On May 27, Michael Reich, Professor at UC Berkeley, will join the Program for Research on Inequality for a discussion. His presentation will cover “Heterogeneous Labor Supply Elasticities and Wage Markdowns.”
Abstract:
We provide novel estimates of heterogeneity in labor supply elasticities among different groups of U.S. workers, using survey and administrative datasets. Our survey results are based on the Federal Reserve’s SHED for 2021 to 2024, which asked workers how they would respond to hypothetical wage cuts. Our administrative results use QWI separation data on restaurant workers from 2001 to 2019. Elasticities are significantly higher among white workers than among black or Hispanic workers, marginally higher among men than among women, and vary little with age, education, and household income. Building on Amior and Manning (2021), we examine the wage markdown implications of heterogeneous labor supply elasticities. If some groups of workers have less elastic labor supplies, wage markdowns are greater for all workers. These markdowns are larger when the labor supply is more heterogeneous.