Inter-city wage differentials and intra-city workplace centralization

We explore the interaction of inter-city and intra-city wage differentials by occupation. The paper makes two main contributions. 1) We construct an occupation-specific index of workplace centralization that accounts for the difference between average employment density from the perspective of employees in each occupation and average employment density from the perspective of all employees. 2) We provide empirical evidence that relative wages of central to non-central occupations increase with city size, or equivalently, the elasticity of wages with respect to city size increases with occupational centrality. We conjecture that this empirical regularity arises because, as city size increases, workers in more central occupations face an increasingly less desirable locus of housing prices and commuting times relative to workers who have jobs in residential areas. The results are robust to the inclusion of individual-specific human capital variables and city-specific fixed effects.     

MEASURING HUMAN CAPITAL AND ITS EFFECTS ON WAGE GROWTH

Abstract Ever since Mincer, years of labour market experience were used to approximate individual's general human capital, while years of seniority were used to approximate job‐specific human capital. This specification is restrictive because it assumes that starting wages at a new job depend only on job market experience. In this paper, I investigate the effects of human capital on wage growth by using a more flexible specification of the wage equation, which allows for a rich set of information on past employment spells to affect the starting wages. In addition, I endogenize the labour mobility decision. In order to illuminate the effects of human capital accumulation patterns on wage growth, I compare counterfactual career paths for representative individuals.     

The distribution of changes in manufacturing employment and the impact of the minimum wage

That employment for workers in durable goods industries is more sensitive to the pace of economic activity than for non-durable goods employees is not a surprising result. What is noteworthy about the conclusions of this study, however, is the manner in which increases in the minimum wage have altered the distribution of employment and sensitivity to short-run changes in employment of production workers in manufacturing industries. By focusing on the distribution of employment and how that distribution changes over the cycle, estimates of some aspects of the impact of the minimum wage that have not previously been analyzed have been developed.The evidence indicates that increases in the minimum wage over the period 1947–1975 have had a significant impact on employment patterns. Minimum wage legislation has had the effect of decreasing the share of projected employment and increasing vulnerability to cyclical changes in employment for the group of workers most ‘marginal’ to the work force low-wage industry employees. Hence, as a result of increased minimum wages, low-wage industry employees are able to obtain fewer jobs during periods of normal employment growth and their jobs are less secure in the face of short-run employment variations.Minimum wage legislation has undoubtedly resulted in higher wages for some of the relatively-low-productivity workers who were able to obtain employment than these workers would have received in its absence. The cost in terms of lost employment opportunities and cyclical vulnerability of jobs, however, has apparently been borne most heavily by low-wage industry employees. The primary beneficiaries of the shifts in the pattern of employment shares occasioned by minimum wage increases were high-wage industry workers, particularly in the ordnance, food, tobacco, and petroleum industries.     

Wage determination in the union and nonunion sectors.

This study contains estimates of wage equations for white male union and nonunion employees. The authors find that nonunion wages are generally more responsive than union wages to individuals' education and experience and to regional price-level variation. Despite those differences, however, estimates of union-nonunion wage differentials based on these separate equations do not differ greatly from a differential obtained from a union dummy variable in an equation based on combined union and nonunion observations. Union-nonunion differentials vary widely across occupational groups and are generally larger in the lower skilled and more highly unionized occupations. The results for manufacturing, for which additional industry data are available, indicate a negative impact of high concentration ratios on the wages of all workers and a greater impact of establishment size on nonunion than on union wages. Data were drawn from the May 1973 Current Population Survey.     

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).     

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.     

Within Occupation Wage Dispersion and the Task Content of Jobs

Most analyses linking task content of jobs to income inequality focus on the effects between occupations, e.g. the growing dispersion between lousy and lovely jobs. The theory, meanwhile, provides insights on links between task content of jobs and inequality also within occupations: models predict compression of wages in more routine jobs, that is those where capital is a direct substitute for labour, and an increase in dispersion in jobs where capital and labour are complements. I document that within occupations dispersion of wages is empirically relevant, as it represents around half of total wage inequality across Europe. I then link wage inequality to the task content of jobs. Using matched employee–employer data from Europe for the period 2002–14, I show that occupations where tasks complement newer technologies exhibit higher wage dispersion. This relationship is robust to adjusting for a variety of confounding and mitigating channels.     

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.     

Unemployment and compensating wages: an analysis of shift work

Compensating wages have been documented for a number of job attributes including working non-standard hours. Using data that aggregates across occupations, our analysis confirms a wage premium for working night shifts. However, the compensating wage is greater in areas where unemployment is low, suggesting that employers are less pressured to compensate for night shifts when employment opportunities are relatively scarce. If this result holds for other undesirable work characteristics, such as risk of death on the job, then weak labor markets will have lower compensating wages in general.     

Noncognitive skills, occupational attainment, and relative wages

This paper examines whether men's and women's noncognitive skills influence their occupational attainment and, if so, whether this contributes to the disparity in their relative wages. We find that noncognitive skills have a substantial effect on the probability of employment in many, though not all, occupations in ways that differ by gender. Consequently, men and women with similar noncognitive skills enter occupations at very different rates. Women, however, have lower wages on average not because they work in different occupations than men do, but rather because they earn less than their male colleagues employed in the same occupation. On balance, women's noncognitive skills give them a slight wage advantage. Finally, we find that accounting for the endogeneity of occupational attainment more than halves the proportion of the overall gender wage gap that is unexplained.     

Is tax progression really good for employment? A model with endogenous hours of work

This paper discusses the effect of tax progression on wage setting and employment in a unionised labour market. Recent contributions to this field argue that tax progression paradoxically enhances employment if wage setting is subject to collective bargaining. In this literature, individual hours of work are usually assumed to be exogenously given. We show that the positive employment effect of tax progression can be generalized to a model with a positive labour supply elasticity of individual workers. However, the wage-moderating effect of tax progression does not unambiguously carry over to a world where the union may fix both wages and individual hours of work. In this framework, the union reacts to tax progression by cutting individual working time. The wage rate, however, may decrease or increase. If the wage rate increases, the number of employed workers may decline despite the reduction in hours of work.     

Minimum wages and employment in Swedish hotels and restaurants

This paper considers the effects of union-bargained minimum wages on transitions into and out of employment in the hotels and catering industry over the period 1979–99. This industry is characterised by a high fraction of unskilled labour input, high worker turnover and binding minimum wages. The empirical approach identifies workers affected by real minimum wage increases and decreases, respectively. Job separations and accessions for the treatment groups are then contrasted to the outcomes for control groups, with wages marginally above those of the treatment groups. Unlike previous studies, this paper also considers same-period transitions for same-wage workers who are unaffected by minimum wage changes. This procedure should help to control for unobserved differences between high- and low-wage workers and is made possible by the diversified minimum wage structure of the industry. According to the results, job separations tend to increase with rising minimum wages (except for teenagers during 1993–98). The evidence regarding accessions is less conclusive.     

THE RETURNS TO ENDOGENOUS HUMAN CAPITAL IN PAKISTAN'S RURAL WAGE LABOUR MARKET

This paper estimates the private returns to human capital in Pakistani rural labour markets. The rich data used permit inclusion of several dimensions of human capital and control for endogeneity resulting from investment in human capital. The results suggest that, without data on determinants of human capital, it would not be possible to disentangle the separate effect of each dimension of human capital on wage differentials nor to distinguish human capital explanations for wage differentials from signalling and credentialist models. With control for endogeneity of human capital and selectivity into wage employment, cognitive achievement, but not schooling attainment separate from cognitive achievement nor long-run health status, affects wage differentials.     

The Variation in Wage Rigidity by Occupation and Union Status in the Us

This study estimates wage equations with data disaggregated by occupation and union status, and it derives two measures of wage rigidity for each group of workers: the sensitivity of wages to unemployment and the speed with which wages respond to price inflation. The sensitivity of wages to an aggregate measure of unemployment was found to depend negatively on an occupation's skill level. In addition, union wages were more sensitive to unemployment than non-union wages and responded less rapidly to price inflation.     

Are shirking and leisure substitutable? An empirical test of efficiency wages based on urban economic theory

Recent theoretical work has examined the spatial distribution of unemployment using the efficiency wage model as the mechanism by which unemployment arises in the urban economy. This paper extends the standard efficiency wage model in order to allow for behavioral substitution between leisure time at home and effort at work. In equilibrium, residing at a location with a long commute affects the time available for leisure at home and therefore affects the trade off between effort at work and risk of unemployment. This model implies an empirical relationship between expected commutes and labor market outcomes, which is tested using the Public Use Microdata sample of the 2000 U.S. Decennial Census. The empirical results suggest that efficiency wages operate primarily for blue collar workers, i.e. workers who tend to be in occupations that face higher levels of supervision. For this subset of workers, longer commutes imply higher levels of unemployment and higher wages, which are both consistent with shirking and leisure being substitutable.     

The effect of minimum wage hikes on employment: Evidence from regional panel data from Romania

Minimum wage hikes aim to increase the income of low-wage workers and improve their labour market participation. However, there are concerns that large increases may reduce employment, especially in countries where minimum wages increased quickly and whose competitiveness depends, at least partly, on low production costs. This study examines the employment effect of large increases in the minimum wage in Romania between 2008 and 2016. It uses regional (NUTS III) data and dynamic panel methods. The results do not support the hypothesis that minimum wage hikes reduce employment. They are robust to the use of different econometric methods, plausible variations of the specification and definitions of the key variables. Moreover, the results suggest insignificant effects even for low wage, less developed or high unemployment regions.     

Wages,non-wage characteristics,and predominantly male jobs

This paper estimates the wage premium associated with working in predominantly male jobs. It also examines whether this wage premium is greater than the compensation workers demand for the less desirable non-wage characteristics of such jobs. The coefficients of the change in the proportion of men in an occupation on the change in wages for quits and layoffs provide opposing biased estimates of the wage premium; because workers who voluntarily quit move to better matches, but those that are laid off accept jobs from the representative distribution of job offers. Specifically, when the premium paid over- (under-)compensates for undesirable work characteristics, the quit estimate is a downward (upward) biased estimate of the wage premium, while the layoff estimate is biased upward (downward). Results from the U.S. National Longitudinal Survey of Youth (NLSY) and the U.S. Panel Study of Income Dynamics (PSID) indicate that: (1) the estimated bounds of the wage premium are large; and (2) the wage premium overcompensates for the non-wage characteristics of male jobs.     

Wage-setting institutions as industrial policy

Centralized wage-setting arrangements compress wage differentials along many dimensions, but how do they affect employment structure? To address this issue, we relate the evolution of US–Swedish differences in the industry distribution of employment to relative wages between and within industries. We find that centralized wage setting shifted Swedish employment away from industries with high wage dispersion among workers, a high mean wage and, especially, a low mean wage. The dissolution of Sweden's centralized wage-setting beginning in 1983 led to widening wage differentials and a reversal in the evolution of US–Swedish differences in industry structure.     

Job mobility and careers in firms

This paper presents a theoretical model that combines employers learning about worker productivity, human capital acquisition, job-assignment and resolution of worker uncertainty regarding disutility of work from a job, to show how widely documented findings on both wage and promotion dynamics and turnover can be captured in a single set-up. Specifically we show how our model can capture results such as; probability of turnover decreases with labor market experience, wage changes during job changes is more in earlier periods, serial correlation in wages and probability of promotion increases in wages, amongst others.     

Cross-sectional earnings risk and occupational sorting: The role of risk attitudes

This paper investigates to what extent individuals' risk preferences are correlated with the cross-sectional earnings risk of their occupation. We exploit data from the German Socio-Economic Panel, which contains a direct survey question about willingness to take risks that has been shown to be a behaviorally valid measure of risk aversion. As a measure of earnings risk, we use the cross-sectional variation in earnings that is left unexplained by human capital variables in Mincerian wage regressions. Our evidence shows that individuals with low willingness to take risks are more likely to work in occupations with low earnings risk. This pattern is found regardless of the level of occupation categories, region, gender and labor market experience.