Comparing employment estimates using different minimum wage variables: the case of Brazil

Several minimum wage variables have been suggested in the literature to estimate the effect of the minimum wage on employment. The most common ones are the real minimum wage, the ‘Kaitz index’, the ‘fraction affected’, the ‘fraction at’ and the ‘fraction below’. This diversity of variables makes it difficult to compare the associated estimates across studies. One problem is that these estimates are not always calibrated to represent the employment effect of a 1% minimum wage increase. Another problem is that these estimates measure employment effects for different groups of workers. In this paper we critically compare employment effect estimates using these five minimum wage variables and data from a Brazilian monthly household survey panel from 1982 to 2000. Our principal finding is that the sign of this effect is robust across the different minimum wage variables, but that its magnitude and significance are sensitive to the minimum wage variable used.     

Spillover effects of a minimum wage increase – evidence from Slovenia

This article Analysis the effects of a large increase in Slovenia’s minimum wage in March 2010 on the wage distribution using an administrative matched employer–employee panel database. We find that the minimum wage hike increased the concentration of low-paid workers, creating a much more pronounced spike at the minimum, particularly in market services, and for the young, the least educated and those with the least work experience. Our analysis also shows that the March 2010 minimum wage increase also produced sizeable spillover effects. The spillover effects were higher among young and older workers, especially for wage levels near the new minimum wage. The results are based on a difference-in-differences approach comparing changes in wages during the control and treatment periods as experienced by workers in the wage group immediately above the level of the new minimum wage and workers in wage groups higher up in the wage distribution.     

Education and the minimum wage in the United States

This article shows that, across the US states, the level of education has a causal effect on the minimum wage. More specifically, it argues that a one-percentage point increase in the proportion of college graduates implies a 0.4–0.5% decrease in the real value of the minimum wage. This is the first article that uses System GMM in order to examine the effect of education on the minimum wage. Given the structure of the available data, this is the most appropriate econometric technique. System GMM not only controls for endogeneity and for fixed effects but also maximizes the precision of the estimates by using all the available variation in the data.     

Economic liberalization and wage inequality in the presence of labour market imperfection

This paper is purported to analyze the consequences of liberalized economic policies on the skilled–unskilled wage inequality in the developing countries using a three sector general equilibrium model reasonable for at least a few developing economies. The analysis of the paper has found that the wage inequality rises unambiguously due to a reduction of import tariff from the low-skill manufacturing sector. However, an inflow of foreign capital produces a favourable effect on the wage inequality under a reasonable factor intensity condition. Interestingly, contrary to the common wisdom, a policy of labour market reform may raise the competitive unskilled wage and improve wage inequality under reasonable condition.     

The exceptional performance of exporters and labour market outcomes: evidence from Egyptian firms

ABSTRACT

This paper examines the manufacturing export market in Egypt after the Arab Spring using a novel firm-level census dataset from 2013. Export is very rare in Egypt. The conventional export premia are very high, except for total factor productivity. Exporters have stark effects on labour market outcomes, including wages, employment, demand for skilled and female workers, wage inequality, and job security. These findings have two important implications: (1) Manufacturing exports might be monopolized by large firms, and (2) promoting exports could improve labour market outcomes, especially for skilled and female workers.     

The effect of education on the minimum wage

This research shows for the first time that the level of education has a causal, negative effect on the minimum wage. I use 2SLS, with historical educational data as an instrument for the level of education in 2010, and I find that across the US states a one percentage point greater proportion of college graduates is associated with a real minimum wage that is lower by 1.5%–1.6%. Also, in order to control for state-level omitted variables, I regress the change in the minimum wage on the change in education and I find again a negative, and significantly at the 1% level, effect. Minimum wage is a policy that is chosen by governments according to voters’ preferences. The results of this research imply that when the level of education increases voters prefer a lower minimum wage.     

Recent decline in wage inequality and formalization of the labour market in Argentina

Labour market conditions improved during the 2000s in Latin America, a process that included a reduction in the magnitude of informal employment. A decline of wage inequality was another feature of this period. Both dynamics were particularly intense in Argentina. The purpose of this study is to evaluate the role played by the process of formalization of the labour market that occurred in Argentina during that period on the reduction of income inequality, while additionally taking into account other factors that might have also contributed to such dynamics of income inequality. The method employed is a decomposition proposed by Firpo, Fortin and Lemieux, which allows extending the Oaxaca-Blinder approach to decompose some distributive statistics of income between a ‘composition effect’ and a ‘returns effect’. The study concludes that the process of increasing labour market formalization had an equalizing effect over the period, a finding that had not been emphasized in previous studies.     

Combining minimum wage and exchange rate policy to release the external constraint on growth

In this article we analyse the combination of a minimum wage and a devaluation/depreciation so as to release the external constraint on growth. The policy maker aims at achieving both balanced trade and higher growth. These may be reached by devaluating the domestic currency, which however supports traditional industries characterized by high price elasticity and low income elasticity of demand. The release of the external constraint in the short term then yields a stronger constraint in the longer term. If traditional industries are unskilled and labour‐intensive, the setting of a minimum wage distorts the specialization towards sectors with high demand growth. Devaluation/depreciation and minimum wage may thus be combined to release both the short term and longer term external constraint. We determine the condition for such a policy to be efficient. This combined policy must come with an educational policy that supports skill upgrading. It is typically tailored to ‘advanced emerging countries’ which aim at changing their specialization without slowing their growth.     

Price and quantity adjustments in the Austrian labour market

Austria is among the very few countries in the European Union which have managed to maintain comparatively low unemployment rates and high employment rates. This study looks at the price and quantity adjustment mechanisms in the Austrian labour market which may have contributed to this favourable outcome. After reviewing briefly the basic theoretical reasoning an empirical investigation is began into gross flow dynamics in the labour market and the cyclical volatility of employment and unemployment in Austria. In international comparison Austrian unemployment is very stable over the business cycle. This is due mainly to the high sensitivity of the labour force on cyclical conditions and, partly, also on the relatively weak responsiveness of employment to cyclical fluctuations in output, the latter being possibly attributable to the high degree of real wage flexibility in Austria. The study proceeds to show that the long-run elasticity of wages with respect to unemployment is indeed quite high in Austria. However, evidence was also found for outsider effects in the Austrian wage setting process. Relative wage structures, on the other hand, appear to be rather rigid.     

The German generation internship and the minimum wage introduction: evidence from big data

The new German minimum wage applies a specific exemption clause for internships, where internships that last up to three months are exempted while internships that exceed three months are due to the minimum wage. Negative minimum wage effects on internships are heavily debated as internships are mostly non-productive. Difference-in-difference analyses that exploit establishment and regional variation in the bite of the minimum wage do not show a reduction in the number of internships. In addition, we pursue an innovative approach by using Google search data to analyse how the search intensity for internships changed in course of the minimum wage introduction. Difference-in-difference comparisons with other countries in Europe do not reveal an effect on the search for internship positions in general, but we observe a significant reduction in Google search for ‘generation internship’. This suggests that the underlying societal phenomenon of a generation entering internships without a perspective for regular jobs has lost in relevance.     

The division of labour and market structure

Most firms produce most of the time under conditions of substantial economies of scale. The division of labour, according to Adam Smith the mainspring of wealth, is intrinsically an economies of scale phenomenon. Market structure in most industries in characterized by a small number of suppliers and a larger number of customers. I explain this law of small numbers as the equilibrium of two forces: the deconcentration effect of imitation and the market spliting effect of further refinements in the division of labour by innovation. A deconcentrated market creates larger incentives for market splitting (product differentiation) by innovation than a concentrated market. But market splitting raises concentration in the market and it raises the number of different markets in the economy. Before the economies of scale of old products are fully exploited, new products are being offered which again are produced under conditions of economies of scale.     

A regional analysis of flows into and out of the UK national minimum wage

This article utilizes the panel element of the UK Labour Force Survey (LFS) to identify for individual regions total inflows and outflows and hazards for those individuals paid at or below the National Minimum Wage (NMW). In particular, it examines the extent and direction of the correlation between low-pay inflows and outflows and the economic cycle. Further, it examines the impact of regional variations in the bite of the NMW on regional flows into and out of the NMW.     

Marriage and employment participation with wage bargaining in search equilibrium

We build an equilibrium search model where married couples make joint decisions on home production and labour market participation and analyse the implications of our results for a frictional marriage market. A worker's bargaining position reflects their productivity, and the productivity and employment status of their spouse. People sometimes accept transitory jobs only to raise the spouse's long-term wages. Firms sometimes reduce turnover by unilaterally increasing a worker's wage, ensuring that the spouse stays at home.     

The endogenous national minimum wage institution

This paper offers reasoning for the endogenous sustainability of the National Minimum Wage Institution (NMWI). In an economy with asymmetries in productivity among unionized firms, high-tech firms may often opt for minimum wage agreements covering all unionized workers, in order to raise the relative costs of their rival low-tech firms. Their workers’ unions as well as the unions of workers in low-tech firms share this interest, provided that the degree of product substitutability is not too low and the wage agreement is not too high. Hence, since economy-wide minimum wage agreements prove to be compatible with the interest of all unions and high-tech firms, the NMWI can be sustained in equilibrium under politically convenient circumstances.     

A mathematical note on Msgr. John A. Ryan's thought on the minimum wage

This paper examines Msgr. John A. Ryan's economic thought regarding the mechanics by which an increase in the minimum wage is funded. In particular, a mathematical comparative-static model is used to explore Msgr. Ryan's economic assumptions concerning the channels by which income is redistributed to workers from other factor owners. The analysis shows that Msgr. Ryan's approach includes assumptions regarding economic relationships and implies specific values of wage elasticities.     

The effect of minimum wage on poverty

To the best of my knowledge, the minimum wage's influence on poverty in Russia has never been investigated. Russian data provide a unique opportunity for studying the effects of the minimum wage on poverty, given significant increases in the minimum wage in recent years, almost complete coverage, and a high representation of full-time workers in poor households. This article examines the effect of the minimum wage on the incidence of poverty and the transitions into and out of poverty in Russia using data from the Russia Longitudinal Monitoring Survey of Higher School of Economics (RLMS-HSE) from 2006 to 2011. The results indicate that the minimum wage in Russia had moderate poverty-reducing effects.     

Venture capital availability and labour market performance around the world

This article studies the effects of venture capital on the performance of the labour market. Using data from a much larger sample of countries than previous papers, it finds more readily available venture capital to favourably affect both the unemployment and the employment rate. The magnitude of the estimated effects is substantial. We control for both endogeneity of venture capital availability and most major determinants of labour market performance. The results are robust to variations in specification.     

Active labour market programmes and reservation wages: it is a hazard

This article uses a randomized controlled trial to show that positive earnings effects of a labour market programme can be caused by either a faster return to employment together with a lowering of reservation wages or a more moderate return to employment together with an increase in reservation wages. I model wages and unemployment duration simultaneously in a hazard framework allowing for unobserved heterogeneity.     

Non‐wage benefits,costs of turnover and labour attachment

Like firms in established market economies, many Russian firms provide non‐wage benefits to their workers, such as housing, medical care or day care. This article explains the provision of benefits as a strategic choice for firms in the presence of labour and service market imperfections. Analysing unique survey data for 404 industrial establishments from 40 Russian regions, the authors provide strong evidence that non‐wage benefits are used by firms to attach workers and thereby reduce the costs of labour turnover in the face of tight labour markets. It is also shown that this attachment strategy works due to imperfections in the regional markets for social services.     

The effect of shocks to labour market flows on unemployment and participation rates

This article presents an analysis of labour market dynamics, in particular of flows in the labour market and how they interact and affect the evolution of unemployment rates and participation rates, the two main indicators of labour market performance. Our analysis has two special features. First, apart from the two labour market states – employment and unemployment – we consider a third state – out of the labour force. Second, we study net rather than gross flows, where net refers to the balance of flows between any two labour market states. Distinguishing a third state is important because the labour market flows to and from that state are quantitatively important. Focusing on net flows simplifies the complexity of interactions between the flows and allows us to perform a dynamic analysis in a structural vector-autoregression framework. We find that a shock to the net flow from unemployment to employment drives the unemployment rate and the participation rate in opposite directions while a shock to the net flow from not in the labour force to unemployment drives the rates in the same direction.