Today.

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More women in leadership positions don’t make firms more successful

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Many European countries are contemplating (or have already introduced) mandatory quotas for the share of women on the executive level of firms. The idea is to help women break the glass ceiling and create more equality of opportunity also in the lower ranks. Quota advocates also argue that more gender diversity at the top increases firms’ productivity and performance.

In a new IZA Discussion Paper, Daniele Paserman and Stefano Gagliarducci explored whether this is indeed the case. They looked at the outcomes of Germans firms whose share of women in leadership positions increased substantially between 1993 and 2012. Surprisingly, firms with more women at the top perform worse in terms of business volume, investment, total wage bill per worker, total employment, and turnover. On the other hand, they are more likely to implement female-friendly policies, such as providing childcare facilities or promoting and mentoring female junior staff.

But it is important to note that there is no causal effect. It is rather a matter of sorting: Women are more likely to seek leadership positions in small and less productive establishments that invest less, pay their employees lower wages, but are more female-friendly.

American women respond to immigration inflows by having more children

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The hot debate about President Obama’s immigration reform shows that many Americans still view immigrants as taking jobs away from natives – while in fact quite the opposite can be true: In a recent IZA Discussion Paper, Delia Furtado shows that better childcare availability due to immigrant inflows allows U.S. women to work more despite having more children.

Using U.S. Census data from 1980 and 2000, Furtado provides evidence that immigrant inflows are indeed associated with increased likelihoods of having a baby, and responses are strongest among women who are most likely to consider childcare costs when making fertility decisions – married women with a graduate degree.

More precisely, the distinctive migration-induced decrease in the median wage of childcare workers seems to be transmitted into higher fertility rates: A ten percentage point increase in the share of low-skilled immigrants in a metropolitan area is associated with a 0.67 percentage point increase in the probability that high skilled women in that region give birth.

The responsiveness to decreased costs of childcare seems to be increasing with the educational level. Women with a graduate degree have stronger reactions in their childbearing behavior than women with a college degree, while this relation between graduate and college degree is less pronounced for the effect on the subsequent reentry into the labor market.

This difference in the responsiveness by skill group might explain the inefficiency of many introduced family-friendly policy measures: If high-skilled women react to price changes with disproportional changes in fertility compared to changes in their reentry decision, these fertility increases could offset some of the desired effects on female labor supply.

 

Exposure to Ramadan in utero affects labor market outcomes

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Nutritional disruptions experienced during the stage of fetal development impair an individual’s labor market productivity later in life. This is shown in a new IZA paper by Marie Louise Schultz-Nielsen, Erdal Tekin and Jane Greve, who analyze intrauterine exposure to the month of Ramadan as a natural experiment that might cause shocks to the inflow of nutrients essential for fetal development.

The authors use administrative data from Denmark to investigate the impact of exposure to Ramadan in utero on labor market outcomes of adult Muslim males, including employment status, annual salary, hourly wage rate, and hours of work. They find scarring effects on the fetus expressed as poor labor market outcomes later in life. Specifically, exposure to Ramadan in the 7th month of gestation results in a lower likelihood of employment, a lower salary, and reduced labor supply, but not necessarily a lower wage rate.

These results may partially be driven by increased disability and to a lesser extent by poor educational attainment among those who were exposed to Ramadan during this particular period in utero. Since individuals with biological deficits due to their exposure to Ramadan in utero may have received more favorable resources from society or their parents in an effort to mitigate their disadvantages, the results of the study should be interpreted as the long-term biological and social effects of Ramadan exposure. The pure biological impact without remediation might be larger.

The findings have implications for societies in both Western and developing worlds, where millions of babies continue to be born malnourished due to problems such as poverty. Therefore, the study could be considered a basis for advocating interventions that provide benefits to pregnant mothers or families with young children (e.g., subsidized child care or kindergarten, parental leave policies, mentoring programs for children from low socio-economic backgrounds, etc.).

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