Working Papers
Turnover Costs: Evidence From Unexpected Worker Separations. Pdf
Job Market Paper. Antoine Bertheau, Pierre Cahuc, Simon Jäger, and Rune Vejlin
Abstract: To what extent do unexpected worker exits affect firm profits? To answer this question, we exploit exogenous variation coming from unexpected worker deaths, linked with rich administrative data on firm profitability in Denmark. We find that turnover costs are large – equal to roughly one year of labor costs for an average employee – much larger than previous evidence based on employer surveys. The imperfect substitutability of incumbent workers with outsiders drives the larger estimates. We find negative effects on revenue even after employment has recovered and higher labor costs to retain the remaining workers. Our findings of substantially higher replacement costs help to resolve puzzles in search and matching models, which struggled to reconcile seemingly low turnover cost estimates with several other empirical regularities.
Selected presentations: NBER Summer Institute (Macro Perspectives), SOLE, the Dale Mortensen Centre Conference, SaM, EALE
Why Firms Lay Off Workers instead of Cutting Wages: Evidence from Matched Survey-Administrative Data -November 2022.
Antoine Bertheau, Marianna Kudlyak, Birthe Larsen and Morten Bennedsen
Abstract: We study how firms adjust labor in response to adverse shocks—via layoffs or pay cuts—and the reasons behind each adjustment margin. To do so, we design and implement a novel large-scale survey of firms in Denmark and link it to administrative data. We find, first, that layoffs are much more prevalent than pay cuts, but pay cuts are not rare. Second, employers do not consider pay cuts to be a viable substitute for layoffs during crises. The size of a hypothetical pay cut needed to save a layoff is large. Furthermore, some layoffs during a crisis are not caused by the crisis. Rather, a crisis is an opportune time for firms to lay off some workers. Third, employers who did not cut base pay think that it would damage morale, or lead employees to quit, or they perceive base pay as a commitment to employees. Fourth, losing specific workers’ skills is the most important consideration in layoff decisions.
Selected presentations: SOLE, COPE, the Dale Mortensen Centre Conference, the Nordic Summer Institute in Labor Economics, the CRC Workshop on Labor Markets
Job Ladders by Firm Wage and Productivity - January 2023. Submitted.
Antoine Bertheau and Rune Vejlin
Abstract: We investigate whether workers reallocate up firm productivity and wage job ladders, and the cyclicality of this process. We document that productivity is a better measure of the job ladder than the average wage, since high productivity firms relative to low poach more workers than high wage firms relative to low. Employment cyclicality over the business cycle differs between the firm wage and productivity ladders. In recessions, employment decreases more in low than in high productivity firms. Low productivity firms fire more workers in recessions and stop hiring unemployed workers. Thus, there is a cleansing effect of recessions from the point of view of productivity reallocation. Oppositely, employment decreases more in high than in low wage firms, and the poaching channel of employment growth explains the difference. In recessions separations to other firms slow down more in low wage firms relative high wage firms and thus reallocation up the wage job ladder breaks down - a sullying effect of recessions. Thus recessions speed up productivity-enhancing reallocation but impede progression on the wage ladder.
Selected presentations: SOLE, the Dale Mortensen Centre Conference, EALE, SaM, briq Workshop on Firms Jobs and Inequality, IZA Labor Statistics Workshop
Worker skills or firm wage-setting practices? Decomposing wage inequality across 20 OECD countries - January 2023. Submitted.
Chiara Criscuolo, Alexander Hijzen, Cyrille Schwellnus, Erling Barth, Antoine Bertheau, Wen-Hao Chen, Richard Fabling, Priscilla Fialho, Jonathan Garita, Andrei Gorshkov, Katarzyna Grabska-Romagosa, Antton Haramboure, Ryo Kambayashi, Michael Koelle, Valerie Lankester, Timo Leidecker, Balazs Murakőzy, Oskar Nordström Skans, Satu Nurmi, Vladimir Peciar, Capucine Riom, Duncan Roth, Catalina Sandoval, Balazs Stadler, Richard Upward and Wouter Zwysen
Abstract: What drives differences in pay between firms? To answer this question, we build a harmonised cross-country linked employer-employee data set to analyse the role of firms in wage inequality since the 2000s in 20 OECD countries. The main finding is that, on average across countries, changes in the dispersion of average wages between firms explain about half of the changes in overall wage inequality. Two-thirds of these changes in between-firm wage inequality, i.e. about a third of overall wage inequality, are accounted for by changes in wage premia, i.e. the part of wages that is determined by the firm rather than the characteristics of its workers. The contribution of wage premia tends to be larger in countries with decentralised collective bargaining systems and lower levels of job mobility. The remaining third, i.e. a sixth of overall wage inequality, can be attributed to changes in workforce composition, including the sorting of high-skilled workers into high-paying firms. These results suggest that firms play an important role in explaining wage inequality as wages are determined, to a significant extent, by firm wage-setting practices rather than being exclusively determined by workers’ earnings characteristics.
From Matchy-Administrative
Employer Wage-Setting Power: Evidence From Matched
Turnover Costs: Evidence From Unexpected Worker Separations. Pdf
Job Market Paper. Antoine Bertheau, Pierre Cahuc, Simon Jäger, and Rune Vejlin
Abstract: To what extent do unexpected worker exits affect firm profits? To answer this question, we exploit exogenous variation coming from unexpected worker deaths, linked with rich administrative data on firm profitability in Denmark. We find that turnover costs are large – equal to roughly one year of labor costs for an average employee – much larger than previous evidence based on employer surveys. The imperfect substitutability of incumbent workers with outsiders drives the larger estimates. We find negative effects on revenue even after employment has recovered and higher labor costs to retain the remaining workers. Our findings of substantially higher replacement costs help to resolve puzzles in search and matching models, which struggled to reconcile seemingly low turnover cost estimates with several other empirical regularities.
Selected presentations: NBER Summer Institute (Macro Perspectives), SOLE, the Dale Mortensen Centre Conference, SaM, EALE
Why Firms Lay Off Workers instead of Cutting Wages: Evidence from Matched Survey-Administrative Data -November 2022.
Antoine Bertheau, Marianna Kudlyak, Birthe Larsen and Morten Bennedsen
Abstract: We study how firms adjust labor in response to adverse shocks—via layoffs or pay cuts—and the reasons behind each adjustment margin. To do so, we design and implement a novel large-scale survey of firms in Denmark and link it to administrative data. We find, first, that layoffs are much more prevalent than pay cuts, but pay cuts are not rare. Second, employers do not consider pay cuts to be a viable substitute for layoffs during crises. The size of a hypothetical pay cut needed to save a layoff is large. Furthermore, some layoffs during a crisis are not caused by the crisis. Rather, a crisis is an opportune time for firms to lay off some workers. Third, employers who did not cut base pay think that it would damage morale, or lead employees to quit, or they perceive base pay as a commitment to employees. Fourth, losing specific workers’ skills is the most important consideration in layoff decisions.
Selected presentations: SOLE, COPE, the Dale Mortensen Centre Conference, the Nordic Summer Institute in Labor Economics, the CRC Workshop on Labor Markets
Job Ladders by Firm Wage and Productivity - January 2023. Submitted.
Antoine Bertheau and Rune Vejlin
Abstract: We investigate whether workers reallocate up firm productivity and wage job ladders, and the cyclicality of this process. We document that productivity is a better measure of the job ladder than the average wage, since high productivity firms relative to low poach more workers than high wage firms relative to low. Employment cyclicality over the business cycle differs between the firm wage and productivity ladders. In recessions, employment decreases more in low than in high productivity firms. Low productivity firms fire more workers in recessions and stop hiring unemployed workers. Thus, there is a cleansing effect of recessions from the point of view of productivity reallocation. Oppositely, employment decreases more in high than in low wage firms, and the poaching channel of employment growth explains the difference. In recessions separations to other firms slow down more in low wage firms relative high wage firms and thus reallocation up the wage job ladder breaks down - a sullying effect of recessions. Thus recessions speed up productivity-enhancing reallocation but impede progression on the wage ladder.
Selected presentations: SOLE, the Dale Mortensen Centre Conference, EALE, SaM, briq Workshop on Firms Jobs and Inequality, IZA Labor Statistics Workshop
Worker skills or firm wage-setting practices? Decomposing wage inequality across 20 OECD countries - January 2023. Submitted.
Chiara Criscuolo, Alexander Hijzen, Cyrille Schwellnus, Erling Barth, Antoine Bertheau, Wen-Hao Chen, Richard Fabling, Priscilla Fialho, Jonathan Garita, Andrei Gorshkov, Katarzyna Grabska-Romagosa, Antton Haramboure, Ryo Kambayashi, Michael Koelle, Valerie Lankester, Timo Leidecker, Balazs Murakőzy, Oskar Nordström Skans, Satu Nurmi, Vladimir Peciar, Capucine Riom, Duncan Roth, Catalina Sandoval, Balazs Stadler, Richard Upward and Wouter Zwysen
Abstract: What drives differences in pay between firms? To answer this question, we build a harmonised cross-country linked employer-employee data set to analyse the role of firms in wage inequality since the 2000s in 20 OECD countries. The main finding is that, on average across countries, changes in the dispersion of average wages between firms explain about half of the changes in overall wage inequality. Two-thirds of these changes in between-firm wage inequality, i.e. about a third of overall wage inequality, are accounted for by changes in wage premia, i.e. the part of wages that is determined by the firm rather than the characteristics of its workers. The contribution of wage premia tends to be larger in countries with decentralised collective bargaining systems and lower levels of job mobility. The remaining third, i.e. a sixth of overall wage inequality, can be attributed to changes in workforce composition, including the sorting of high-skilled workers into high-paying firms. These results suggest that firms play an important role in explaining wage inequality as wages are determined, to a significant extent, by firm wage-setting practices rather than being exclusively determined by workers’ earnings characteristics.
From Matchy-Administrative
Employer Wage-Setting Power: Evidence From Matched
Publications
The Unequal Consequences of Job Loss across Countries - American Economic Review: Insights. Accepted.
Antoine Bertheau, Edoardo Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio
Media Coverage: VoxEu.org and World Economic Forum in English, LaVoce.info in Italian, The Conversation España in Spanish, Portuguese Economy Research Report in English.
The Unequal Consequences of Job Loss across Countries - American Economic Review: Insights. Accepted.
Antoine Bertheau, Edoardo Acabbi, Cristina Barcelo, Andreas Gulyas, Stefano Lombardi, and Raffaele Saggio
Media Coverage: VoxEu.org and World Economic Forum in English, LaVoce.info in Italian, The Conversation España in Spanish, Portuguese Economy Research Report in English.
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Abstract:
We document the consequences of losing a job across countries using a harmonized research design applied to seven matched employer-employee datasets. Workers in Denmark and Sweden experience the lowest earnings declines following job displacement, while workers in Italy, Spain, and Portugal experience losses three times as high. French and Austrian workers face earnings losses somewhere in between. Key to these differences is that Southern European workers are less likely to find employment following displacement. Loss of employer-specific wage premiums explains a substantial portion of wage losses in all countries. Employer-to-Employer Transitions and Time Aggregation Bias - Labour Economics. April 2022.
Antoine Bertheau and Rune Vejlin Abstract:
The rate at which workers switch employers without experiencing a spell of unemployment is one of the most important labor market indicators. However, Employer-to-Employer (EE) transitions are hard to measure in widely used matched employer-employee datasets such as those available in the US. We investigate how the lack of the exact start and end dates for job spells affect the level and cyclicality of EE transitions using Danish data containing daily information on employment relationships. Defining EE transitions based on quarterly data overestimates the EE transition rate by approximately 30% compared to daily data. The bias is procyclical and is reduced by more than 10% in recessions. We propose an algorithm that uses earnings and not just start and end dates of jobs to redefine EE transitions. Our definition performs better than definitions used in the literature. Employer Search Behavior: Reasons for Internal Hiring - Labour Economics. December 2021.
Antoine Bertheau Abstract:
This article studies reasons for internal hiring, i.e., re-assigning or promoting an employee instead of recruiting an external candidate. We exploit a representative survey of establishments covering all European Union countries to measure employers’ search for internal candidates. Internal search is a widespread practice: 66% of establishments typically search internally. The accumulation of specific skills and the provision of incentives for employees are the main advantages of hiring internally in the theoretical literature. Ordered probit estimates show that on-the- job training and internal search are positively associated. On the contrary, incentive schemes such as variable pay are not associated with employer search. These results help to assess competing theories, and in particular, suggest that specific human capital is an important driver of internal hiring. Finally, we uncover two interesting facts that need further research: internal hiring is less likely in service firms and in non-competitive product markets. |
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Work in Progress
Employer Wage-Setting Power: Evidence From Matched Survey-Administrative Data
Abstract: Employers misperceive their position on the pay distribution. In particular, two-thirds of employers who think they pay about the same wages as their competitors are paying higher or lower wages. The misperception is stronger for small and less productive firms. We document this fact by eliciting employers' beliefs in a representative survey in Denmark and comparing them to measures of actual wage policies in linked administrative labor market data. The most common reason to set high wages is to attract candidates and retain incumbent employees. Compensating for negative job characteristics is the least common reason to set high wages.
Policy Work
I am an active member of the Link Employer-Employee Data (LinkEED) working group, coordinated by the OECD. The previous topics covered the role of the firm for the gender wage gap, and labour market monopsony and wage-setting power.
Book chapter : “Monopoly’s neglected twin? The effect of labour market concentration on wages and inequality” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team
Book chapter : “Is it where you work, what you do, or what you get? Unpacking the gender wage gap and its evolution over the life-course” in "The Role of Firms in Wage Inequality” published by the OECD in 2021, with the LinkEED team