The Effect of Changes in Real Exchange Rates on Employment: Evidence from Manufacturing Industries in China, 1980–2002

This paper analyzes the effect of changes in real exchange rate on manufacturing employment. Our theoretical model predicts the positive effect of depreciation of real exchange rate on employment through a firm’s expectation on changes in real exchange rate and the interaction between real exchange rate and a firm’s import and domestic input. Using China’s manufacturing data during the 1980–2003 period, we find that depreciation of real exchange rate promotes employment growth in manufacturing industries, while change in real exchange rate is not a significant factor in promoting wage growth. We also find that an increase in export share offsets partially the effects of real exchange rate on employment and real wages. Translated from Journal of World Economy, 2005, (4): (in Chinese)     

Effects of Local,State, and Federal Minimum Wage on Employment Growth among Teenagers in the Restaurant Industry

Over the last 20 years, local municipalities have been implementing minimum wage ordinances at an accelerated rate. These local changes, along with state and federal minimum wage increases, are included in the examination of the impact of minimum wage hikes on employment growth of teenagers in the food services and drinking places subsector. While most minimum wage research focuses on employment levels, recent contributions highlight the importance of analyzing employment growth. Following this trend, this study focuses on teenagers within the restaurant industry to test for the impact of minimum wages on inexperienced workers. Using a distributed-lag model, the results show that an increase in a minimum wage reduces employment growth for teenagers within this subsector. The effects of minimum wages within this demographic were most strongly felt in the first three years following an increase in minimum wage. Specifically, the results show that a 10% increase in the minimum wage decreases the employment growth rate by approximately 2.27% over a period of three years.

     

Are institutional rigidities at the root of European unemployment?

The Netherlands experienced employment growth higher than thatin the US and achieved an unemployment rate of less than 3%,but Germany's unemployment rate remained at high levels. A widelyheld view regards a distorted incentive structure in welfarestates as the ‘root of the European unemployment problem’,but welfare state institutions in the Netherlands are more generousthan the German ones. Therefore, differences in the incentivestructures between the two economies cannot explain the differencesin employment success. The reasons for this seem instead tobe rooted in coordinated monetary, wage and fiscal policiesin the Netherlands while these are incompatible policies inGermany.     

The heterogeneous regional effects of minimum wages in Poland

We evaluate the impact of large minimum wage hikes on employment and wage growth in Poland between 2004 and 2018. We estimate panel data models utilizing the considerable variation in wage levels, and in minimum wage bites, across 73 Polish NUTS 3 regions. We find that minimum wage hikes had a significant positive effect on wage growth and a significant negative effect on employment growth only in regions of Poland that were in the first tercile of the regional wage distribution in 2007. These effects were moderate in size, and appear to be more relevant for wages. Specifically, if the ratio of minimum wage to average wage had remained constant after 2007, by 2018, the average wages in these regions would have been 3.2% lower, while employment would have been 1.2% higher. In the remaining two-thirds of Polish regions, we find no significant effects of minimum wage hikes on average wages or on employment.     

Labour Demand, Wage Mark-ups and Product Market Integration

Globalization makes it easier to relocate production and thus employment across countries. Therefore, it is often asserted that labour demand becomes more elastic, causing wage mark-ups to fall and thus erode the effective market power of trade unions. We explore this issue in a general equilibrium model where the elasticity of labour demand is endogenized and related to the facility by which production can be relocated across countries. Wages and employment increase unambiguously as a result of product market integration, but it is ambiguous whether wage mark-ups decrease or increase. A numerical illustration suggests that the elasticity effect – even when the wage mark-up falls – is of second order relative to the gains from trade.      

Employment expectations and uncertainties ahead of the new German minimum wage

This article analyzes announcement effects of the new statutory minimum wage on employment expectations and uncertainties in Germany. Using a difference‐in‐differences approach applied to the IAB Establishment Panel, employers affected by the minimum wage show an increased employment uncertainty and a 0.9% points drop in their expected employment growth. Using the same identification strategy with data from 2015, the treatment effect on actual employment growth of affected employers matches the employers' expectation. Hence, an analysis of employer expectations seems to be promising to detect employment effects of policy changes before they come into force.     

Intersectoral wage linkages: the case of Sweden

The purpose of this study is to investigate whether wage-setting in certain sectors of the Swedish economy affects wage-setting in other sectors. The theoretical background is the Scandinavian model of inflation, which states that wage-setting in the sectors exposed to international competition lead wage-setting in the sheltered sectors of the economy. The Johansen maximum likelihood cointegration approach is applied to quarterly data on Swedish sector wages for the period 1980:1–2002:2. Different vector error correction (VEC) models are created, based on assumptions as to which sectors are exposed to international competition and which are not. Granger causality tests are then carried out in the different restricted/unrestricted VEC models to test for sector wage leadership. The Granger causality tests provide strong evidence for the presence of intersectoral wage causality, but no evidence of a wage-leading role for the internationally exposed manufacturing sector.      

Real earnings and business cycles: new evidence

In the time domain, the observed cyclical behavior of the real wage hides a range of economic influences that give rise to cycles of differing lengths and strengths. This may serve to produce a distorted picture of wage cyclicality. Here, we employ frequency domain methods that allow us to assess the relative contribution of cyclical frequency bands on real wage earnings. Earnings are decomposed into standard and overtime components. We also distinguish between consumption and production wages. Frequency domain analysis is carried out in relation to wages alone and to wages in relation to output and employment cycles. Our univariate analysis suggests that, in general, the dominant cycle followed by output, employment, real consumer and producer wages and their components is 5–7 years. Consistent with previous findings reported in the macro-level literature, our bi-variate results show that the various measures of the wage are generally not linked to the employment cycle. However, and in sharp contrast with previous macro-level studies we find strong procyclical links between the consumer wage and its overtime components and the output cycle, especially at the 5–7 years frequency.

Observed real wages are not constant over the cycle, but neither do they exhibit consistent pro- or counter-cyclical movements. This suggests that any attempt to assign systematic real wage movements a central role in an explanation of business cycles is doomed to failure. (lucas 1977)

     

Full wages,part-time employment and the minimum wage

The economic effects of the minimum wage have become increasingly ambiguous. Historically, economists have asserted that increases in the minimum wage result in increases in unemployment. This relationship has been challenged recently by Card and Krueger, Katz and Krueger, and Card. These authors have provided empirical evidence that seems to indicate that there is no relationship between various economic variables (such as level of employment, and product price, among others) and the minimum wage. In addition, these authors have not provided a cogent presentation of the effects of the minimum wage on part-time employment. This study examines, from a theoretical standpoint, the effects of the minimum wage on employment. Furthermore, we emphasize the distinction between money wages and full wages; and the role that part-time employmentplays in the analysis. After incorporating these factors into a theoretical presentation, we provide empirical evidence by way of an OLS regression. We conclude that firms respond to increases in the minimum wage by altering the level of part-time employment. By doing this, firms are able to absorb the minimum wage increase because part timers receive fewer fringe benefits.     

Swimming with the Tide: Solidary Wage Policy and the Gender Earnings Gap

This paper addresses the consequences of wage compression for the gender wage gap in Sweden during the period 1968–1991. We find that the effects of changes in the wage structure on women's wages have varied over time and have been partly counteracting. Changes in industry wage differentials have systematically worked against women, while changes in the returns to human capital and unobserved characteristics have contributed to reductions in the gender wage gap. Changes in the wage structure were particularly important between 1968 and 1974 when there was a dramatic reduction in overall wage inequality.
JEL classification : J 16; J 31; J 51     

ENVIRONMENTAL POLICY AND LABOUR MARKET IMPERFECTION

This paper will set up a general equilibrium model with a distorted labour market to explore the effects of an environmental tax and union bargaining power on formal employment and the informal competitive wage. We find that when the government raises the environmental tax, both formal employment and informal competitive wage would fall. In addition, we confirm that a policy of labour market reform would increase both formal employment and the informal competitive wage.     

The Ethnic Employment and Income Gap in Sweden: Is Skill or Labor Market Discrimination the Explanation?*

This study uses a cognitive test score, the Swedish Military Enlistment test taken at age 18, to identify whether the ethnic employment and income gap in Sweden is caused by a pre‐market skill gap and/or ethnic discrimination. The employment gap and income gap are estimated for males born in Sweden with different ethnic backgrounds: their parents were born in Sweden or in southern Europe or outside Europe. Controlling for the cognitive test score does not affect the ethnic employment gap, and for incomes the ethnic income gap almost disappears.     

Inside the Institution of Growthmanship: Reprising the Stagnation Hypothesis

Growthmanship — the once institutionalized legacy of the Keynesian revolution in the US — holds that rapid, sustained growth in GDP should be (and can be) the uppermost macroeconomic policy objective. Postulating the automaticity of market forces, the Chicago school’s ascendency in the early 1970s effectively marginalized growthmanship, while eliding stagnation and refocusing economics on vacuous, equilibrium-driven models. As a result, growthmanship was superseded by the institutionalization of wage stagnation as a macroeconomic policy objective. An institutionalist analysis of stagnation posits conditional and contingent conjunctures and denies the determinism underlying the conceptualization of permanent tendencies. I hypothesize the emergence of a social structure of redistribution based on the institutionalization of wage stagnation. Wage stagnation is a condition arising from the pursuit of neoliberal macroeconomic policies that are antithetical to full employment and wage growth.     

A common trends model of UK core inflation

In this paper the long-run trend in RPI inflation (core inflation) for the UK over the 1961–1997 period is estimated within the framework of a multivariate common trends model which extends the bivariate VAR approach of Quah and Vahey (1995). In this context core inflation is directly linked to money and wage growth and interpreted as the long-run forecast of inflation from a small-scale, cointegrated macroeconomic system. First version received: September 1999/Final version received: October 2001 RID="*" ID="*"  We thank two anonymous referees for many helpful comments and suggestions. Work on this paper was partially conducted when C. Morana was at Heriot-Watt University.     

Income Growth and Earnings Variations in New Zealand, 1998–2004

This article analyses changes in the distributions of working‐age individuals' earnings and total income in New Zealand over the period 1998–2004. We find that there have been broad gains in income across the distribution, suggesting the spoils of growth have been shared widely. Mean and median earnings increased 15 and 23 per cent respectively, while mean and median income increased 12–13 per cent. Inequality, as measured by the Gini coefficient, was more stable: earnings inequality fell 4 per cent, while income inequality was unchanged. The main drivers of the changes were employment and real wage growth. We estimate that roughly one‐half of the growth in average incomes was due to employment growth, and one‐quarter each to demographic changes and wage growth. The relative employment and wage contributions varied across the income distribution: employment growth dominated gains at the lower end of the distribution, while wage gains dominated changes at the higher end.     

Wage inequality in developing countries: South–South trade matters

The relationship between trade liberalization and inequality has received considerable attention in recent years. The major purpose of this study is to present new results on the sources of wage inequalities in manufacturing taking into account South–South (S–S) trade. Globalization has not only lead to increasing North–South (N–S) trade, but it has also changed the direction and composition of trade as more trade is carried out among developing countries. In this study, we find that increasing wage inequality is associated more with the South–South trade liberalization than with the classical trade liberalization with northern countries. A part of this increasing wage inequality due to S–S trade comes from the development of N–S trade relationship in S–S trade that increases wage inequality in middle-income developing countries. This study also seeks to shed some light on the link between the direction of trade and technological change. We explore the fact that S–S trade leads to a technological change biased toward skill-intensive sectors more than N–S trade. This indirect effect increases wage inequality for all developing countries, but it is more important in low-income countries.     

A Union-bashing Model of Inflation Targeting

This paper shows that in an open two‐sector economy, centralization of wage setting may be important in determining the employment (and welfare) effects of different monetary targets. By disciplining unions in the sectors open to international trade, exchange rate targeting yields higher employment than inflation targeting when wage‐setting is more centralized in the open sector than in the shielded sector. When wage‐setting centralization is higher in the shielded sector, we show that general price‐level inflation targeting, while better than exchange rate targeting, is inferior to an inflation target that focuses more heavily on shielded sector prices.     

二元经济结构下最低工资的就业效应研究——基于劳动力市场的视角

现阶段我国整体就业形势不容乐观,分析最低工资对就业的影响具有重要的现实意义。通过对我国劳动力市场分割条件下最低工资的就业效应进行实证分析发现,最低工资对竞争性行业劳动力市场（城市二级劳动力市场）就业有显著的正面影响,对行政垄断行业劳动力市场（城市一级劳动力市场）就业的正面影响则很小。因此,根据我国劳动力市场的具体情况,合理设置最低工资标准有利于促进就业。     

The Employment Effects of Gender Discrimination in Australia 1994–95

Interpreting the unexplained component of the gender wage gap as indicative of discrimination, the empirical literature to date has tended to ignore the potential impact wage discrimination may have on employment. Clearly, employment effects will arise if discrimination lowers the female offered wage and the labour supply curve is upward sloping. The empirical analysis employs the ABS Income Distribution Survey 1994–95 and finds evidence of both wage and associated employment effects. The analysis is replicated for the earlier period 1989–90. A comparison across time is of interest given the substantial deregulation of the Australian labour market over the period.