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Labor market news and expectations about jobs & earnings

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  • Schmidpeter, Bernhard

Abstract

I show that workers update expectations about job search and salary growth when exposed to labor market news. To identify the impact of news on expectations, I exploit Foxconn's announcement to build a large production plant in Racine County, Wisconsin. Exposure to positive news leads to an increase in expected salary growth at the current firm, with no discernible differences between workers who are optimistic about receiving any outside offer in the future and those who are not. This suggests that firms and workers bargain frequently over wages, even in the absence of an outside job offer. Moreover, I find that individuals revise their expectations about potential outside wage offers upward, anchoring their beliefs in Foxconn's publicly announced wages. Investigating whether individuals act on their updated beliefs, I find evidence that exposure to the news leads to a small increase in current consumption. Using Foxconn's later announcement of a scaled down version of the initial investment plan, I find that individuals revise their expectations back toward baseline.

Suggested Citation

  • Schmidpeter, Bernhard, 2023. "Labor market news and expectations about jobs & earnings," Ruhr Economic Papers 1030, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.
    • Handle: RePEc:zbw:rwirep:279546
    DOI: 10.4419/96973199
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    References listed on IDEAS

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    More about this item

    Keywords

    Beliefs formation; wage expectations; outside options; consumption;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • D84 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Expectations; Speculations
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • J63 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers - - - Turnover; Vacancies; Layoffs

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