Dissecting Between-Plant and Within-Plant Wage Dispersion: Evidence from Germany

Using rich linked employer–employee data for (West) Germany between 1996 and 2014, we conduct a decomposition analysis based on recentered influence function (RIF) regressions to analyze the relative contributions of various plant and worker characteristics to the rise in German wage dispersion. Moreover, we separately investigate the sources of between-plant and within-plant wage dispersion. We find that industry effects and the collective bargaining regime contribute the most to rising wage inequality. In the case of collective bargaining, both the decline in collective bargaining coverage and the increase in wage dispersion among the group of covered plants have played important roles.     

Doubts Regarding the Human Capital Theory of Racial Inequality

Using wage data developed by Smith (1984), this paper compares human capital and institutional explanations of trends in the racial wage gap since 1890. While a regression including daily schooling variables is consistent with the human capital theory, so is an institutional model which omits schooling variables but adds the influences of isolation in the rural South, discriminatory hiring and promotion practices, unemployment, and government policy. Including schooling and institutional variables together casts doubt on the relative importance of schooling compared to labor market demands and political variables.     

The Impact of Wage Bargaining Regime on Firm‐Level Competitiveness and Wage Inequality: The Case of Ireland

This paper uses a linked employer‐employee dataset to analyze the impact of institutional wage bargaining regimes on average labor costs and within‐firm wage dispersion in private sector companies in Ireland. The results show that while centralized bargaining reduced labor costs within both the indigenous and foreign‐owned sectors, the relative advantage was greater among foreign‐owned firms. The analysis suggests that there are potentially large competitiveness gains to multinational companies that locate in countries implementing a centralized bargaining system. Furthermore, the results provide additional support to the view that collective bargaining reduces within‐firm wage inequality.     

Inertia and Discrimination in the California State Civil Service

Analysis of the California State Civil Service indicates that its occupational wage structure is very stable. Salaries established in 1931 continue to influence current wages, over 60 years later, even while controlling for market wages. This results from the California Civil Service's policy of maintaining the relative wage structure that was established initially in 1931 despite conflicting market wages. Because the California Civil Service explicitly lowered salaries for female-dominated jobs when it established its initial salary structure, these jobs remained underpaid by $1.6 billion from 1973 to 1993. These findings support notions of wage rigidity and fairness in efficiency wage and institutional labor market theories.     

The Effect of Interest Arbitration on Salary Dispersion Among Employers

This study uses Wisconsin teacher salary grid data for the period 1974–75 to 1984–85 to examine the impact of interest arbitration on wage determination and salary dispersion among employers. Models of wage determination are developed and estimated using observations from a period before and after implementation of arbitration. These wage equations are then used to decompose the difference in the variance of the log wages for the two periods. The results suggest that although observed salary dispersion is greater at the statewide level under arbitration, the imposition of arbitration mitigates the impact of measured factors on wage determination, resulting in less salary dispersion within small clusters of school districts, all else constant.     

Entry deregulation,firm organization,and wage inequality

This paper identifies a causal link between changes in product market competition, firm reorganization and within-firm wage inequality. We exploit a unique episode of comprehensive firm entry deregulation as a quasi-natural experiment and use exceptionally detailed linked employer-employee data for the universe of private sector firms and workers in Portugal. Following deregulation affected firms flatten their hierarchies: the number of layers is reduced and managers’ span of control increased. Dropping a hierarchy layer is accompanied by a significant reduction in wage inequality within the firm, by 8% for the average pay ratio between the top and the bottom layer and 4.4% for the 90-50 percentile wage ratio, showing that there are real changes arising from firm reorganization. Overall wage dispersion, measured by the standard deviation of hourly pay, is also reduced. We discuss mechanisms and interpretations for these changes.     

Collective Bargaining and Within-firm Wage Dispersion in Spain

This paper analyses the effect of collective bargaining on within‐firm wage dispersion for the case of Spain. What is relevant in the Spanish case is to compare the effect of the two basic levels of bargaining (firm and sector) on wage dispersion. By using the Oaxaca–Blinder decomposition, this paper concludes that collective agreements at firm level have a negative effect on wage dispersion. At the same time, firms that have signed these types of agreements show greater wage dispersion than those covered by agreements at the sector level, owing to the positive and compensating effect of firms’ and workers’ features.     

Changes in the Relative Economic Performance of Immigrants to Great Britain and the United States, 1980–2000

We compare the relative labour market performance of immigrants in the USA and in Britain over the period 1980–2000, when the stocks of immigrants were rising in both countries alongside differential shifts in demand and changes to labour market institutions. We find that the average relative employment prospects of immigrants are generally better in the USA than in Britain, particularly for non‐white immigrants, while the average relative wage prospects for immigrants are generally better in Britain, particularly for men. Over time, relative wage and employment prospects for immigrants to the USA appear to have deteriorated, particularly among women, in a way that is not as apparent in Britain.     

Collective Bargaining and the Evolution of Wage Inequality in Italy

Italian male wage inequality has increased at a relatively fast pace from the mid‐1980s until the early 2000s, while it has been persistently flat since then. We analyse this trend, focusing on the period of most rapid growth in pay dispersion. By accounting for worker and firm fixed effects, it is shown that workers' heterogeneity has been a major determinant of increased wage inequalities, while variability in firm wage policies has declined over time. We also show that the growth in pay dispersion has entirely occurred between livelli di inquadramento, that is, job titles defined by national industry‐wide collective bargaining institutions, for which specific minimum wages apply. We conclude that the underlying market forces determining wage inequality have been largely channelled into the tight tracks set by the centralized system of industrial relations.     

Sectoral Productivity and the Distribution of Wages

Policy reports suggesting that productivity growth will raise the earnings of low-wage workers are based on the concept that gains from productivity will trickle down to raise the wages of workers at the lower end of the wage distribution. The compensation and employment systems of American industry do strongly link gains in industry productivity to wage increases for most workers. However, this analysis finds that the linkage of productivity change to wage change for the workers at the lower end of the distribution is virtually nonexistent. The empirical results of this study suggest that productivity increases have no effect on the wage change of workers at the lowest 10th percentile of the distribution and widen the dispersion in industry wages.     

Managerial Intentions and Wage Determination in the Canadian Petroleum Industry

Scant attention has been given to the impact of managerial objectives on wage policies. This study demonstrates that in the Canadian petroleum industry, which has minimal wage dispersion, managerial objectives—in particular, a tendency toward imitative behavior and a strategy of union avoidance—do affect wage determination.     

Trade Union Concentration and the Determination of Wages: The Case of Teachers in England and Wales

Multi-unionism is a common feature of the industrial relations scene, yet to date there has been relatively little economic analysis of its effects, in particular on the outcome of wage negotiations. In this paper, we examine the impact of multi-unionism—specifically, the degree of union membership concentration—on the determination of the relative pay of a particular occupational group, namely that of schoolteachers in England and Wales. We measure teacher trade union concentration using the Herfindahl index of concentration, and find that, after controlling for other possible influences, changes in the value of this index have a positive impact on schoolteachers' relative pay. In addition, we find union membership concentration to be a better indicator of 'union pushfulness' effects in wage determination than the traditional measure, union density. These findings are potentially of wider significance for the analysis of wage determination in multi-union environments.     

Estimating the Wage Premium of Collective Wage Contracts: Evidence from Longitudinal Linked Employer–Employee Data

Using a large‐scale linked employer–employee dataset from western Germany, this paper presents new evidence on the wage premium of collective bargaining contracts. In contrast to previous studies, we seek to assess the extent to which differences in wages between workers in covered and uncovered firms arise from the nonrandom selection of workers and firms into collective bargaining coverage. By measuring the relative wage changes of workers employed in firms that change contract status, we obtain estimates that depart considerably from previous results relying on cross‐sectional data. Results from analyzing separate transitions show that leaving industry‐level contracts is associated with subsequent wage losses. However, the results from a trend‐adjusted difference‐in‐difference approach indicate that particularly the transitions to no coverage appear to be associated with negative shocks. Overall, our findings provide no evidence of a “true” wage effect of leaving wage bargaining, once we account for differences in pretransition wage growth.     

Unions,Wage Gaps,and Wage Dispersion: New Evidence from the Americas

Using a common methodology, the effects of unions on wage levels and wage dispersion are estimated for two neighboring countries, Bolivia and Chile, and for the United States. The analysis shows that unions have broadly similar effects on the wage distribution within these three economies. The findings suggest that the political economy of unions, coupled with market constraints on labor costs, produce commonality in union wage effects that transcend other economic and institutional differences.     

Rising Wage Inequality, Returns to Education and Labour Market Institutions: Evidence from Ireland

Institutional factors and increased supply of skilled labour have been advanced in an effort to explain why some countries have experienced smaller increases in earnings dispersion and in returns to education than the USA and the UK. Ireland has had a highly centralized wage bargaining structure and the supply of skilled labour has increased sharply in recent years; hence, relatively little change in earnings dispersion might be expected. We compare the distribution of earnings in Ireland in 1987 and 1994 and find a surprisingly large growth in earnings dispersion. In addition, using a decomposition technique, we find that much of this is accounted for by increasing returns to measured.     

A Note on the Changes in the Relative Wages of LEP Hispanic Men between 1980 and 2000

Using the Juhn‐Murphy‐Pierce (1993 ) wage decomposition technique, we analyzed changes in the earnings differential between Hispanic and non‐Hispanic white men in the United States between 1980 and 2000. The empirical findings, based on decennial census data, indicate that limited‐English‐proficient (LEP) Hispanic men gained in their relative earnings position compared to English‐fluent Hispanics during the 1990s. Our interpretation is that the relative demand for LEP Hispanic workers has risen in recent years.     

The Effect of Minimum Wages on Labour Market Outcomes: County‐Level Estimates from the Restaurant‐and‐Bar Sector

We use US county‐level data on employment and earnings in the restaurant‐and‐bar sector to evaluate the impact of minimum‐wage changes in low‐wage labour markets. Our estimated models are consistent with a simple competitive model in which supply‐and‐demand factors affect both the equilibrium outcome and the probability of the minimum wage being binding. Our evidence does not suggest that minimum wages reduce employment once controls for trends in county‐level sectoral employment are incorporated. Rather, employment appears to exhibit an independent downward trend in states that have increased their minimum wages relative to states that have not, thereby predisposing estimates towards reporting negative outcomes.     

The Role of Job Attributes in Understanding the Public-Private Wage Differential

This study uses a unique data set for Great Britain to investigate the impact of differences in job attributes on the public-private wage differential. The study reveals that (1) there are substantial differences in wage structure between the two sectors, particularly finding that the public-sector wage structure is less sensitive to differences in the attributes of jobs, and (2) differences in job attributes play in a major role in accounting for pay differences across sectors.     

Determinants of the Wage Share: A Panel Analysis of Advanced and Developing Economies

Wage shares have declined substantially in all OECD countries and most developing economies since 1980. This study uses a new ILO/IILS dataset on adjusted wage shares for a panel of up to 43 developing and 28 advanced economies (1970–2007) to explain changes in wage shares and assess the relative contributions of technological change, financialization, globalization and welfare state retrenchment. We find strong negative effects of financialization as well as negative effects of welfare state retrenchment. Globalization has (in production) robust negative effects in advanced as well as in developing economies, which is at odds with the Stolper–Samuelson theorem. We find small, and for developing countries positive effects of technological change. Our results support a Political Economy approach to explaining income distribution.     

Gender Differences in the Returns to and the Acquisition of On-the-Job Training

This article finds that gender differences in on-the-job training significantly affect the male/female wage gap. First, we find that previously trained workers exhibit larger cumulative wage gains during their current training. Thus, a substantial portion of the gender wage gap results from the fact that women have little prior training relative to men. Second, a significant amount of the observed male/female wage differential is explained by less female acquisition of current training. Gender differences in workplace promotion and training practices help explain why women accumulate less training than men. Both of these sources of gender differences have lessened from 1976 to 1985, which has led to a narrowing of the male/female wage gap.