Working Papers
“The Measure of Monopsony: The Labour Supply Elasticity to the Firm and its Constituents“ (NEW July 2023, some results in this paper are split from my JMP “Local Monopsony Power”)
The estimation of labour supply elasticities is central to the measurement of monopsony power in the labour market. In this paper I provide new, firm-level estimates of the labour supply elasticity that distinguish between a recruitment elasticity (for potential new workers) and a separation elasticity (as relevant to incumbents). My study uses comprehensive HR data for a large multi-establishment firm in the UK. This setting allows me to develop job-establishment level variation in wages derived from both a government wage floor policy which only effects my firm under study and arbitrary variation in advertised wages resulting from idiosyncratic HR department decisions. My estimates show that, in contrast to common assumptions, the recruitment elasticity is almost double the size of the separation elasticity. Heterogeneity analysis is suggestive that differences in wage-saliency for job seekers versus incumbents is likely a factor in this difference. Combined the elasticities give a labour supply elasticity to the firm of 4.6 implying a wage markdown of 18% from the marginal product of labour. I find no evidence of spillovers from wage changes to the local market despite establishments being relatively large, indicating a monopsonistic wage setting framework is more suitable than an oligopsonistic one.
“Local Monopsony Power” (JMP, new version coming soon)
Awarded “Econ Job Market Best Paper Award”, 8th Edition, UniCredit Foundation
This paper studies the extent of monopsony power in a low pay labour market and explores its determinants. I emphasise the role of the spatial distribution of activity and workers’ distaste for commuting in generating imperfect substitutability between jobs, and heterogeneity in monopsony power. Using detailed HR data for a firm with hundreds of establishments across the UK, coupled with two sources of job-establishment level exogenous wage variation, I estimate both the recruitment and separation elasticities as well as the commuting-wage elasticity. Estimates show strong evidence of monopsony power, with wage markdowns of 20-25%, and a sizeable distaste for commuting amongst workers. To formalise the role of commutes in generating monopsony power I develop a job search model where utility depends on wages, commutes and an idiosyncratic component. The model endogenously defines probabilistic spatial labour markets which are point specific and overlapping, and generates labour supply to the firm elasticities which vary across space. Distaste for commuting is shown to increase monopsony power, but does so heterogeneously, increasing monopsony power in rural areas more than in denser urban areas. Spatial heterogeneity in market-power predicted by the model is evidenced in both causal estimates using the HR data and descriptive estimates using a nationally representative dataset. Structurally estimating the model using spatial variation in monopsony power I find that commutes are responsible for approximately 1/3 of the wage markdown.
“Non-tariff barriers and consumer prices: evidence from Brexit“ with Jan David Bakker, Richard Davies & Josh De Lyon
In the media: Guardian, BBC, the Times, the Independent, CNBC, Evening Standard, Daily Mirror, Politico, Sky News, Economic Times, City AM, Bloomberg…
Non-Tariff Barriers (NTBs) are the main policy impediment to international trade, yet little is known about their pass-through to prices. This paper exploits the Brexit trade policy shock to quantify how NTBs affect consumer prices and welfare. The increase in NTBs raised prices by 6%, implying a passthrough of 50-80%. Based on a standard welfare framework, we show households lost £5.84bn, domestic producers gained £4.78bn, and £1.06bn was lost through deadweight loss. Due to differences in food expenditure shares, households in the lowest decile experience a 52% higher increase in the cost of living than households in the top decile.
“Living wages and age discontinuities for low-wage workers“ with Stephen Machin
This paper considers an emerging, highly policy relevant feature of minimum wages, studying what happens when a wage floor significantly higher than a nationally legislated minimum is imposed. The consequences of age-wage discontinuities and wage floors higher than mandated minimum wages are explored in the context of a Living Wage being introduced to a large UK organisation through time. Between 2011 and 2019, the Company was exposed to a Living Wage Rate higher than the statutory National Minimum Wage, which was sequentially introduced into some of its establishments and had the effect of boosting wages and strongly increasing the age-wage discontinuity from age-related pay grades. The analysis finds positive labour supply responses at the age discontinuity before Living Wage treatment, but a fall in hours at the discontinuity following treatment. The Living Wage raised wage costs but did not affect aggregate hours, showing a within-establishment reallocation of hours by age arising from differential eligibility to be paid the Living Wage.
“Willing to pay for security: a discrete choice experiment to analyse labour supply preferences”
In the media: CentrePiece, LSE USAPP, VoxEU, WEF, Helsinki Times, Workplace Insights
This paper investigates the extent to which labour supply preferences are responsible for the marked rise in atypical work arrangements in the UK and US. By employing vignettes in a discrete job choice experiment in a representative survey, I estimate the distribution for preferences and willingness-to-pay over various job attributes. The list of attributes includes key distinguishing factors of typical and atypical work arrangements, such as security, work-related benefits, flexibility, autonomy and taxation implications. The results are indicative that the majority of the population prefer characteristics associated with traditional employee-employer relationships, and this preference holds even when analysing just the sub-sample of those in atypical work arrangements. Additionally, preferences across the UK and US are very similar, despite differences in labour market regulations. Rather than suggesting that labour supply preferences have contributed to the increase in atypical work arrangements, I find that the changing nature of work is likely to have significant negative welfare implications for many workers.
Funding: CEP Research Grant (£25,000, Principal Investigator)
Works In Progress
“Two-Sided Market Power: Evidence from the Tenancy Fee Act” with Jan David Bakker
“Consequences of Living Wages > Minimum Wages” with Stephen Machin
Published Work
“Zero Hours Contracts and Labour Market Policy”, with G. Giupponi and S. J. Machin
Economic Policy, 34(99): 369–427, 2019
In the media: The Guardian, Apolitical, OUP Blog
The evolving nature of atypical work arrangements is studied. A particular focus is placed on one such form of work relation: zero hour contracts (ZHCs). The paper uses existing secondary data and new survey data collected for the specific purpose of studying alternative work arrangements to describe the nature of ZHC work in the UK labour market. The interaction with labour market policy is also explored, in the context of the 2016 introduction of the UK’s National Living Wage. ZHC work is shown to be an important feature of today’s work arrangements, and a higher minimum wage has resulted in an increased use of ZHCs in the UK social care sector, and in low wage sectors more generally.