Are low-skill public sector workers really overpaid? A quasi-differenced panel data analysis

Public–private sectoral wage differentials have been studied extensively using quantile regression techniques. These typically find large public sector premiums at the bottom of the wage distribution. This may imply that low skill workers are ‘overpaid’, prompting concerns over efficiency. We note several other potential explanations for this result and explicitly test whether the premium varies with skill, using Australian data. We use a quasi-differenced Generalized Method of Moments (GMM) panel data model which has not been previously applied to this topic, internationally. Unlike other available methods, this technique identifies sectoral differences in returns to unobserved skill. It also facilitates a decomposition of the wage gap into components explained by differences in returns to all (observed and unobserved) skills and by differences in their stock. We find no evidence to suggest that the premium varies with skill. One interpretation is that the compressed wage profile of the public sector induces the best workers (on unobserved skills) to join the public sector in low wage occupations, vice versa in high wage occupations. We also estimate the average public sector premium to be 6% for women and statistically insignificant (4%) for men.     

中国农村地区收入差距解释:1997～2005

1997～2005年我国农村地区收入差距以2000年为转折点,经历了先下降后上升的变化过程。要素分解分析表明,1997～2000年地区收入差距的下降完全归因于分配效应;2001～2005年地区收入差距的上升主要归因于结构效应。样本分解分析表明,东中西部地区间的差距和东部地区内部的差距是形成农村地区差距的主要原因。费景汉-兰尼斯分解分析表明,工资性收入、地理位置、教育、物质资本和人均占有耕地面积共解释了地区收入差距的80%以上。     

EARNINGS INEQUALITY IN USA, 1969–99: COMPARING INEQUALITY USING EARNINGS EQUATIONS

A simple decomposition method using an earnings equation is proposed by synthesizing two decomposition methodologies, those of Juhn, Murphy, and Pierce (1993) and Fields (2003), in order to study changes in earnings inequality in America during the last three decades in the 20th century. The proposed method enables us to compute both aggregate and detailed decompositions of changes in earnings inequality. The decomposition of earnings inequality change during the last three decades in 20th century shows that the increase in earnings inequality in America was caused by changes in the wage structure and the distribution of unobservables. The premium to education contributes substantially to the widening of earnings inequality during the 1980s and 1990s. A decreasing male wage premium contributes to leveling earnings inequality.     

Are children driving the gender wage gap?

We examine how much children and the responsibilities related to them contribute to the divergence of men's and women's wages, and consequently, to the formation of the gender wage gap. To derive the relative contribution of gender‐specific parent gaps to the overall gender wage gap, we provide a modification of the Oaxaca–Blinder decomposition and include simultaneous corrections for selection into employment and parenthood. The results show that the fatherhood wage premium contributes most significantly to the gender wage gap, especially in Poland. The motherhood penalty is also significant, while the role of the gender gap among childless individuals is small.     

Understanding the gender wage-gap differential between the public and private sectors in Italy: A quantile approach

This paper analyzes the gender-based wage gaps across the wage distribution in the private and public sectors in Italy for the years 2005–2010. We use quantile regression methods to estimate and decompose the wage gap at all wage levels and propose a two-step procedure that relies on a novel approach to estimating fixed effects quantile regressions. The method's main advantage is that it allows the employment sector's marginal effect on wages at various points of the distribution to be estimated, while accounting for both observable and time-invariant unobservable factors. The new method stresses important differences with respect to standard decomposition analyses and amplifies the differences in the two sectors' wage-setting mechanisms. When the estimation is net of individual heterogeneity, the gender-based wage gap decreases in both sectors and there is evidence of a glass ceiling effect, but only in the public sector. Economic grounds are provided.     

IMMIGRANT RELATIVE WAGES AT THE GREAT RECESSION: EVIDENCE WITH MATCHED EMPLOYER‐EMPLOYEE DATA FOR SPAIN

The article examines relative wages of immigrants in Spain, with a particular focus on the impact of the Great Recession. The empirical analysis is restricted to men and is based on matched employer‐employee microdata and the decomposition techniques of Juhn et al. (1991, 1993) and Fortin et al. (2011). Our results show that the significant native‐immigrant wage gap that exists both in terms of average wages and of differentials along the wage distribution is essentially explained by differences in the endowments of observed characteristics so that, in general, immigrants tend to receive a similar wage treatment than Spaniards with analogous observed attributes. On the other hand, the Great Recession has had a noticeable impact on the relative wages of immigrants, given that the significant increase of the native‐immigrant wage gap observed during the previous expansionary period was mitigated during the economic downturn due to composition effects arising from the severe employment destruction pattern.     

Imperfect credibility,sticky wages,and welfare

This paper studies optimal monetary policy under imperfect credibility in a New Keynesian model with staggered price and wage setting. In our imperfect credibility framework, the central bank commits to a policy plan but occasionally reneges on past promises with a given common knowledge probability. We find that the welfare gains from increasing credibility are approximately linear on the initial credibility level. We also find that the output-inflation stabilisation trade-off is nonmonotonic as higher credibility does not always reduce output volatility. The variance decomposition shows that wage markup shocks are the main driver of economic fluctuations and that these shocks are better contained, even in relative terms, when credibility is high. We then show that the degree of credibility impacts the effect of wage flexibility on welfare. When credibility is low, monetary policy is less potent and the economy can experience a feedback loop between wage volatility and price volatility. We show, though, that once wage markup shocks are taken into account, wage flexibility is usually welfare improving.     

Migrants as second-class workers in urban China? A decomposition analysis

In urban China, urban resident annual earnings are 1.3 times larger than long-term rural migrant earnings as observed in a nationally representative sample in 2002. Using microsimulation, we decompose this difference into four sources, with particular attention to path-dependence and statistical distribution of the estimated effects: (1) different allocation to sectors that pay different wages (sectoral effect); (2) hourly wage disparities across the two populations within sectors (wage effect); (3) different working times within sectors (working time effect); and (4) different population structures (population effect). Although sector allocation is extremely contrasted, with very few migrants in the public sector and very few urban residents working as self-employed, this has no clear impact on earnings differentials, because the sectoral effect is not robust to the path followed for the decomposition. The second main finding is that the population effect is robust and significantly more important than wage or working time effects. This implies that the main source of disparity between the two populations is pre-market (education opportunities) rather than on-market.     

Bayesian Unconditional Quantile Regression: An Analysis of Recent Expansions in Wage Structure and Earnings Inequality in the US 1992–2009

We develop Bayesian inference for an unconditional quantile regression model. Our approach provides better estimates in the upper tail of the wage distribution as well as valid small sample confidence intervals for the Oaxaca–Blinder decomposition. We analyze the recent changes in the US wage structure using data from the CPS Outgoing Rotation Group from 1992 to 2009. We find that the largest part of the recent changes is explained mainly by differences in returns to education while the decline in the unionization rate has a small impact, and that earnings inequality is rising more at the top end of the wage distribution.     

When does transition increase the gender wage gap?

In the context of underlying stability in female participation rates, the gender wagegap, measured by the log of monthly wages, more than doubled in Belarus from 1996 to 2006. In this respect, the country has experienced a variant of the transition which occurred in the former Soviet Union where relative female wages fell by more than female participation. We have used the Machado and Mata (2005) analysis of the gender gap distribution. This reveals that the effect of coefficients on observed characteristics in widening the gap was increasing over time, especially in the lower and middle deciles of the wage distribution. At the same time, the effect of the characteristics themselves in reducing the gap was shrinking. The decomposition of changes in the gap over time, based on Juhn et al. (1991) , confirms that the contraction of women’s relative wages has been caused both by a deterioration in the observed characteristics of female workers and by the associated remuneration. Changes in the residual wage distribution tend to slightly reduce the gap rather than, as is the case elsewhere, to increase it. The analysis carried out in line with Neuman and Oaxaca (2004) suggests that the increased gap was not caused by sample selection. Instead, two observed factors are found to be mainly responsible for the results: hours of work have increased for men more than for women and women have experienced segregation in low‐wage industries.     

The veteran wage differential

There is debate in the literature as to whether military service is rewarded in the economy and the extent to which veterans receive either a wage premium or penalty. In this paper, we take a new approach to this question by conducting a wage decomposition of the veteran wage differential and decomposing the wage distribution of veterans and civilians instead of focusing only on the standard wage gap analysis at the averages. We find the veteran wage differential is driven by observable factors such as education, occupation, and industry, but also by location choice, a factor that has been previously overlooked in the literature. At the average, we find white men experience a veteran penalty whereas black men and women experience a veteran premium consistent with the bridging hypothesis. Additionally, we find that as we move along the wage distribution for all demographic groups, the veteran premium tends to become a veteran penalty, even after accounting for selection into military service. However, once we account for selection, we find that the premium for veteran black men disappears.     

Recent Changes in British Wage Inequality: Evidence from Large Firms and Occupations

Using a linked employer–employee dataset covering large firms, we present new evidence on British wage inequality trends over the past two decades. Differences between firms in the average wages they paid did not drive these trends. Between 1996 and 2005, greater wage variance within firms accounted for 86% of the total increase in wage variance among employees. In the following decade, wage inequality between firms continued to increase, whereas overall wage dispersion decreased. Approximately all the contribution to inequality dynamics from estimated firm-specific factors, throughout the employee wage distribution, disappears after accounting for the changing occupational content of wages.     

REMOVING THE “VEIL OF IGNORANCE”: NONLINEARITIES IN EDUCATION EFFECTS ON GENDER WAGE INEQUALITIES

A large literature studies the mean gender wage gap in developing countries and finds mixed evidence about the role of education policies in closing gender earnings inequalities. We contribute to this literature by exploring two types of nonlinearities in wage earning regressions: (1) nonlinearities on the effects of education on expected earnings along the distribution of education endowments; and (2) heterogeneities on the contributions of education to the gender wage gap at different quantiles of the wage distribution. Our analyses provide new insights on how these nonlinear effects can be used to set up better targeted gender and development policies. (JEL I26, C14)     

Minimum wages and the wage distribution in Estonia

Abstract: This article studies how changes in the statutory minimum wage have affected the wage distribution in Estonia, a post-transition country with little collective bargaining and relatively large wage inequality. The analyses show that the minimum wage has had substantial spillover effects on wages in the lower tail of the distribution; the effects are most pronounced up to the twentieth percentile and then decline markedly. The minimum wage has contributed to lower wage inequality and this has particularly benefitted low-wage segments of the labour market such as women and the elderly. Interestingly, the importance of the minimum wage for the wage distribution was smaller during the global financial crisis than before or after the crisis.     

The Impact of Unemployment Insurance on the Job Match Quality: A Quantile Regression Approach

This paper investigates the impact of unemployment insurance (UI) generosity on the distribution of the match starting wage and tenure. We show evidence of a positive shift in the location (mean) and scale (variance) of both variables: more generous UI increases expected starting wage and tenure, and this impact is greater at the highest quantiles. In this sense, more generous UI reduces the thickness of the lower tail of match quality (shorter and lower paid jobs), and, at the same time, increases the quality of matches available to all workers (the location effect on match duration and wages). These results can be seen as favorable evidence of match quality gains from UI generosity.The authors would like to thank Pedro Portugal, José A. F. Machado, Francisco Lima and an anonymous referee for helpful comments and discussions, as well as participants at the following conferences: ESPE – Paris, EEA – Amsterdam, LACEA – Paris and IV Brucchi Luchino – Milan. We are also grateful to Marianne Bertrand for providing a file used to construct the simulated unemployment insurance benefits. Opinions expressed herein do not necessarily reflect the views of the Banco de Portugal.     

Measuring the gender wage gap—a methodological note

ABSTRACT

We propose to estimate the Blinder-Oaxaca decomposition by a single-equation model augmented with interactions between the group membership and other predictors. The relative importance of predictors on the discriminatory wage gap is examined by the interaction coefficients, which may lead to very different conclusions than the usual percentage calculations using the detailed decomposition method. Comparisons are made between the traditional interpretations and those suggested here using wage data from Finland. The decomposition analysis suggests that the discriminatory male-female wage gap is largely related to work experience, while our preferred model points to the importance of family gap and working industry.     

The changing composition of academic majors and wage dynamics: Beyond mean returns

This paper studies the effects of the changing composition of academic majors during expansion of higher education on the dynamics of wage distribution. Using a unique dataset constructed from open-ended responses in the Russia Longitudinal Monitoring Survey, we conduct a structural analysis of wage distribution dynamics for higher education graduates over 2002–2016. In addition to the standard mean wage estimations across majors we explore within-major and across-cohort variation, as well as major-specific permanent and transitory variance components and their time paths.The results suggest that changing wage inequality among university graduates is due to both changes in skill prices and wage shocks induced by economic fluctuations. Moreover, variation in skill prices relates to equilibrium effects induced by changes in the supply of graduates specialized in different fields. Uneven expansion in certain majors induces labor market saturation and leads to an increase in the wage variance of graduates from the fastest growing majors. The estimation results also show the importance of accounting for within-major heterogeneity across cohorts, which could reflect differences in student ability distribution, changes in academic content, and changes in educational quality over time. Finally, this study suggests that focusing only on mean wage returns, without assessing the distributional implications, might substantially understate the labor market impact of the changing major composition.     

互联网使用与工资收入差距*——基于CHNS数据的经验分析

基于2004—2011年的中国营养与健康调查数据（CHNS）,本文使用最小二乘法和控制自选择偏差的倾向性得分匹配法详细估计了互联网使用对工资收入的影响。结果表明,互联网使用对个体工资收入有积极的影响,尤其对于拥有高中学历的个体而言,这种影响更大。本文进一步使用基于RIF回归的FFL分解方法考察了互联网使用对工资不平等的影响。本文发现,2004—2011年间互联网使用比例的增加降低了整体工资不平等,且使用过互联网的高中学历人员比例增加有助于降低高工资与中等工资收入人群的工资差距。同时,互联网使用收益率的下降也有助于降低工资不平等,尤其有助于降低高工资与中等工资收入人群之间的工资差距。因此,普及互联网使用,尤其是提高低收入群体的互联网使用比例和普及该群体的高中阶段教育对于抑制不平等的扩大有重要的意义。     

Its Bark is Worse Than its Bite: The Wage and Employment Effects of the Minimum Wage in the US

This study examines the effect of changes in the US minimum wage on wages and employment in 32 industries selected for their presumed sensitivity to the minimum wage. Applying time series techniques commonly used in macroeconomics and finance to changes in the minimum wage occurring from 1967 and 1991, we initially test for a wage response; only where one is found do we test for an employment response. Twenty-five per cent of the industry/minimum-wage-increase pairs show evidence of an appropriate wage response. Eight of these 54 show a statistically significant negative employment response, while six show significant, positive employment responses. Positive effects may be due to either a high variance distribution centred on zero or markets with 'lemons' problems concerning worker quality. Limiting analysis to industries in which the minimum wage binds provides no evidence of a consistent negative relationship between the historical minimum wage and employment.