Wage bargaining and turnover costs with heterogenous labor and perfect history screening

We study effects of mobility costs in a model of (Nash) wage bargaining between workers and firms, with instantaneous matching, heterogeneous workers, identical firms and free firm entry, and where firms can screen workers perfectly according to their previous work history but not their actual productivity. We derive the employment level and the minimum worker quality standard, in the market solution, and in the efficient solution established by a social planner. When workers have positive bargaining power, there is always some inefficient unemployment among desired workers in the market solution. The lowest hiring standard chosen by firms is higher than the planner's standard when firing costs are high relative to hiring costs, but may be lower in the opposite case. We show that any higher established hiring standard corresponds to a market equilibrium. The model explains a tendency for a high initial unemployment rate to remain high, particularly for low-skilled workers.     

Job satisfaction and co-worker pay in Canadian firms

One reason to be concerned about income inequality is the idea that people care about not only their own absolute income but also their income relative to various reference groups (co-workers, friends, neighbours, relatives, etc.). We use Canadian linked employer–employee data to estimate the casual effect of co-worker pay on a worker's reported job and pay satisfaction. Since worker satisfaction can affect the worker's productivity, organizational commitment, turnover, creativity and innovation as well as the firm's productivity and profitability, this is an issue that requires more attention and careful examination. In models that control for a rich set of workplace characteristics, we find that co-worker pay has a large positive and significant effect on both pay and job satisfaction. In our preferred models with establishment-level fixed effects, the effect of co-worker pay on pay satisfaction is half as large and the effect on job satisfaction completely disappears, suggesting that part (all) of what previous studies attribute to the effect of co-worker pay on worker pay (job) satisfaction is driven by unobserved heterogeneity across firms or establishments. Our results also suggest that the effect of co-worker pay on worker satisfaction is much stronger for workers who leave their job during the following year. Finally, we find that while co-worker pay has a positive effect on pay satisfaction among Canadian-born whites, it has a negative effect among immigrants and Canadian-born visible minorities.     

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.     

Teams,Teamwork and Absence*

We argue that firms with interdependent worker productivity, team production, have a higher cost of absence and, as a consequence, spend additional resources on monitoring absence. As a result, firms with team production should have lower absence rates. We estimate the determinants of absence for blue‐collar workers using a sample of German manufacturing establishments. Workplace teams are used as a proxy for team production. The estimates reveal that firms with teams have lower absence rates, as do smaller establishments. The size effect, however, is unique to establishments with teams, which fits prior theoretical work that has not been previously tested.     

The effect of unemployment on labour productivity: an international comparative analysis

This is a comparative empirical analysis of the effect of unemployment - via a ‘work-intensity effect’ and/or a ‘workplace-innovation effect’ - on manufacturing productivity growth in eight advanced capitalist economies. My econometric results confirm earlier findings of positive work-intensity and workplace-innovation effects of unemployment on productivity growth in the United States; but I do not obtain similarly strong results for the other countries, and in Germany and Sweden I find evidence of negative unemployment effects. My findings are consistent with the comparative hypothesis that the sign and strength of unemployment effects on productivity growth will vary negatively with the degree to which a country's socioeconomic environment is characterized by cooperative capital-labour relations and worker security.     

Technology choice,relative performance pay,and worker heterogeneity

We identify a new problem that may arise when heterogeneous workers are motivated by relative performance pay: if workers’ abilities and the production technology are complements, the firm may prefer not to adopt a more advanced technology even though this technology would costlessly increase each worker’s productivity. Due to the complementarity between ability and technology, under technology adoption the productivity of a more able worker increases more strongly than the productivity of a less able colleague. As a consequence, both workers’ motivation to exert effort is reduced. We show that this adverse incentive effect is dominant and, consequently, keeps the firm from introducing a better production technology if talent uncertainty is sufficiently high and/or monitoring of workers is sufficiently precise.     

Part-time work and the hiring of older workers

This research uses German establishment data to examine the relationship between back loading compensation, the hiring of older workers and their part time status. We confirm that establishments that defer compensation are less likely to hire older workers. We demonstrate for the first time that establishments that defer compensation are more likely to limit older workers to part time jobs, when they do hire them. Thus, deferred compensation plays a larger role in reducing the chances of older workers being hired into full time jobs than would be inferred from past estimates simply examining their odds of being hired at all.     

Learning about match quality and the use of referrals

The firm?s decision to use referrals as a hiring method is studied in a theoretical model of the labor market. The labor market is characterized by search frictions and uncertain quality of the match between a worker and a job. Using referrals increases the arrival rate of applicants and provides more accurate signals regarding a worker?s suitability for the job. Consistent with the data, referred workers are predicted to have higher wage, higher productivity and lower separation rates and these differentials decline with tenure. The model is extended by introducing heterogeneity in firm productivity and allowing the endogenous determination of signal accuracy. High productivity firms are predicted to invest more in increasing signal accuracy and use referrals to a lesser extent.     

UNDERSTANDING LABOUR MARKET FRICTIONS: AN ASSET PRICING APPROACH

Labour market friction is viewed in terms of the market value of an employed worker as opposed to the position of the Beveridge curve. This market value of an installed worker, which I call Tobin's  Q  of a worker, is inversely proportional to the average quality of the match between employers and workers. Based on this measure, I find that the labour market friction rises during a period of productivity boom. This phenomenon is indirectly supported by the data where it is found that the relative value of a worker with respect to tangible capital shows a positive association with the total factor productivity. The model suggests that firms may be compromising the quality of a skill match during a period of tight labour market conditions.     

Labor relations and productivity growth in advanced capitalist economies

In this paper, we claim that worker rights (including collective bargaining rights, employment protection, and income security) promote productivity growth. We argue that cooperative labor-management relations encourage workers to make positive contributions to technical and organizational innovations that raise labor productivity, and that an industrial relations system that secures strong worker rights fosters cooperative labor-management relations. These arguments are supported by an empirical analysis of long-run productivity growth in 15 advanced capitalist countries. We first develop an index of worker rights and show its positive effect on several indicators of labor-management cooperation. We then develop an index combining measures of worker rights and labor-management cooperation and show its positive effect on the rate of growth of labor productivity.     

What are the determinants of hiring? The importance of product market demand and search frictions

In this article, we study the importance of product market demand and search frictions for hiring. We use a search-matching model with imperfect competition in the product market to derive an equation for total hiring in a local labour market, and estimate it on Swedish panel data. If product markets are imperfectly competitive, product demand shocks should have a direct effect on employment for given levels of prices and wages. Our main finding is that product demand has such a direct effect on hiring. This highlights the importance of taking imperfect competition in the product market into account in studies of employment dynamics and hiring. We also find that, for given levels of prices, wages, and product demand, the number of unemployed workers in a local labour market has a positive effect on hiring, suggesting that search frictions matter. Quantitatively, product demand shocks seem to be more important for understanding the variation in hiring than shocks to the number of unemployed workers.     

An Empirical Analysis of Post‐Merger Organizational Integration

We study post‐merger organizational integration using linked employer–employee data. Integration is implemented by reassigning a small number of high‐skilled workers, especially in R&D and management. Workforce mixing is concentrated to establishments set up after merger, rather than to previously existing establishments. Worker turnover is high after merger, but new hiring yields stable total employment. Target employees have higher turnover and reassignment, particularly if the target firm is small relative to the acquiring firm. These findings might suggest that integration is costly, but can be achieved by focusing on key employees. Alternatively, the reassignment of a few key employees is sufficient for achieving integration.     

The impact of minimum wages and foreign domestic workers in Taiwan

The purpose of setting the minimum wage is mainly to protect the rights and interests of vulnerable workers and to enhance productivity of labour. In this paper, an attempt has been made to explore the effect of the upwards adjustment of the minimum wage in Taiwan on the inflation rate, the unemployment rate, labour productivity, economic growth and other macroeconomic variables by means of an analysis of empirical data using a structural vector auto‐regressive model. The findings of the paper show that upwards adjustment of the minimum wage in Taiwan will not intensify the unemployment rate. On the contrary, it will help to promote labour productivity to an extent that will have a positive effect on the economic growth rate. In addition, this paper investigates, long‐term care system should incorporate the foreign domestic worker labour pool, which could provide the additional personnel necessary for the nation's long‐term care. Minimum wage should apply to foreign domestic workers, and foreign domestic workers should not be treated as a separate group of workers in minimum wage policy.     

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.     

The gift of being chosen

We report evidence from an experiment where an employer selects one of two workers to perform a task for a fixed compensation. Workers differ in their ability. The employer’s payoff depends on the worker’s ability and on a non-contractible effort that the worker exerts once employed. We find that selected workers exert an effort higher than the minimum enforceable one. When the employers can send a free-text form message to the selected worker, workers with low ability exert significantly higher effort than the workers with high ability. The difference in effort overcompensates the difference in ability.     

THE IMPACT OF MANUFACTURING FIRMS’ USE OF ACADEMIC WORKERS ON THEIR PRODUCTIVITY LEVEL

We examine how firms’ productivity level, measured by the total factor productivity (TFP), is affected by their use of academic workers. A panel dataset of Norwegian manufacturing firms is used. Firms’ production level is shown to be negatively affected by their share of academic workers, but we find no clear relationship between this share and the TFP. If we account for the fact that there is an interaction between the share of academic workers and the capital stock, we find that this share has a non‐significant effect on the production level.     

The impact of hiring top workers on productivity: what is the role of absorptive capacity?

We examine the heterogeneous productivity impacts of hiring top workers on small and medium-sized enterprises, exploiting matched employer–employee panel data and employing within-firm as well as matching and difference-in-difference estimators. The results provide robust evidence that the productivity impact is stronger for firms with higher absorptive capacity. Technological laggards within an industry benefit more strongly from hiring top workers if their workforce is more well-educated.     

Foreign workers and productivity in an emerging economy: The case of Malaysia

Many developed and developing countries are experiencing large and growing levels of international migration of labor. However, the large majority of research on the economic impact of inflows of migrant workers on host economies focuses exclusively on developed countries. In this paper, we address this gap in the literature by examining migrant‐induced productivity effects in the emerging economy of Malaysia. Importantly, the Malaysian case is typical for many Asian economies where, next to high skilled foreign workers, large numbers of migrants consist of low skilled workers that are employed in host economies on a temporary basis. Using detailed industry level data for the period 2005 to 2009, we find that both high skilled and low skilled foreign workers generate positive productivity effects in Malaysian manufacturing industries. Furthermore, our results identify a strong presence of industry heterogeneity, as the effects of foreign workers, in general, and low skilled foreign workers, in particular, are pronounced in labor and assembly intensive modern industries with a strong export focus. This indicates the importance of foreign workers for the contemporary international competitiveness of the Malaysian manufacturing sector. As such, our findings provide important new input to the debate on the role of low skilled foreign workers in processes of development of the Malaysian economy.     

‘Employability-miles’ and worker employability awareness

This article studies the use and impact of a (‘Employability-miles’) voucher scheme. These vouchers could be used for participation in a restricted number of training courses, which all aim to stimulate employees to develop a more active attitude towards their own employability. Using data from two surveys of one firm’s workforce, we find that voucher use is related to various personality traits and personal characteristics. In particular, a worker’s ambition, goal setting and education level are positively related to voucher use. In addition, workers with longer tenure spend their vouchers more often. Conversely, workers with a more positive self-image as well as those who are negatively reciprocal spend their vouchers less often. The negative relation between voucher use and negative reciprocity suggests that workers who are more negatively reciprocal perceive the voucher as an HR tool for outplacement. Further, we find that voucher use positively affects worker employability awareness and willingness to train. Remarkably, participation in non voucher training shows little relation to personality traits. From a human resources (HR) perspective, this finding suggests that by employing a voucher scheme, the firm makes training participation more dependent on employee personality and individual characteristics instead of the HR development strategy of the firm.     

The heterogeneity of beauty premium in China: Evidence from CFPS

Using a nationwide representative sample of the Chinese population, we examine the effect of physical appearance on the hourly wage. Our theoretical framework that connects physical appearance and the hourly wage has two predictions. First, the beauty premium is larger for high-skilled workers than for low-skilled workers. Second, this statistical-based discrimination arises from the hiring manager’s belief that beauty contributes to productivity through non-cognitive skills. Empirical results confirm both predictions. Good-looking individuals earn roughly 5.4% more than the rest, and bad-looking individuals earn roughly 3.3% less than the rest. Moreover, quantile estimates show that the effect of physical appearance at the 0.75 quantile is more than twice as the one at the 0.25 quantile. Finally, social skills, communication skills, and self-confidence are three transmission channels through which physical appearance can positively affect one’s hourly wage in our sample. Our findings imply that the beauty premium is widespread in the labor market and relevant anti-discrimination regulations are needed.