Union-nonunion compensation differentials across plant sizes: Evidence from CPS 1983

Previous empirical work on the relationship between plant size and union-nonunion differentials has focused either on wages (Podgursky, 1986) or benefits (Bramley, Wunnava, and Robinson, 1989; Freeman, 1981). This note extends this research by simultaneously focusing on both wages and benefits. There are several arguments that can be made in explaining union-nonunion differentials across plant sizes: (1) union threat effects, (2) efficiency wage effects, and (3) wage dispersion effects. Our study focuses on measuring the union-nonunion differential in total compensation. For this end, estimates of total compensation are obtained using Mellow's suggestion (1982) for combining hourly wage information with qualitative data on pensions and health insurance, and Ross's imputations (1989) for holidays and vacations benefits. Our results, based on the May 1983 CPS supplemented by BLS data on pensions, health insurance, holidays, and vacation benefits indicate significant union-nonunion total compensation differentials exist only for workers in establishments with less than 500 workers. These results are consistent with Podgursky's wage differential findings.     

Trade in High-Tech Services

This paper examines the size, scope, and potential implications of trade in high-tech services in the U.S. The results suggest that many service activities are tradable, tradable service activities tend to employ more educated workers and pay higher wages, and high-tech services account for a large share of service activities that are tradable. Service exporters are more prevalent in high-tech industries with larger establishments and higher wages. Within industries, service exporters tend to be larger, pay higher wages, and are more productive. Tradable service activities seem consistent with U.S. comparative advantage and, as a result, less likely to be vulnerable to offshoring. Consistent with this, recent employment growth in tradable service industries is not significantly different than employment growth in non-tradable service industries.     

Redistribution of Trade Gains in the Presence of Firm and Worker Heterogeneity

Trade gains are unequally distributed; in particular, low‐ability workers lose out in terms of wages and employment probability. In this paper, we investigate the impact of redistribution schemes on aggregate and disaggregate variables. To this end, we built a trade model with trade unions, heterogeneous firms and workers. Three redistribution schemes are distinguished: unemployment benefits financed by either a wage tax, a payroll tax or a profit tax. We find that: (i) all three redistribution schemes reduce output per capita; (ii) but the marginal reduction is lowest in the wage tax funding scenario; and (iii) If the profit tax is used, labour demand for low‐ability workers increases.     

A study of living wage effects on employees' performance‐related attitudes and behaviour

Despite the surge of interest in living wage research, most studies pay little attention to the effect of living wages on employee attitudes and behaviour. We examine the differences between living wage and minimum wage workers on three attitudinal and behavioural outcomes: affective commitment, organizational citizenship behaviour (OCB), and turnover intention. We also examine the effects of training and benefits on the three outcomes. Results show that living wage workers have higher affective commitment and lower turnover intention. Training and benefits also improve workers' attitudinal and behavioural outcomes variously. Copyright © 2016 ASAC. Published by John Wiley & Sons, Ltd.     

Do Newly Founded Firms Pay Lower Wages? First Evidence from Germany

Using a linked employer–employee data set for Germany, this paper analyses wage setting in a cohort of newly founded and other establishments from 1997 to 2001. While theory provides alternative explanations for higher or lower wages in newly founded firms, we show empirically that start-ups tend to pay lower wages, ceteris paribus. On average, wages in newly founded establishments are 8% lower than in similar incumbent firms. This negative wage differential is substantially smaller in eastern than in western Germany. The wage differential is shown to decline over time as the newly founded firms become more mature.     

Foreign direct investment and inequality: Evidence from China's policy change

In this paper, we examine the impact of foreign direct investment (FDI) on local urban inequality in China. Specifically, we consider the FDI policy change as an exogenous shock on the local labour markets. We find that cities that have experienced a bigger policy change in promoting FDI between 1997 and 2002 are significantly more unequal in 2005. This pattern is mainly driven by the positive association between FDI liberalisation and skill premia. The result holds after we control for other policy changes, such as privatisation of state-owned enterprises, infrastructure and trade liberalisation. We then turn to investigate the mechanisms using firm and individual-level information. Our firm-level evidence shows that FDI firms not only hire relatively more high-skilled workers but also provide relatively higher wages to high-skilled workers compared to domestic firms. Moreover, the individual-level analysis shows that FDI has a significantly positive spillover effect on wages received by skilled workers employed by state-owned enterprises, but not wages of unskilled workers.     

Multinational enterprises and domestic wages: The contingent effect of skill composition

While previous literature has extensively shown that foreign-owned firms pay higher wages than domestically owned firms, the examination of intra-industry wage spillovers between foreign-owned and domestic companies has received much less attention, particularly among non-core EU economies. In this paper, we contribute to the literature on wage spillovers of foreign multinational enterprises onto domestic firms by considering whether the presence of MNE subsidiaries in the Spanish manufacturing industry affects wages in domestic firms in the same industry. Although no evidence supports the existence of wage spillovers from MNEs onto domestic firms on aggregate, we show that the effect of this outside presence on domestic wages is significantly more positive in step with the higher level of workers’ skills in domestic firms. Because only workers in domestic firms with a highly skilled workforce will benefit from wage spillovers from the foreign firm presence in the industry, policy makers need bear in mind that not all FDI will automatically generate spillover benefits to domestic firms.     

UNIONS,MONOPOLISTIC COMPETITION AND THE OPTIMAL MONETARY REGIME

This paper considers the optimal monetary regime in a monopolistically competitive economy where wages are set by non‐atomistic (i.e. large) unions. In such a context, the conduct of monetary policy is known to influence not only the equilibrium inflation rate, but also equilibrium employment. Previous contributions which have examined this scenario have commonly concluded that a low degree of accommodation of wages and prices is optimal. This study shows, however, that the framework's principal features imply a highly accommodating policy stance can potentially achieve a superior outcome and, indeed, despite its character, is able to both eliminate unemployment and deliver zero inflation.     

Trade, offshoring, and the invisible handshake

We study the effect of globalization on the volatility of wages and worker welfare in a model in which risk is allocated through long-run employment relationships (the ‘invisible handshake’). Globalization can take two forms: international integration of commodity markets (i.e., free trade) and international integration of factor markets (i.e., offshoring). In a two-country, two-good, two-factor model we show that free trade and offshoring have opposite effects on rich-country workers. Free trade hurts rich-country workers, while reducing the volatility of their wages; by contrast, offshoring benefits them, while raising the volatility of their wages. We thus formalize, but also sharply circumscribe, a common critique of globalization.     

Reassessing the foreign ownership wage premium in Germany

This paper evaluates the effect of foreign takeover on wages of workers in German establishments, using rich linked employer–employee data from 2003 to 2014. To identify a causal effect of foreign takeover, we combine propensity-score matching with a difference-in-difference estimator. We find that a takeover by a foreign investor leads to a wage premium of 4.0 log points in the year after ownership change, which further increases to 6.3 log points 3 years after acquisition. The wage premium is largest for high-skilled workers, which is consistent with three theoretical arguments, namely rent appropriation by managers, technology protection and training on new technology. We also show that the wage premium does not pick up an exporter effect due to a platform investment of the foreign owner, that it takes about 4 years before it fully develops, that it does not vanish after foreign divestment and that the wage increase is specific to foreign acquisition instead of ownership change per se.     

Union impact on wages and fringe benefits of hospital nonprofessionals

Union effects on the wages and fringe benefits of nonprofessionals are estimated for a sample of hospitals in three midwestern states. Survey questionnaire, personal interviews, and published data are combined to determine both the compensation gains of unionized workers and the "spillover" effects on nonunion workers in unionized hospitals. The results of this analysis suggest that overall union effects on total compensation are in the order of 6 to 7 percent for both groups.     

Vor der Bundestagswahl: Argumente für Mindestlöhne überzeugen nicht

For the first time ever, all political parties represented in the German Bundestag are proposing some form of minimum wage regulation in their federal campaigns. After sketching an overview of the vast empirical literature on the employment effects of minimum wages, which has yet to come to a consensus, the paper concentrates on the most common theoretical arguments for the view that minimum wages need not reduce the employment levels of affected workers. The authors find that those arguments are either conceptually inconsistent or assume market characteristics that can hardly describe the reality of low-wage labour markets. In the end, minimum wages are a blunt instrument to reduce poverty among workers — its primary objective — because it benefits many that are not poor and does not address the most important determinant of poverty in Germany, namely unemployment.     

Bilanz des gesetzlichen Mindestlohns: deutliche Lohnerhöhungen,aber auch viele Umgehungen

Three years after the introduction of the minimum wage in 2015, the assessment of its labour market impact is positive. Contrary to early warnings, there has been no apparent decline in employment in most affected parts of the labour market. The share of the working poor who were eligible for drawing in-work benefits declined by 2.7 percentage points. Nevertheless, there still is a pressing problem of 2.2 million minimum wage violations. Those occur more often in establishments that do not have worker representation and are not covered by collective bargaining. Women and East Germans are also more often affected. Lost wages and social insurance contributions in 2016 were as high as €10 billion.     

Ethical consumerism and wage levels: Evidence from an experimental market

This paper contributes to the promotion of multidisciplinary research on ethical consumerism by providing experimental evidence on consumer's willingness to reward sellers by paying higher wages to their workers. We analyze repeated interactions occurring between workers, sellers, and consumers within the framework of an experimental market. By successfully performing a task, workers allow sellers to offer a good through a market. Sellers set the price of goods and decide the wages of workers. Consumers enter the market sequentially and decide whether to accept one of the offers or to leave the market. Our data show that, especially in the first periods of the experiment, some sellers opt to pay high wages to their workers. However, this behavior is not rewarded by consumers, whose purchasing choices are almost exclusively driven by self-interest. In our interpretation, the connection between workers and sellers that connotes our experimental design, with workers who allow sellers to enter the market, may induce consumers to believe that eventual sacrifices for paying high wages to workers must be entirely on sellers. Our result suggests that the more salient is made the importance of some stakeholders in allowing the firm's activity, the fewer consumers' may be willing to sacrifice their monetary payoff to improve these stakeholders' condition.     

The power of prediction: predictive analytics,workplace complements,and business performance

Anecdotes abound suggesting that the use of predictive analytics boosts firm performance. However, large-scale representative data on this phenomenon have been lacking. Working with the Census Bureau, we surveyed over 30,000 American manufacturing establishments on their use of predictive analytics and detailed workplace characteristics. We find that productivity is significantly higher among plants that use predictive analytics—up to $918,000 higher sales compared to similar competitors. Furthermore, both instrumental variables estimates and the timing of gains suggest a causal relationship. However, we find that the productivity pay-off only occurs when predictive analytics are combined with at least one of three workplace complements: significant accumulation of IT capital, educated workers, or workplaces designed for high flow-efficiency production. Our findings support claims that predictive analytics can substantially boost performance, while also explaining why some firms see no benefits at all.

     

Productivity, wages and intrinsic motivations

There is a long-standing debate in labour economics on the impact of workers’ intrinsic motivations on equilibrium wages. One direction in economic theory suggests that intrinsically motivated workers are willing to accept lower wages and “donate” work, for example, in terms of unpaid overtime (the donative-labour hypothesis). In the other direction, intrinsic motivations are expected to increase worker productivity and, in turn, wages (the intrinsic motivation-productivity hypothesis). Using a new database of a sample of workers in the cooperative non-profit sector, we find that, consistently with the motivation-productivity hypothesis, more motivated workers earn significantly higher wages, which signals higher productivity. Evidence supporting the donative-labour hypothesis is weaker, even though a generally positive connection between motivations and work-donation is confirmed. We interpret these findings by arguing that the impact of the donative-labour effect is dominated by the intrinsic motivation-productivity effect.     

Entrepreneurship,job creation and wage growth

This paper analyses the importance of entrepreneurs in terms of job creation and wage growth. Relying on unique data that cover all establishments, firms and individuals in the Danish private sector, we are able to distil a number of different subsets from the total set of new establishments—subsets which allow us to more precisely capture the “truly new” or “entrepreneurial” establishments than has been possible in previous studies. Using these data, we find that while new establishments in general account for one-third of the gross job creation in the economy, entrepreneurial establishments are responsible for around 25% of this, and thus only account for about 8% of total gross job creation in the economy. However, entrepreneurial establishments seem to generate more additional jobs than other new establishments in the years following entry. Finally, the jobs generated by entrepreneurial establishments are to a large extent low-wage jobs, as they are not found to contribute to the growth in average wages.     

Job Flows and Job Quality by Establishment Size in the Finnish Manufacturing Sector 1980–94

This paper studies how employment patterns and growth vary with establishment size in the Finnish manufacturing sector during the period 1980–94. The findings are compared with the predictions of alternative theories of firm growth. The paper also examines some aspects of job quality in different size categories, including wages, labour productivity, working hours, labour turnover and the persistence of jobs. According to the findings, small establishments create and destroy jobs relatively more than large establishments. In addition, in the smallest size categories both the share of gross job creation and the share of gross job destruction is larger than the share of employment. However, there is no clear relationship between establishment size and net employment change. Furthermore, after studying different aspects of job quality, we can conclude that the jobs offered by small and large establishments differ greatly in many respects and it is difficult to evaluate the total welfare effect.     

Saving good jobs from global competition by rewarding quality and efforts

This paper links firms' endogenous quality choices to worker effort and efficiency wages. In the model, firms differ in their ability to monitor workers who have an incentive to shirk. As high quality output requires high worker effort, it is firms with better monitoring ability that upgrade their quality. Indeed, these firms upgrade their quality to such a degree that they also end up paying higher wages to induce even more worker effort. Trade liberalization can induce greater or smaller wage inequality but always enlarges the welfare inequality as higher wages go hand in hand with even greater effort.