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Research ArticleArticles
Open Access

Labor Market Polarization, Job Tasks, and Monopsony Power

Ronald Bachmann, Gökay Demir and Hanna Frings
Journal of Human Resources, April 2022, 57 (S) S11-S49; DOI: https://doi.org/10.3368/jhr.monopsony.0219-10011R1
Ronald Bachmann
Ronald Bachmann is head of the research unit “Labor Markets, Education, Population” at RWI–Leibniz Institute for Economic Research in Essen, Germany, adjunct professor of labor economics at the Düsseldorf Institute for Competition Economics (DICE) at Heinrich Heine University Düsseldorf, and Research Fellow at IZA.
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Gökay Demir
Gökay Demir is researcher at RWI and Heinrich Heine University Düsseldorf.
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Hanna Frings
Hanna Frings is deputy head of the research unit “Labor Markets, Education, Population” at RWI and Research Fellow at IZA.
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  • Figure 1
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    Figure 1

    Yearly Labor Supply Elasticities for Workers with Different Routine Task Intensity (RTI)

    Source: Authors’ calculations based on SIAB 1985–2014, for West Germany.

    Notes: The estimates are derived from the same specification as in Table 4. Further, a three-way interaction with year dummies is added to analyze the development over time, that is, log wages, RTI, and year dummies are interacted. The plotted lines correspond to the sum of the relevant coefficients for workers with mean RTI as well as workers with RTI one standard deviation below (“low RTI”) and above (“high RTI”) the mean.

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    Figure A.1

    Labor Supply Elasticities for Workers with Different Routine Task Intensity (RTI) over Three-Year Intervals

    Source: Authors’ calculations based on SIAB 1985–2014, for West Germany.

    Notes: The estimates are derived from the same specification as in Table 4. Further, a three-way interaction with three-year dummies is added to analyze the development over time; that is, log wages, RTI, and three-year dummies are interacted. The plotted lines correspond to the sum of the relevant coefficients for workers with mean RTI as well as workers with RTI one standard deviation below (“low RTI”) and above (“high RTI”) the mean.

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    Figure A.2

    Yearly Labor Supply Elasticities for Workers with Different Routine Task Intensity (RTI)-Within-Worker Variation

    Source: Authors’ calculations based on SIAB 1985–2014, for West Germany.

    Notes: The estimates are derived from a stratified Cox model using the same control variables as in Table 4. Further, a three-way interaction with year dummies is added to analyze the development over time; that is, log wages, RTI, and year dummies are interacted. The plotted lines correspond to the sum of the relevant coefficients for workers with mean RTI as well as workers with RTI one standard deviation below (“low RTI”) and above (“high RTI”) the mean.

Tables

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    Table 1

    Sample Description

    RoutineNRMNRCAll Workers
    MeanSDMeanSDMeanSDMeanSD
    Log(daily wage)4.320.334.140.434.480.394.320.38
    Imputed log(daily wage)4.370.384.160.454.750.524.440.48
    Share censored5.652.4732.4212.62
    RTI0.430.150.360.160.260.110.380.16
    NRMTI0.360.170.380.150.170.130.320.17
    NRCTI0.210.180.260.190.570.180.300.23
    Job tenure in years6.366.564.966.015.686.165.976.41
    Share of high-skilled workers in firm5.788.915.528.3117.6620.568.2913.26
    Share of low-skilled workers in firm17.3614.5620.2116.0213.4513.1617.0114.69
    Share of foreign workers in firm9.8913.8413.4117.338.0113.6910.0914.57
    Share of female workers in firm21.2919.2030.0323.0336.9323.5426.1821.93
    Share of part-time workers in firm5.099.158.8114.1510.9814.027.0011.59
    Share in small firms (0–19 employees)24.9819.5022.7323.55
    Share in medium firms (20–250 employees)41.6144.8739.7541.77
    Share in large firms (251–999 employees)17.6518.4619.3518.16
    Share in very large firms (1000+ employees)15.1316.5217.5815.90
    Missing0.630.660.600.63
    Share in agriculture and forestry0.190.160.120.17
    Share in fishery0.010.000.000.01
    Share in mining industry1.480.340.381.04
    Share in manufacturing industry42.6630.9226.2337.09
    Share in energy and water supply industry1.380.290.861.08
    Share in construction industry17.463.092.7211.80
    Share in trade and repair industry13.6617.6212.7514.15
    Share in catering industry0.454.635.642.30
    Share in transport and news industry7.7210.072.727.05
    Share in finance and insurance industry0.560.359.672.48
    Share in economic services industry6.5617.2616.6810.59
    Share in public services industry4.254.464.524.35
    Share in education industry0.421.074.211.35
    Share in health industry0.824.758.303.12
    Share in other industry1.744.334.582.80
    Missing0.640.660.610.64
    Share in top 3 industries with highest collective bargaining commitment22.277.9016.9118.62
    Share in bottom 3 industries with lowest collective bargaining commitment21.8332.3121.1123.49
    Share of foreign workers11.6018.726.8711.82
    Share without vocational training11.2120.462.7010.97
    Share with upper secondary school leaving certificate or vocational training84.4873.8169.4079.38
    Share with university degree or university of applied sciences degree2.171.6325.337.07
    Missing2.154.092.572.58
    Share in age group 18–2515.8718.7610.4515.20
    Share in age group 26–3530.4231.1938.4332.28
    Share in age group 36–4528.4527.3030.0228.59
    Share in age group 46–5525.2722.7521.1123.94
    Share in district-free cities29.9335.9641.4733.47
    Share in urban districts44.3943.0239.7243.15
    Share in rural districts, some densely populated areas14.1612.2210.4813.03
    Share in rural districts, sparsely populated10.888.147.739.73
    Missing0.640.660.600.63
    Number of separations to employment258,28484,761101,819444,864
    Number of separations to nonemployment450,502168,768123,420742,690
    Number of employment spells3,448,117976,9051,216,2195,641,241
    Number of workers338,384164,654171,454465,131
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: Employment spells are split by calendar year. Shares are expressed in percent. All statistics are estimated after dropping censored spells (except imputed wages and the share of censored spells). NRM, nonroutine manual; NRC, nonroutine cognitive; RTI, routine task intensity; NRMTI, nonroutine manual task intensity; NRCTI, nonroutine cognitive task intensity.

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    Table 2

    Labor Supply Elasticity to the Firm by Task Group

    RoutineNRMNRC
    Separation rate to employment
     log wage (ϵe sw)-1.271***-1.203***-0.905***
    (0.012)(0.019)(0.020)
    Observations1,766,919497,460733,684
    Separation rate to nonemployment
     log wage (ϵn sw)-1.628***-1.610***-1.302***
    (0.008)(0.013)(0.015)
    Observations3,351,798930,5941,177,920
    Hiring probability from employment
     log wage Embedded Image1.737***1.519***1.887***
    (0.013)(0.020)(0.022)
     ϵθw1.0651.0211.079
    Observations574,157199,582205,774
    Share of hires from employment (θ)0.3870.3280.428
    Firm-level labor supply elasticity (ϵLw)1.6961.6590.958
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: Clustered standard errors at the person level in parentheses. Covariates included (see Section III for details): dummy variables for age and education groups, immigrant status, occupation fields, economic sector, worker composition of the firm (shares of low-skilled, high-skilled, female, part-time, and immigrant workers in the plant’s workforce), dummy variables for plant size, the average age of its workforce, year and federal state fixed effects, unemployment rate by year and federal state. Significance:

    • * p < 0.10,

    • ** p < 0.05,

    • ↵*** p < 0.01.

    • NRM, nonroutine manual; NRC, nonroutine cognitive.

    • View popup
    Table 3

    Decomposition of the Difference in the Firm-Level Labor Supply Elasticity

    ComponentRoutine Workers’ Estimated Firm-Level Labor Supply ElasticityChange in Percent of the Routine – NRC Difference in the Labor Supply ElasticityNRM Workers’ Estimated Firm-Level Labor Supply ElasticityChange in Percent of the NRM – NRC Difference in the Labor Supply Elasticity
    Routine/NRM workers’ estimated firm-level labor supply elasticity1.6961.659
    … when using NRC workers’ estimated separation rate elasticity to employment (ϵe sw)1.188-68.831.263-56.49
    … when additionally using NRC workers’ estimated separation rate elasticity to nonemployment (ϵn sw)0.989-26.971.056-29.53
    … when additionally using NRC workers’ estimated wage elasticity of the share of hires from employment Embedded Image0.897-12.500.809-35.28
    … when additionally using NRC workers’ estimated share of hires from employment ( = NRC workers’ estimated labor supply elasticity) (θ)0.958+8.300.958+21.30
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: The decomposition is based on estimates from Table 2. NRM, nonroutine manual; NRC, nonroutine cognitive.

    • View popup
    Table 4

    Labor Supply Elasticity to the Firm by Task Intensities (TI)

    RTINRMTINRCTI
    Separation rate to employment
     log wage (ϵe sw mean TI)-1.273***-1.199***-1.241***
    (0.009)(0.009)(0.009)
     log wage × TI-0.315***-0.181***0.359***
    (0.007)(0.007)(0.007)
     ϵe sw (high TI)-1.588-1.380-0.882
     ϵe sw (low TI)-0.958-1.018-1.600
    Observations2,998,0632,998,0632,998,063
    Separation rate to nonemployment
     log wage (ϵn sw mean TI)-1.612***-1.570***-1.582***
    (0.006)(0.006)(0.006)
     log wage × TI-0.227***-0.075***0.222***
    (0.005)(0.005)(0.005)
     ϵn Sw (high TI)-1.839-1.645-1.360
     ϵn sw (low TI)-1.385-1.495-1.804
    Observations5,460,3125,460,3125,460,312
    Hiring probability from employment
     log wage Embedded Image1.725***1.724***1.717***
    (0.010)(0.010)(0.010)
     log wage × TI-0.114***-0.098***0.160***
    (0.008)(0.008)(0.009)
     ϵθw (high TI)1.0521.0851.045
     ϵθw (mean TI)1.0661.0691.082
     ϵθw (low TI)1.0591.0281.104
    Observations979,514979,514979,514
    Share of hires from employment (θ)
     with high TI0.3470.3330.443
     with mean TI0.3820.3800.370
     with low TI0.4240.4360.291
    Firm-level labor supply elasticity (ϵLw)
     with high TI2.2881.8520.985
     with mean TI1.6891.5591.615
     with low TI1.1031.2772.241
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: Clustered standard errors at the person level in parentheses. Routine task intensity (RTI), nonroutine manual task intensity (NRMTI), and nonroutine cognitive task intensity (NRCTI) are standardized with mean zero and standard deviation one. Thus, for instance, workers with low RTI are workers with RTI one standard deviation below the mean, and workers with high RTI are workers with RTI one standard deviation above the mean. Same control variables as in Table 2. Significance:

    • * p < 0.10,

    • ** p < 0.05,

    • ↵*** p < 0.01.

    • View popup
    Table 5

    Labor Supply Elasticity to the Firm by Task Intensities and Collective Bargaining Coverage

    High CoverageLow CoverageBaseline
    Firm-level labor supply elasticity (ϵLw)
     with high RTI2.0101.3792.288
     with high NRMTI1.5101.2371.852
     with high NRCTI1.0440.3870.985
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: Clustered standard errors at the person level in parentheses. Routine task intensity (RTI), nonroutine manual task intensity (NRMTI), and nonroutine cognitive task intensity (NRCTI) are standardized with mean zero and standard deviation one. Thus, for instance workers with low RTI are workers with RTI one standard deviation below the mean, and workers with high RTI are workers with RTI one standard deviation above the mean. Same control variables as in Table 2.

    • View popup
    Table 6

    Separation Rate Elasticities by Task Intensities and Tenure Brackets

    High RTIHigh NRMTIHigh NRCTI
    Separation rate elasticity to employment (ϵe sw)
     Job tenure: 0–3 years-1.066-0.891-0.505
     Job tenure: 3–10 years-0.916-0.783-0.293
     Job tenure: 10+ years-0.698-0.678-0.191
    Separation rate elasticity to nonemployment (ϵn sw)
     Job tenure: 0–3 years-1.446-1.254-1.058
     Job tenure: 3–10 years-1.251-1.132-0.803
     Job tenure: 10+ years-1.092-1.006-0.705
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: We use exponential models for this table. The table shows separation rate elasticities for high routine task intensity (RTI), high nonroutine manual task intensity (NRMTI), and high nonroutine cognitive task intensity (NRCTI) workers. To compute the elasticity of high TI workers we add the coefficient of the interaction term to the coefficient of the log wage in the respective estimations. RTI, NRMTI and NRCTI are standardized with mean zero and standard deviation one. Thus, for instance workers with low RTI are workers with RTI one standard deviation below the mean, and workers with high RTI are workers with RTI one standard deviation above the mean. Same control variables as in Table 2.

    • View popup
    Table 7

    Nonpecuniary Job Charactersistics by Task Group. Odds Ratios from Regression Analysis

    Dependent Variable19851992199920062012
    NRMNRCNRMNRCNRMNRCNRMNRCNRMNRC
    Panel A: Physical Working Conditions
    Work in cold, hot, humid, wet or draught conditions1.259***0.484***0.698***0.576***1.1090.448***1.219*0.258***2.467***0.815*
    (0.078)(0.027)(0.063)(0.053)(0.077)(0.026)(0.127)(0.018)(0.234)(0.097)
    Work under noisy conditions1.0950.470***0.655***0.512***1.0190.395***0.735***0.241***2.845***0.992
    (0.067)(0.026)(0.059)(0.047)(0.071)(0.022)(0.077)(0.017)(0.268)(0.115)
    Work in a physically unfavorable position0.845***0.456***0.571***0.626***0.869**0.409***0.8800.329***2.917***1.023
    (0.053)(0.027)(0.052)(0.059)(0.060)(0.024)(0.093)(0.024)(0.292)(0.131)
    Panel B: Mental Working Conditions
    Work under strong deadline or performance pressure0.805***1.311***0.723***1.629***0.650***1.381***0.9981.502***0.8881.115
    (0.049)(0.067)(0.054)(0.127)(0.045)(0.073)(0.115)(0.114)(0.086)(0.138)
    Perceiving the workplace as part of a community0.8900.9180.8961.319***0.774**0.997
    (0.070)(0.056)(0.121)(0.119)(0.096)(0.151)
    Cooperation with colleagues0.9871.315**0.8831.245
    (0.171)(0.156)(0.136)(0.251)
    Panel C: Satisfaction
    Satisfied with job overall0.650***1.550***0.8881.484***0.9101.273***0.9591.242*
    (0.045)(0.090)(0.079)(0.131)(0.111)(0.097)(0.099)(0.155)
    Satisfied with promotion opportunities0.748***1.350***0.804***1.491***0.8701.402***0.9690.980
    (0.059)(0.112)(0.057)(0.085)(0.094)(0.099)(0.093)(0.115)
    Satisfied with work climate0.855*1.0030.776***1.0130.9681.310***0.9161.037
    (0.070)(0.085)(0.058)(0.058)(0.107)(0.092)(0.087)(0.121)
    Satisfied with the type and content of tasks0.652***1.608***0.717***1.568***0.9221.570***0.9471.292**
    (0.058)(0.140)(0.057)(0.093)(0.113)(0.120)(0.098)(0.162)
    Satisfied with the possibility to use own skills0.620***1.598***0.697***1.597***0.9191.603***1.0191.267**
    (0.051)(0.137)(0.053)(0.095)(0.107)(0.119)(0.100)(0.152)
    Satisfied with the training opportunities0.742***1.424***0.801***1.542***0.794**1.627***1.1281.292**
    (0.058)(0.119)(0.057)(0.088)(0.086)(0.114)(0.107)(0.150)
    Number of observations10,3845,9498,6194,4053,274
    • Source: BIBB 1985, 1992, 1999, 2006, and 2012 waves. Authors’ calculations.

    • Notes: Odds ratios from ordered logit and logit models. Results are from ordered logit models except for the 1992 wave, where logit models are used for all dependent variables in Panel A. Missing cells indicate questions that were not asked in the particular BIBB wave. We recoded the dependent variables such that the lowest value of a variable shows a low level of approval while the highest value shows the highest level of approval. Standard errors are provided in parentheses. We include controls for federal state, sector, education, age, establishment size, immigrant worker, job tenure, and job tenure squared in the estimation. Routine workers are the base category. Significance:

    • ↵* p < 0.10,

    • ↵** p < 0.05,

    • ↵*** p < 0.01.

    • View popup
    Table A.1

    Labor Supply Elasticity to the Firm by Task Intensities (TI)—Exponential Model

    RTINRMTINRCTI
    Separation rate to employment
     log wage (ϵe sw mean TI)-1.454***-1.376***-1.420***
    (0.011)(0.011)(0.011)
     log wage × TI-0.333***-0.195***0.383***
    (0.009)(0.009)(0.009)
     ϵe sw (high TI)-1.787-1.571-1.037
     ϵe sw (low TI)-1.121-1.181-1.803
    Observations2,998,0632,998,0632,998,063
    Separation rate to nonemployment
     log wage (ϵn sw mean TI)-1.849***-1.802***-1.816***
    (0.008)(0.008)(0.008)
     log wage × TI-0.255***-0.106***0.266***
    (0.007)(0.007)(0.007)
     ϵn sw (high TI)-2.104-1.908-1.550
     ϵn sw (high TI)-1.594-1.696-2.082
    Observations5,460,3125,460,3125,460,312
    Hiring probability from employment
     log wage Embedded Image1.725***1.724***1.717***
    (0.010)(0.010)(0.010)
     log wage × TI-0.114***-0.098***0.160***
    (0.008)(0.008)(0.009)
     ϵθw (high TI)1.0521.0851.045
     ϵθw (mean TI)1.0661.0691.082
     ϵθw (low TI)1.0591.0281.104
    Observations979,514979,514979,514
    Share of hires from employment (θ)
     with high TI0.3470.3330.443
     with mean TI0.3820.3800.370
     with low TI0.4240.4360.291
    Firm-level labor supply elasticity (ϵLw)
     with high TI2.7292.2821.314
     with mean TI2.0861.9472.008
     with low TI1.4551.6252.700
    • Source: SIAB and BHP 1985–2014. Authors’ calculations.

    • Notes: Clustered standard errors at the person level in parentheses. Routine task intensity (RTI), nonroutine manual task intensity (NRMTI), and nonroutine cognitive task intensity (NRCTI) are standardized with mean zero and standard deviation one. Thus, for instance, workers with low RTI are workers with RTI one standard deviation below the mean, and workers with high RTI are workers with RTI one standard deviation above the mean. Same control variables as in Table 2. Significance:

    • * p < 0.10,

    • ** p < 0.05,

    • ↵*** p < 0.01.

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Labor Market Polarization, Job Tasks, and Monopsony Power
Ronald Bachmann, Gökay Demir, Hanna Frings
Journal of Human Resources Apr 2022, 57 (S) S11-S49; DOI: 10.3368/jhr.monopsony.0219-10011R1

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Labor Market Polarization, Job Tasks, and Monopsony Power
Ronald Bachmann, Gökay Demir, Hanna Frings
Journal of Human Resources Apr 2022, 57 (S) S11-S49; DOI: 10.3368/jhr.monopsony.0219-10011R1
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  • Article
    • Abstract
    • I. Introduction
    • II. Task Groups, Technological Progress, and Monopsony Power
    • III. Empirical Methodology
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