Wage-setting under Fordism: The rise of job evaluation and the ideology of equal pay

The use of job evaluation techniques during the Fordist period has been relatively neglected by political economists. Widely adopted in the 1940s by the large manufacturing firms that constituted the dynamic sector of industry, job evaluation helped to restructure relations between management and labor. As mass production replaced craft production, employers sought to pay their workers on the basis of 'deskilled' job content. Job evaluation was also a not-so-subtle repudiation of bargaining power, determining 'the rate for the job' on the basis of internal hierarchies and market wage surveys rather than collective negotiations. However, the practice of job evaluation also rested on a theory of wage determination that set wages according to the principle of equal pay for equal work. That is, wages were based on the attributes of the job rather than the individual incumbent. The process of reconciling equal pay as ideology with preexisting gender wage disparities resulted in a narrow definition of equal work.     

Comparable worth in a decentralized labour market: the case of Ontario

Abstract.  We document the application of pro‐active pay equity legislation to the private sector of the Canadian province of Ontario in the early 1990s. We report substantial lapses in compliance among smaller firms where the majority of men and women work. We also find that the pay equity law had no effect on aggregate wages in female jobs or on the gender wage gap. This experience provides unique perspectives on (1) the tensions between the workings of a decentralized labour market and the principles of comparable worth and (2) the obstacles to its extension to the private sector. JEL classification: J7, J3     

A gender analysis of U.S. labor market policies for the working poor

Current anti-poverty policy proposals focus on welfare reform to the exclusion of reforming the low-wage labor market. In contrast, we compare two policy proposals aimed at low-wage labor markets: a national comparable worth policy and an increase in the minimum wage. With both policies we pay specific attention to their impact by gender. Our findings suggest that while both would reduce poverty among working women, the impact of a comparable worth policy on female poverty would be greater under most scenarios presented. It is estimated that an increase of 96 cents per hour in the national minimum wage would be necessary to equal the poverty reduction effect for women workers of a comparable worth policy which excludes small employers. Both policies decrease the incidence of povertylevel wages less among men, since roughly 60 percent of minimum wage workers are women. Additionally, not only would a national comparable worth policy improve the economic status of low-waged women workers, it would also narrow the gap between male and female poverty. While an increase in the minimum wage would also reduce this gap, comparable worth would virtually eliminate it.     

The Sri Lankan Unemployment Problem Revisited

High unemployment in Sri Lanka has been attributed to unrealistic expectations, to queuing for public sector jobs, and to stringent job security regulations. However, the empirical evidence supporting these explanations is weak. This paper analyzes individual records from the 1995 Labor Force Survey, and time series for wages in the formal and informal sectors of the economy. The paper rejects the unrealistic‐expectations hypothesis by comparing the impact of education on the actual wages of those who have a job and on the lowest acceptable wages of the unemployed. But it finds substantial rents associated with jobs in the public sector, and in activities protected by high tariffs or covered by job security regulations. A time‐series analysis of the impact of unemployment on wage increases across sectors suggests that many among the unemployed are waiting for “good” job openings, but are not interested in readily available “bad” jobs.     

Remedying "Unfair Acts": U.S. Pay Equity by Race and Gender

Case studies in Canada, Australia, and the U.S. have found that pay equity (or comparable worth) has reduced the gender-based wage gap substantially, and results of research on the gender composition of jobs have been used guiding pay equity implementation. But, in general, the racial composition jobs remains overlooked in the literature and in public policy. We extend previous work on eliminating the wage penalty of employment in female-dominated occupations to estimating the potential effect of adopting comparable worth to alleviate race- as well as gender-based wage discrimination. First we report the negative impact of racial-ethnic and female composition of jobs on pay in the U.S. Correcting for this form of wage discrimination, we find that implementing comparable worth would appreciably narrow the race- and gender-based wage gaps and significantly reduce the percent of workers earning poverty-level wages, especially among women of color. Close to 50 percent of women of color and 40 percent of white women currently earning less than the federal poverty threshold for a family of three would be lifted out of poverty. Second, we show that, in addition to the effects of occupational concentration, being a woman, an African-American, or a worker of Hispanic origin negatively and significantly affects pay. Not every type of wage discrimination is alleviated by a pay equity policy, which is why activists have also supported anti-discrimination and affirmative action policies for women and people of color.     

RESERVATION WAGES AND THE UNION JOB QUEUE: A SAMPLE SELECTION APPROACH

This paper uses a unique data set of unemployed semi-skilled workers to examine the relationship between reservation wages and the decision to queue for a union sector job. Estimation of selected reservation wage equations indicates that the failure of all previous estimates to model the queuing decision results in biased coefficients. Those workers who queue for a union job are subject to a distinct reservation wage formation process which differs from those not queuing. Moreover, a structural estimate of the queuing decision demonstrates that workers with the greatest differences between estimated reservation wages in the union and non-union sector are the most likely to queue. This estimate of the queuing decision stands as one of the few which focus on unemployed workers. Among other results, women and minorities are more likely to queue for union jobs, all else equal.     

SOME REFLECTIONS ON COMPARABLE WORTH

Despite its somewhat impudent tone, this paper examines a major controversy. "Comparable worth" has its proponents and detractors, but as in most debates, neither side fully appreciates the maintained hypotheses of the other. From an economic point of view, the disagreement seems to boil down to differences of opinion about whether the "excessive supply" of women to "women's jobs" is a result of their different utility functions or of their different constraints. There also has been a serious confusion of the "normative" with the "positive," some oversight of the potentially large regulatory costs that would accompany comparable worth legislation, and a tendency to consider only the partial-equilibrium consequences of these measures. Each of these considerations is examined in detail, with the conclusion that while comparable worth measures might alleviate some inequities in the short term, the long-term consequences could seriously aggravate the very problem the policy was intended to solve.     

Starting Wages Respond to Employer's Risk

Firms hiring new graduates face uncertainty on the future productivity of workers. Theory suggests that starting wages reflect this, with lower pay for greater uncertainty. We use the dispersion of exam grades within a field of education as an indicator of the unobserved heterogeneity that employers face. We find solid evidence that starting wages are lower if the variance of exam grades is higher and higher if the skew is higher: employers shift the cost of productivity risk to new hires, but pay for the opportunity to catch a really good worker. Estimating the extent of risk cost sharing between firm and worker shows that shifting to workers is larger in the market sector than in the public sector and diminishes with experience.     

Monetary regimes and money supply endogeneity

Quasi-longitudinal Canadian microdata was used to compare the movement of individuals between employers with job changes taking place within firms. Internal mobility is found to be much less common than job changing between firms. Workers changing jobs within a firm are more likely to be older and have higher wages and longer tenures in the jobs they leave than individuals employers. This provides some support for the job-matching hypothesis underlying recent research on the causes of individual mobility, although it is also clear that workers in large or unionized firms are more likely to have the opportunity for internal promotion. While wage gains obtained through internal mobility are smaller than those achieved through external mobility, wage levels are higher for individuals moving within the firm. It is argued that this observation is consistent with a dual labour markets interpretation of mobility patterns.     

Where to go? Workers' reasons to quit and intra- vs. interindustry job mobility

We show that workers' reasons for quitting their job affect their decision to stay in or leave their industry, using survey data among public sector employees in the Netherlands. Workers quitting for e.g. pay, work pressure, or job duties move relatively often to another industry, in contrast to workers quitting for commuting time or the atmosphere at work. This suggests that workers use their experience in the initial job to update their expectations on other jobs in the industry, as the first set of job aspects is more likely to be related among jobs within an industry than the latter. Furthermore, it is shown that workers' reasons to quit fully explain the differences in wage growth between intra- and interindustry job movers. Lastly, we find that workers who quit for pay or management often leave the public sector altogether.     

Overeducation,job mobility and earnings mobility among holders of first degrees

Overeducation has been researched extensively for nearly three decades, but some major issues in regard to it are still topics of ongoing debate. By using a panel data, that combines a survey of two cohorts of Israeli first-degree holders and data from administrative sources on jobs and wages, we examine the contribution of job turnover, cognitive abilities and continuing graduate studies to the likelihood of overeducation and wage dynamics. The study produces four main findings. First, rapid job-switching makes a negative contribution to the increase in employee’s wage and there is a negative correlation between two variables – an employee’s tenure and the number of past employers in the years after the completion of degree studies – and the probability of being overeducated. Second, the contribution of the individual’s cognitive abilities and quantitative reasoning skills to the likelihood of becoming overeducated is negative. Third, the wages of overeducated employees are some 11% lower and rise more slowly than the wages of those whose level of schooling corresponds to their jobs; this outcome may be interpreted as indicating that the ‘scars’ of being overeducated tend to be long-lasting. Fourth, the overeducated workers have lower propensity to continue to advanced academic studies.     

The impact of minimum wages on employment of low‐wage workers

This study provides empirical evidence on the impact of a minimum wage increase on employment of workers in the formal sector who have wages below the minimum level in Vietnam. Using the difference‐in‐differences with propensity score matching and the Vietnam Household Living Standard Surveys of 2004 and 2006, the article finds that the minimum wage increase in 2005 reduced the proportion of workers having a formal sector job among low‐wage workers. Most workers who lost formal sector jobs became self‐employed.     

Migration Policy in a Small Open Economy with a Dual Labor Market

The paper uses a two–sector efficiency–wage model to analyze the consequences of immigration for a small open economy with a dual labor market. Immigrants are characterized by an (exogenous) return probability. Legal regulations impose preferential hiring of natives or "old" immigrants. As a result, there is sectoral segregation between natives and immigrants, leading to discrimination of the type equal pay for equal work,but unequal "work." In the short run (with sector–specific capital), immigration has a positive first–order impact on natives' welfare if migration policy favors segregation through high return rates or restrictive hiring practices ("guest–worker system"). In the long run, its effect is only determined by factor intensities (2 ¥ 2 model). Finally, the improved integration of migrants yields efficiency gains and improves aggregate welfare of all residents.     

Employer and Employee Ignorance in Developing Countries: The Case of Trinidad and Tobago

The authors examine the degree of employer and employee ignorance about reservation and offer wages in Trinidad and Tobago and find this to be considerable. On average employers pay more than 26% above workers’ reservation wages, while employees earn 22% less than the maximum wage on offer, ceteris paribus. However, there are some differences across sub‐groups of jobs, particularly with regard to individuals’ lack of information about the best wage offers. Some differences are also found compared to previous results for developed nations, although the level of ignorance does not appear to be higher in Trinidad and Tobago.     

COMPARABLE WORTH: SOME ISSUES FOR CONSIDERATION

The comparable worth approach is a radical departure from market determination of wages. This paper considers some economic issues pertinent to the comparable worth dialogue and focuses on implications of comparable worth legislation at the state and local levels. We show that current sex differentials in wages could reflect voluntary labor supply choices and/or discrimination. We also discuss the reverberations of comparable worth and note that some women in an occupation targeted with a wage increase could be made worse off as a result of employer cutbacks. We discuss why state or local officials may be hesitant to adopt comparable worth and also offer possible explanations for their being receptive to it. The intent throughout is to provide a balanced discussion that will aid individuals in taking an educated stand on the issue.     

Wage Determination and Occupational Attainment in the Rural Industrial Sector of China

The development of China's rural township, village, and private enterprises (TVP), in which real wages have grown at around 11% per annum over the past decade, is one of the most remarkable achievements of China's economic reform. This achievement has taken place despite relatively rigid control of labor mobility and job assignment by local authorities. Individual firms, however, have considerable influence over wage determination. This study applies human capital theory to explore the wage setting process in this sector. It is found that the impact of both labor market experience and education reflect labor productivity rather than sociopolitical rules of wage setting. The paper employs a logit model to investigate the links between education and occupational attainment. The relationship between wages, education, and occupational attainment, for those who find jobs through their own efforts, is similar to that of western market economies. Although education does not affect wages of those assigned jobs it affects their occupational attainment.     

Wage and Technology Dispersion

This paper explains why firms with identical opportunities may use different technologies and offer different wages. Our key assumption is that workers must engage in costly search in order to gather information about jobs (Stigler (1961)). In equilibrium, some firms adopt high fixed cost, high productivity technologies, offer high wages, and fill job openings quickly. Other firms adopt less capital-intensive technologies and offer low wages, hiring mostly uninformed workers. In equilibrium, the amount of wage dispersion leaves workers indifferent about whether to gather information, and the fraction of informed workers leaves firms indifferent about their wage and technology choice. We show that worker search, which would appear to be a rent-seeking activity in partial equilibrium, may be efficiency-enhancing in general equilibrium.     

PAY EQUITY AND COMPARABLE WORTH

An important and emerging public policy consideration… generally called equal pay for comparable worth…has received great attention from those who influence or report public policy initiatives. The comparable worth movement is directed at pay equity issues, primarily between men and women. The source of controversy surrounding comparable worth concerns the mechanism for determining wages in the economy…either an unrestricted market process or a subjective valuation process by designated "pay equity experts." Although the pay and allocation mechanisms and their side effects are controversial, other important questions concern the actual method of equity determination to be used in implementing comparable worth. This paper analyzes, from a general public policy perspective, many of the issues and much of the evidence surrounding comparable worth initiatives.     

Determinants of wage stickiness in a developing economy

We explore wage flexibility in a developing country and compare our results to what has been found in similar studies using European data. In particular, we conduct a survey of 1189 firms in Pakistan to analyze the determinants of wage rigidity. We find that the existence of competitive wages and an interaction with the informal economy are statistically significant determinants of wage stickiness. While the role of competitive wages is similar to what has been found in studies of European firms, the latter find a much larger role for turnover, collective bargaining and employment protection. In contrast, in Pakistan we find that firms hiring from the informal sector are significantly more flexible in changing their wages. This suggests that the informal sector adds to the wage flexibility of the formal sector.     

Incidence and Duration of Unemployment Spells: Implications on the Wage Differentials of Part-Time and Full-Time Workers

This article analyzes the extent to which incidence of unemployment and duration of unemployment spells affect the wage differentials between full-time and part-time workers. The estimation results of a sample selectivity bias–adjusted wage equation reveal that high incidences of unemployment are associated with low wages for both full-time and part-time workers. However, the reduction in wages due to incidence of unemployment is larger for full-time workers in high-paid jobs than for their part-time counterparts. Duration of unemployment spells affects full-time and part-time workers differently. In general, longer unemployment spells tend to increase the wages of full-time workers but tend to depress the wages of part-time workers. Although the probability of unemployment is not a factor in explaining the wage differential, the duration of unemployment accounts for a substantial portion (about 66.6% in full sample) of the wage differential that exists between full-time and part-time workers.