Job hopping, earnings dynamics, and industrial agglomeration in the software publishing industry

This paper investigates the implications of industrial clustering for labor mobility and earnings dynamics in one large and increasingly important high-technology sector. Taking advantage of longitudinal employee-employer matched data, I exploit establishment-level variation in agglomeration to explore how clustering in the software publishing industry affects labor market outcomes. The results show that clustering makes it easier for workers to job hop within the sector. Higher earnings levels in more agglomerated areas are partly attributable to sorting across locations among workers and firms in the industry on the basis of observable and unobservable characteristics. Controlling for this heterogeneity, workers in clusters have relatively steep earnings-tenure profiles, accepting lower wages early in their careers in exchange for stronger earnings growth and higher wages later. These findings are consistent with theoretical models in which agglomeration improves labor market coordination and facilitates greater learning and human capital formation.     

Minimum wages,wages and employment in various sectors in Honduras

This paper contributes to our understanding of the impact of minimum wages on labor markets of developing countries, where there are often multiple minimum wages and compliance is weak. We examine how changes in more than 22 minimum wages over 1990–2004 affect employment, unemployment and average wages of workers in different sectors, defined by coverage under the legislation. The evidence suggests that minimum wages are effectively enforced only in medium and large-scale firms, where a 1% increase in the minimum wage leads to an increase of 0.29% in the average wage and a relatively large reduction in employment of ? 0.46%. We find that public sector wages emulate minimum wage trends but the higher cost of labor does not reduce employment there. There are no discernable effects of minimum wages on the wages of workers in small-firms or the self-employed; yet, higher minimum wages may create more unemployment. We conclude that (even under our upper bound estimate of the effect on the wages of workers) the total earnings of workers in the large-firm covered sector fall with higher minimum wages in Honduras, which warrants a policy dialogue on the structure and level of minimum wages.     

Seniority,experience, and wages in the UK

This paper uses BHPS data to investigate the relative importance of seniority and experience in determining male wages in the UK labor market. Using both the Altonji and Shakotko instrumental variable and the Topel two-step estimation approaches, I find that for all male workers, tenure plays a modest role, increasing wages by about 1% each year over the first 10 years on the job. General labor market experience has a larger role, so that after 30 years wages have increased by about 60%. Individual and job match heterogeneity are important, and should be carefully modeled when estimating wage equations for the British labor market. These results are remarkably similar to the most recent evidence about these relationships in the US labor market. After extending the standard model to include industry and occupation experience, the estimated impact of job seniority becomes negligible for nonunion workers. Instead, the wages of nonunion workers rise because of the accumulation of general and sector-specific experience. The wages of union workers are still found to increase with job seniority over the first ten years with their employer, suggesting that if seniority matters for wages it is only for union workers.     

Urban Wages and Labor Market Agglomeration

Using the 5% public use micro sample of the 1990 U.S. census, we find that observationally equivalent workers in the manufacturing sector earn higher wages when they are in urban labor markets that have a larger share of national or metropolitan employment in their same occupation and industry groups. Quantitatively, the effect is large, with an elasticity (measured at the means) of between 1.2 and 3.6 for these effects. We interpret the willingness of firms to pay more for equivalent workers in dense markets as evidence of an agglomeration economy in urban labor.     

The impact of minimum wages on wages,work and poverty in Nicaragua

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.Our analysis of the relationship between the minimum wage and household income finds: a) increases in legal minimum wages increase the probability that a poor worker's family will move out of poverty, and b) increases in legal minimum wages are more likely to reduce the incidence of poverty and improve the transition from poor to non-poor if they impact the head of the household rather than the non-head; this is because the head of the household is less likely than a non-head to lose his/her covered sector employment due to a minimum wage increase and because those heads that do lose covered sector employment are more likely to go to another paying job than are non-heads (who are more likely to go into unpaid family work or leave the labor force).     

Immigration, Labor Market Mobility, and the Earnings of Native-Born Workers

A bstract .   This article seeks to improve on previous estimates of the impact of immigration on native wages by using an occupational segmentation approach that directly controls for regional migration and other shifts in the native-born U.S. labor supply. The U.S. labor market is segmented by occupation in order to determine which, if any, native workers tend to be vulnerable to increased immigrant competition for jobs. The results suggest that native-born workers in the primary sector are the main beneficiaries of increased immigration, while native-born Hispanic females in the secondary sector are the most susceptible to downward wage pressures.     

The cyclicality of effective wages within employer-employee matches in a rigid labor market

This study analyzes real wage cyclicality for male full-time workers within employer-employee matches in Germany over the period 1984-2004. Five different wage measures are compared: the standard hourly wage rate; hourly wage earnings including overtime and bonus pay; the effective wage, which takes into account unpaid overtime; and monthly earnings, with and without additional pay. None of the hourly wage measures exhibits cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages show a strongly procyclical reaction to changes in unemployment. Despite acyclical wage rates, salaried workers without unpaid overtime experienced procyclical earnings movements if they had income from extra pay. Monthly earnings were also procyclical for hourly paid workers with overtime pay. These findings suggest that cyclical earnings movements are generated by variable pay components, such as bonuses and overtime pay, and by flexible working hours. The degree of earnings procyclicality revealed for the German labor market is comparable to the United States.     

Towards a theory of the labor market with a public sector

The object is to specify and analyze equilibrium in a labor market with frictions when there is a significant public sector. In the vast majority of equilibrium studies on labor markets, a public sector has been ruled out by assumption. This seems a strange oversight as about 17% of workers in the US are public sector workers, whereas in western Europe, approximately 22% of workers work in the public sector. The goal in this study is to provide answers to such questions as: what happens to private sector wages if the public sector is increased? If the Government increases the number of public sector jobs, does this crowd out private sector jobs? When will private sector wages be greater (less) than the public sector wage? Reasonably complete answers to these questions (and others) are provided within the context of the model developed.     

Consequences of self-employment for women and men in the United States

Many self-employed workers return to the wage and salaried sector of the labor market after some time. It is possible that the self-employment spell will lead to lower earnings or earnings growth upon return, due to depreciation of firm or sector-specific human capital. Using longitudinal data from the National Longitudinal Survey of Young Women (NLS), this paper examines the effects of spells of self-employment on the future wage and salary sector earnings of male and female workers in the United States. The results indicate substantial penalties arise for women, in terms of returns to experience, while there is little or no impact for men.     

THE IMPACT OF LABOR MARKET REGULATION ON EMPLOYMENT IN LOW‐INCOME COUNTRIES: A META‐ANALYSIS

Controversy over labor market policy often centers on achieving a balance between preventing worker exploitation, and avoiding loss of productivity or employment through excessive regulation. Although the literature documenting the impact of labor market regulation on employment is extensive, there is a dearth of evidence on the impact of such policies in low‐income countries (LICs). Since it is easier for workers, especially women, to slip into the informal sector in LICs, regulations are likely to have stronger impacts on formal employment in these countries (but lower impacts on unemployment). We systematically reviewed available research from countries that are, or were until recently, LICs. Most studies document that more stringent labor regulations are associated with lower formal sector employment and higher informal sector employment. We also conducted a metaregression analysis of the impact of minimum wages on formal and informal employment. After controlling for publication bias, higher minimum wages are associated with lower formal employment and a higher share of informal workers.     

The Traditional Industrial Sector in Developing Countries: An Update on Its Role and Functioning

A bstract . In the theory of urban labor markets in less developed countries , levels of traditional industrial sector incomes, are a key determinant of modern sector skilled wages (directly through the external labor market) and unskilled wages (indirectly through operations of internal labor markets ). Data on traditional sector incomes for 40 urban areas are assembled from a variety of sources; the quality of these data and needs for future data collection are critically appraised. The data are then used to conduct a preliminary test of the labor market model. In general, the predictions of the model are supported by these tests     

Informality in developing economies: Regulation and fiscal policies

This paper proposes a unified theoretical framework where formal and informal firms coexist and face the same type of product and labor market imperfections: they have monopoly power in the goods market, they are subject to matching frictions in the labor market, and wages are determined by bargaining between large firms and their workers, through either individual or collective bargaining. Our model matches the main stylized facts on informality for developing countries and appears to be a good candidate for policy analysis. In this framework, we study the impact on informality, wages and unemployment of policies that may be used to reduce informality. We consider changes in product market regulation (PMR) and in two types of fiscal policies, labor taxes and formality enforcement. We find that lessening PMR decreases informality and unemployment simultaneously, indicating that there is not necessarily a tradeoff between informality and unemployment. The tradeoff appears when fiscal policies are used, though. Moreover, the impacts of PMR on unemployment and on wages are larger under collective than individual bargaining. With respect to wage inequality, lessening PMR reduces it, while lower taxes tend to increase the formal sector wage premium.     

Wages and the City. Evidence from Italy

We analyze empirically the impact of urban agglomeration on Italian wages. Using micro-data from the Bank of Italy's Survey of Household Income and Wealth for the years 1995, 1998, 2000 and 2002 on more than 22,000 employees distributed in 242 randomly drawn local labor markets, we test whether the structure of wages varies with urban scale. We find that every additional 100,000 inhabitants in the local labor market raises earnings by 0.1 percent. The use of a geographical approach enables us to state that this effect decays very rapidly with distance, losing significance beyond approximately 12 kilometers. We also find that urbanization does not affect returns to experience and that it reduces returns to education and to tenure with current firm, while providing a premium to worker supervisors.     

The effects of labor supply shocks on labor market outcomes: Evidence from the Israeli–Palestinian conflict

Since September 2000, as a result of mobility restrictions, the supply of Palestinian workers competing for local jobs in the West Bank has increased by about fifty percent. This paper takes advantage of this unique natural experiment to study the effects of labor supply shocks on labor market outcomes. Using quarterly information on wages and employment in each city in the West Bank, the paper analyzes the short-run adjustment of labor markets to a large inflow of workers separately from the effects of political instability. The results suggest that low-skilled wages are adversely affected by an increase in the supply of low- and high-skilled workers, while high-skilled wages are only weakly negatively related to an increase in their own supply. This is consistent with a scenario in which high-skilled workers compete for low-skilled jobs, pushing the low-skilled into unemployment. This latter hypothesis is confirmed by analyzing the effects of changes in labor supply on unemployment.     

Language usage,participation, employment and earnings: Evidence for foreigners in West Germany with multiple sources of selection

Language proficiency may not only affect the earnings of the individual, but the probability to participate in the labor market or becoming employed as well. It may also affect selection of people into economic sector and occupation. In this paper, the effects of language proficiency on earnings are analyzed for foreigners in Germany with joint consideration of up to four types of selection. The results show that language proficiency significantly increases participation and employment probability and affects occupational choice. When selection into economic sector and occupation is regarded, we do not find an impact of language ability on earnings thereby implying an indirect effect.     

The incentive for working hard: explaining hours worked differences in the US and Germany

This paper seeks to explain the greater hours worked by Americans compared to Germans in terms of forward-looking labor supply responses to differences in earnings inequality between the countries. We argue that workers choose current hours of work to gain promotions and advance in the distribution of earnings. Since US earnings are more unequally distributed than German earnings, the same extra work pays off more in the US, generating more hours worked. Supporting this inequality–hours hypothesis, we show that in both countries hours worked is positively related to earnings inequality in cross-section occupational contrasts and that hours worked raises future wages and promotion prospects in longitudinal data.     

Industry Mix, Wages, and the Divergence of County Income in Pennsylvania

Per capita incomes have diverged across Pennsylvania counties. County incomes may differ because of differences in industrial structures and because of differences in earnings within industries; a county may have a below-average income because its industry mix is comprised of low paying jobs or because county jobs pay low wages compared to the same jobs in other counties. A procedure developed by Hanna (1951) is utilized to separate income differences into these two components by constructing two counterfactual incomes for each county. The handful of high-income counties in Pennsylvania have favorable wages while the counties with incomes below the state average, although with employment mixes comparable to the overall state mix, tend to have workers who receive low wages relative to the state industry average. Wages are low in the relatively poor counties due to less investment in physical and human capital.     

Why Does Growing up in an Intact Family during Childhood Lead to Higher Earnings during Adulthood in the United States?*

With a view to finding an explanation of the observed differences in adult annual earnings between workers raised in intact (INTACT) and non‐intact families in the US labor market, this study tests two hypotheses. First, workers growing up in intact families during childhood earn more during their adulthood because they acquire more years of schooling, which in turn affect their wages positively. Second, intact family background acts as an instrument for numerous factors that contribute to workers' happiness during adulthood. Since happier workers, with other characteristics held constant, are known to have higher earnings, workers raised in intact families during childhood by leading a relatively happier life during their adulthood earn more than their otherwise identical non‐intact counterparts. Both these hypotheses find strong support from the US data. The evidence of simultaneous relationships between wage and happiness and between happiness and schooling confirms that the true effect of INTACT on wage may be much larger than what is envisaged by a simple one‐step process. Regardless of whether this relationship is due to causation or correlation, the study simply demonstrates that the US evidence of higher earnings associated with workers raised in intact families may be attributed partly to their higher levels of schooling and happier lives. By demonstrating a significant positive relationship between the stability of parental family structure during childhood and earnings during adulthood, the current study highlights the importance of responsible parenthood as a means of improving the child's future economic performance.     

THE IMPACT OF IMMIGRATION ON THE LABOR MARKET

The literature on the impact of immigration on the labor market is highly controversial. The aim of this paper is to review the existing literature and draw some general conclusions on how wages and employment respond to immigration. Economic studies indicate that the impact of immigration on the average wage and employment of native workers is null or slightly positive. However, because adjustments take time, the immediate labor market effects of unexpected (as opposed to expected) migration episodes can be detrimental. Immigration also can have distributional consequences. In particular, the skill composition of immigrants matters in determining their impact on native labor market outcomes. An inflow of immigrants will tend to reduce the wages of competing native workers (with skills similar to those of the migrants), and increase those of complementary workers (with skills that complement those of immigrants). By affecting the skill composition of the workforce, immigration can create winners and losers among native workers via changes in the wage structure.     

Commitment, advertising and efficiency of two-sided investment in competitive search equilibrium

Competitive search entails both commitment to and advertising of pay-off relevant aspects of market participants. This paper considers incrementally the implications of each in a labor market where both workers and firms invest prior to market entry. A wide range of institutional arrangements are addressed within the same general framework. When the characteristics of jobs or workers are advertised the efficient outcome pertains. Commitment without advertising typically leads to market unravelling: the Diamond paradox. But, whenever wages and human capital are advertised, firms become residual claimants; the private and social returns to investment coincide. Absent wage commitment, the Hosios condition implies efficiency when investments are advertised.