Firm heterogeneity and wages in unionised labour markets: Theory and evidence

In many countries wages are set in two stages, where industry-level collective bargaining is followed by firm-specific arrangements determining actual paid wages as a mark-up on the industry wage floor. What explains the wage set in each of these stages? In this paper we show that both the industry wage floor and the average wage cushion are systematically associated with the degree of firm heterogeneity in the industry: The former (latter) is negatively (positively) associated with the productivity spread. Furthermore, since the response of the wage floor dominates that of the wage cushion, workers in more heterogeneous industries tend to get lower actual paid wages. These conclusions are reached in a model of Cournot oligopoly with firm productivity heterogeneity and a two-tiered wage setting system. They are then confirmed by administrative data covering virtually all workers, firms and collective bargaining agreements of the Portuguese private sector for the period 1991–2000.     

Transnational labour markets and national wage setting systems in the EU

The article analyses the impact of European regulations of posting on different national wage systems. The article shows that the impact varied across the countries and has been filtered by the national institutions regulating the labour market. In the voluntarist wage setting systems of Germany and even Sweden, they have been a major factor bringing wages back into competition. The ability of national actors to act has been considerably curtailed by the European Court of Justice (EUJ), which has placed free competition above the basic rights of autonomous collective bargaining. Because of the divergent interests of Member States, this weakening of national actors cannot be compensated for by transnational agreements. This ‘negative integration’ brings with it a serious risk that the inclusiveness of European wage systems will be eroded by a series of cumulative effects.     

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.     

DETERMINING MINIMUM WAGES IN CHINA: DO ECONOMIC FACTORS DOMINATE?

We analyze the determinants of minimum wages in China at the regional level. We include a broad set of economic variables and consider the role of spatial spillovers, which reflect the geographical pattern of regions and can arise for several reasons, including competition between local policymakers. The analysis primarily reveals the existence of strong regional ties in the development of minimum wages. Once these spatial effects are considered, the role of economic variables in the determination of minimum wages declines, and their impact is lower than initially thought. Whereas consumption per capita and consumer prices remain significant, regular wages lose their importance when controlling for reverse causation. Although minimum wage regulation stresses the relevance of economic factors in the determination of appropriate levels, actual development is largely driven by regional dependencies. As minimum wage standards set by local officials do not fully reflect regional economic conditions, further reform should be on the agenda.     

Individual contracting,collective bargaining and wages in Australia

We examine wages in Australia under federally registered individual contracts and collective agreements (CAs) using unpublished data from a national earnings survey. The distribution of earnings under registered individual contracts was more unequal than under CAs. Average and median earnings under registered individual contracts were lower than under CAs. There was little evidence that individual contracting raised wages through raising productivity. The link between contracting and pay appears contingent, varying between occupations, industries, and firm size bands and dependent upon employees' position in the labour market and employers' use of union avoidance strategies. This has implications for the interpretation of studies of union wage effects.     

The effects of free trade agreements on regional wages in China

We empirically study the effects of free trade agreements on regional wages in China using Redding and Venables’ (2004) extended model and manufacturing firm-level data in China from 2000 to 2007. We show that although free trade agreements can, in general, increase firms’ average wage level, they also contribute to increasing the wage gap in China. We also find that free trade agreements can have different effects on firms’ wages across China. In particular, they have stronger effects on average wage levels in land border regions than in coastal regions. Moreover, although firms in land border regions may be located closer to the partner countries of free trade agreements, they may still prefer to use shipping to transport goods. Our findings have important policy implications. In particular, we suggest that free trade agreements with China’s western neighbors should be accompanied by the development of appropriate land transportation networks. Moreover, income tax policy regimes should be differentiated across regions in China.     

Flexible collective bargaining agreements: Still a moderating effect on works council behaviour?

We analyse the interaction between different labour market institutions in Germany, namely, industry‐level bargaining and firm‐level codetermination by works councils. In particular, we are interested in the moderating effect of flexibility measures on the link between the existence works councils and collective agreements on wages and productivity. In presence of institutional changes, the question is whether works councils in covered plants still generate rather than redistribute rents, given recent decentralisation processes in the German system of industrial relations. We augment a theoretical model to provide hypotheses, which are then tested using empirical analysis of representative German plant level data. We find that the existence of flexibility provisions in collective bargaining agreements does not alter the effect of works council on firms' wages. We find, however, that with flexibility provisions works council presence is associated with higher productivity levels than without such provisions. These findings, however, depend on the level of collective bargaining: they can only be observed in plants covered by industry‐level contracts, but do not hold in plants covered by firm‐level contracts.     

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.     

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).     

The effects of multiple minimum wages throughout the labor market: The case of Costa Rica

This paper investigates the effects of legal minimum wages on employment and hours worked among workers covered by minimum wage legislation as well as those for whom it does not apply (the uncovered sector) in Costa Rica. This country's large uncovered sector and complex minimum wage policy, which has for decades set numerous wages throughout the wage distribution, provide a stimulating counterpoint to the U.S. framework for the analysis of the impact of minimum wages. Using 1988–2000 micro data, we find that a 10% increase in minimum wages lowers employment in the covered sector by 1.09% and decreases the average number of hours worked of those who remain in the covered sector by about 0.6%. We do not find a significant impact on hours worked in the uncovered sector. Finally, we show that despite the wide range of minimum wages, the largest impact on the employment of covered sector workers is in the lower half of the skill distribution.     

The determination of wages of newly hired employees: Survey evidence on internal versus external factors

This paper reports findings on the relative importance of internal versus external factors in the setting of wages of newly hired workers. The evidence, from a rich firm-level survey on wage and price-setting procedures in 15 European Union countries, suggests that external labour market conditions are less important than internal pay structures in determining hiring pay, with internal pay structures binding even more often when there is labour market slack. When explaining their choice firms allude to fairness considerations and the need to prevent a potential negative impact on effort. Cross-country differences are found to depend on institutional factors: countries in which collective agreements are more prevalent and collective agreement coverage is higher report more often internal pay structures as the main determinant of hiring pay. Within-country differences are found to depend on firm and workforce characteristics: there is a strong association between the use of external factors in hiring pay, on the one hand, and skills (positive) and tenure (negative) on the other.     

The economics of union organization: Efficiency,information and profitability

This article presents a game-theoretical model of union organization that highlights the role played by efficiency and asymmetric information as determinants of unionization and questions commonly-held assumptions about the effect of firm profitability on unionization decisions. In the model, employers set wages taking into account the effect of their choices on workers' incentives to unionize. As a result of employers' strategic wage setting, collective bargaining emerges in equilibrium only if it increases surplus or if there is asymmetric information about the consequences of unionization. While unionization is usually assumed to be more likely in more profitable firms, the model shows that the probability of unionization will be higher in firms with lower rents. It also shows that the union wage premium and unionization will tend to be negatively correlated.     

Trade Boards and minimum wages, 1909-39

Trade Boards were first established in 1909 principally to protect workers in the sweated trades'but were vastly extended under new criteria in 1918. Although the interwar Trade Boards set wage minima which were'tough'by modern standards there has been little analysis of their effects on employment. But in one sector, agriculture, there is clear evidence that minimum wage setting cost jobs. If similar effects occurred in other sectors covered by minimum wages then this could have added significantly to the burden of unemployment during the interwar years.     

The determinants of pay settlements: the influence of the national context

This article studies the influence of national context and collective bargaining on the factors taken into account when adjusting wages. Using data from Spanish and British manufacturing establishments, we examine the relative importance of the cost of living, the ability to recruit or retain employees, the financial performance of the organisation and the industrial relations climate on wage adjustments of manual workers at the establishment level. Our findings show that there are significant differences on the importance given to these factors in both countries. In part, these are related to differences in the incidence of collective bargaining.     

Minimum wages and training

The paper analyzes the influence of minimum wages on firms' incentive to train their employees. We show that this influence rests on two countervailing effects: minimum wages (i) augment wage compression and thereby raise firms' incentives to train and (ii) reduce the profitability of employees, raise the firing rate and thereby reduce training. Our analysis shows that the relative strength of these two effects depends on the employees' ability levels. Our striking result is that minimum wages give rise to skills inequality: a rise in the minimum wage leads to less training for low-ability workers and more training for those of higher ability. In short, minimum wages create a ”low-skill trap.” We indicate that this effect may be important empirically. Finally, including workers' incentives to train themselves makes no major difference to our results.     

最低工资标准提高对我国物流企业影响的效应分析与对策研究

首先回顾了近年来我国最低工资标准调整概况,从理论角度对最低工资标准提高对市场均衡工资率和均衡就业量的影响进行研究,并结合我国物流企业的实际情况,就最低工资标准提高对物流企业的影响进行分析,在此基础上提出物流企业应对最低工资标准提高的具体建议。     

Seniority wages and establishment characteristics

A representative linked employer-employee panel and an innovative two-step estimation strategy are used to show that large and profitable establishments as well as establishments with a highly qualified workforce pay high seniority wages. Also collective bargaining coverage, works councils and reduced working time for older employees are positively correlated with seniority wages, the share of foreigners, females as well as initial wage levels for job entrants are negatively correlated. These results support an agency based motivation for seniority wages with older employees' wages set higher than their productivity.     

Employer preferences,collective agreements and the Australian resources sector: a paradox of limited commodification?

There is a commonly held view that firms in high‐wage/skill‐intensive sectors will tend to provide wages and working conditions that are above market‐clearing levels. This article empirically examines this claim by analysing the content of all collective agreements concluded in the resource sector in Australia after the enactment in 2006 of the Workplace Relations Amendment (Workchoices) Act. This legislation gave employers unprecedented ability to place downwards pressure on employee entitlements. In the resource sector, however, the quantitative results indicate that firms maintained, in the main, substantive standards but used extensively key regulatory provisions to gain an unprecedented level of control over both functional and numerical flexibility.     

An efficiency wage approach to reconciling the wage curve and the Phillips curve

This study develops an efficiency wage model that generates a wage curve at the regional level and a Phillips curve at the national level, under the assumption that workers' efficiency depends on both regional and aggregate labor market conditions. An equation relating wages to unemployment and lagged wages is derived from the profit-maximizing behavior of firms, and it is demonstrated that the coefficient on lagged wages is less than 1 with regional data but equals 1 with aggregate data. In addition, there is an equilibrium relationship between unemployment and wages at the regional level, but not at the aggregate level.     

Noncompete agreements,training, and wage competition

We study the effects of noncompete agreements in an environment where firms invest in training junior workers. After obtaining employer-provided training, trained workers can choose whether to remain loyal to their initial employer or switch to the competing employer. We evaluate the effects of noncompete agreements on wages, employment, investment in training, production, profits, and total welfare. Firms earn higher profits and pay lower average wage when they require workers to sign noncompete agreements.