Labor Statistics Essay, Research Paper

The relatively recent development of longitudinal establishment datasets has

generated quite a bit of excitement in both the academic and the statistical

communities. From this literature, we have learned that there is a large amount

of volatility at the individual establishment level that underlies the smooth

time series of aggregate employment growth. The descriptive statistics coming

out of this literature have not only stimulated the review and updating of

existing labor market theories, but have also stimulated the U.S. statistical

agencies to develop their administrative datasets in such a way so as to produce

longitudinal job flow statistics. The purpose of this paper is to use a new

longitudinal database from the Bureau of Labor Statistics (BLS) in order to

examine how establishment births and deaths contribute to job creation, job

destruction, and net employment growth at different frequencies of measurement.

Despite all that we have learned about the labor market from the existing job

flows literature, the conclusions that can be drawn from these studies are

somewhat limited. First, almost all of the existing work using U.S. data has

been restricted to the manufacturing sector. Recent work by several authors has

illustrated how job creation and job destruction in manufacturing may not be

representative of the entire U.S. economy. 1 A second limitation is that most of

the existing empirical work on job flows, either by choice or by necessity, is

based upon data that excludes the smallest establishments. 2 Since most

establishment births and deaths are quite small, at least in the short run, we

are thus unsure how these births and deaths influence employment growth. While

data that focuses on large establishments will cover most employment, an

analysis of job flows depends on the magnitude of employment flows at continuing

establishments relative to the incidence and average size of establishment

births and deaths. The longitudinal database introduced in this paper is not

subject to either of these limitations. The microdata upon which this paper is

based are the unemployment insurance reports that 1 The studies by Davis and

Haltiwanger (1990, 1992), Davis, Haltiwanger, and Schuh (1993, 1996), and Dunne,

Roberts and Samuelson (1988, 1989a, 1989b) have all used manufacturing data

housed at the Center for Economic Studies at the U.S. Census Bureau. Recent work

with unemployment insurance data by Anderson and Meyer (1994), Foote (1997),

Lane, Stevens, and Burgess (1996), and Leonard (1987) has looked at other

sectors of the economy. 2 Small plants with less than five employees are not in

the sample frame of the Annual Survey of Manufactures (ASM) data used by Davis,

Haltiwanger, and Schuh (1996); these plants represent about one-third of all

plants and about 4 to 7 percent of employment. Using the Census of Manufactures,

Dunne, Roberts and Samuelson (1989a) exclude manufacturing plants with less than

5 employees; these excluded plants account for between 30 and 40 percent of all

plants but represent only one percent of employment. The firm sample used by

Anderson and Meyer (1994) includes only firms with at least 50 employees; this

sample accounts for 83 percent of employment.

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