Working Paper: NBER ID: w9977
Authors: Susan Averett; Howard Bodenhorn; Justas Staisiunas
Abstract: In this paper we test for the existence of compensating differentials for unemployment risk in an era before unemployment insurance. Using information gathered from manufacturing worker surveys conducted during the 1880s in New Jersey, we find that workers who faced higher probabilities of predictable unemployment spells received a small compensating differential. Low-skill laborers and operatives were partially compensated for unemployment risks; skilled craftsmen were not. Although workers were not fully compensated for the unemployment risks they accepted, the results are of interest because most previous writers, dating back to Adam Smith, doubted the existence of compensating differentials in manufacturing. Differentials are typically believed to arise in employments with pronounced seasonal components, such as agriculture and construction.
Keywords: No keywords provided
JEL Codes: N31; J33; J65
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Anticipated unemployment (J64) | Wage differentials (J31) |
| Higher probabilities of predictable unemployment spells (J64) | Compensating differential for lowskill laborers and operatives (J31) |
| Anticipation of missing work (J22) | Higher wages for lowskill laborers and operatives (J31) |
| Skill level (J24) | Differential impact on compensating differentials (J31) |
| Actual compensation for anticipated days of involuntary idleness (J65) | Insufficient to fully offset risks (G52) |