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The Effect of Work First Job Placements on the Distribution of Earnings: An Instrumental Variable Quantile Regression Approach

  • David H. Autor
  • Susan N. Houseman
  • Sari Pekkala Kerr

Federal and state employment programs for low-skilled workers typically emphasize rapid placement of participants into jobs and often place a large fraction of participants into temporary-help agency jobs. Using unique administrative data from Detroit's welfare-to-work program, we apply the Chernozhukov-Hansen instrumental variables quantile regression (IVQR) method to estimate the causal effects of welfare-to-work job placements on the distribution of participants' earnings. We find that neither direct-hire nor temporary-help job placements significantly affect the lower tail of the earnings distribution. Direct-hire placements, however, substantially raise the upper tail, yielding sizable earnings increases for more than fifty percent of participants over the medium-term (one to two years following placement). Conversely, temporary-help placements have zero or negative earnings impacts at all quantiles, and these effects are economically large and significant at higher quantiles. In net, we find that the widespread practice of placing disadvantaged workers into temporary-help jobs is an ineffective tool for improving earnings and, moreover, that programs focused solely on job placement fail to improve earnings among those who are hardest to serve. Methodologically, one surprising result is that a reduced-form quantile IV approach, akin to two-step instrumental variables, produces near-identical point estimates to the structural IVQR approach, which is based on much stronger assumptions.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 17972.

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Date of creation: Apr 2012
Date of revision:
Handle: RePEc:nbr:nberwo:17972
Note: LS
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  1. Susan N. Houseman, 2001. "Why employers use flexible staffing arrangements: Evidence from an establishment survey," Industrial and Labor Relations Review, ILR Review, Cornell University, ILR School, vol. 55(1), pages 149-170, October.
  2. Julia Lane & Kelly S. Mikelson & Pat Sharkey & Doug Wissoker, 2003. "Pathways to work for low-income workers: The effect of work in the temporary help industry," Journal of Policy Analysis and Management, John Wiley & Sons, Ltd., vol. 22(4), pages 581-598.
  3. Christopher T. King & Peter R. Mueser, 2005. "Welfare and Work: Experiences in Six Cities," Books from Upjohn Press, W.E. Upjohn Institute for Employment Research, number waw, April.
  4. Katharine G. Abraham, 1988. "Flexible Staffing Arrangements and Employers' Short-Term Adjustment Strategies," NBER Working Papers 2617, National Bureau of Economic Research, Inc.
  5. Chernozhukov, Victor & Hansen, Christian, 2006. "Instrumental quantile regression inference for structural and treatment effect models," Journal of Econometrics, Elsevier, vol. 132(2), pages 491-525, June.
  6. Ichino, Andrea & Mealli, Fabrizia & Nannicini, Tommaso, 2006. "From Temporary Help Jobs to Permanent Employment: What Can We Learn from Matching Estimators and their Sensitivity?," CEPR Discussion Papers 5736, C.E.P.R. Discussion Papers.
  7. Peter R. Mueser & Carolyn J. Heinrich & Kenneth Troske, 2003. "Welfare to Temporary Work: Implications for Labor Market Outcomes," Working Papers 0308, Department of Economics, University of Missouri.
  8. Alberto Abadie & Joshua Angrist & Guido Imbens, 2002. "Instrumental Variables Estimates of the Effect of Subsidized Training on the Quantiles of Trainee Earnings," Econometrica, Econometric Society, vol. 70(1), pages 91-117, January.
  9. Carolyn J. Heinrich & Peter R. Mueser & Kenneth R. Troske, 2007. "The Role of Temporary Help Employment in Low-wage Worker Advancement," NBER Working Papers 13520, National Bureau of Economic Research, Inc.
  10. David H. Autor, 2000. "Why Do Temporary Help Firms Provide Free General Skills Training?," NBER Working Papers 7637, National Bureau of Economic Research, Inc.
  11. SErgio Firpo & Nicole M. Fortin & Thomas Lemieux, 2006. "Unconditional Quantile Regressions," Textos para discussão 533, Department of Economics PUC-Rio (Brazil).
  12. David H. Autor, 2003. "Outsourcing at Will: The Contribution of Unjust Dismissal Doctrine to the Growth of Employment Outsourcing," Journal of Labor Economics, University of Chicago Press, vol. 21(1), pages 1-42, January.
  13. Andrew Dyke & Carolyn J. Heinrich & Peter R. Mueser & Kenneth R. Troske & Kyung-Seong Jeon, 2006. "The Effects of Welfare-to-Work Program Activities on Labor Market Outcomes," Journal of Labor Economics, University of Chicago Press, vol. 24(3), pages 567-608, July.
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