Exposure to Labor Market News and Expectations about Job Search & Earnings
Sprache des Vortragstitels:
Englisch
Original Tagungtitel:
SOLE (Society of Labor Economists) Annual Conference 2022
Sprache des Tagungstitel:
Englisch
Original Kurzfassung:
I show that workers update expectations about job search and earnings when
exposed to labor market news. To identify the impact of positive news, I exploit a
unique setting, Foxconn?s announcement to create thousands of high-paying jobs in
Racine, Wisconsin. Exposure to positive news increases the expected salary growth
at the current firm, even if an individual does not expect the employer to match
any potential outside offer. This implies that positive news leads to an increase
in workers? perceived bargaining power, but also that firms and workers frequently
bargain over wages, even without explicit outside offers. I also find that individuals
expectations are consistent with predictions from directed search models. Individuals
exposed to positive labor market news do not adjust their expectations about
the job arrival rate. But, conditional on expecting an offer, they revise their expectations
about potential salary offered considerably upward. Investigating whether
individuals act on their updated expectations, I find suggestive evidence that exposure
to positive news leads to an increase in current consumption expenditures.
Using Foxconn?s later announcement of a downward revised new investment plan
to identify the impact of bad news, I find asymmetries in the updating process.