The role of migration in regional wage convergence: Evidence from Sweden 1860–1940

Sweden experienced a decline in inter-county real wage differentials for agricultural workers between 1860 and 1940, historical evidence of early labor market integration well before widespread unionization in agriculture occurred. By means of dynamic panel data analysis, this paper examines whether internal and external migrations caused real wage beta convergence across Swedish counties. To account for statistical problems such as endogeneity of migration, time-invariant county characteristics and autocorrelation in the regression model, we adjust our estimates using fixed effects, instrumental variables and GMM. The preferred model shows that both internal and external migrations contributed to wage convergence before the First World War and internal migration mainly during the interwar years. The agglomeration effects of urbanization were not sufficiently pervasive to offset the labor supply effects of internal and external migrations.     

What has Happened to Wages in the New Order?

This paper reviews trends in real wages in Indonesia since the early 1970s. It finds that there has been wage growth in a range of agricultural and non-agricultural sectors. However, growth has been uneven across sectors and for different periods. After the oil boom, wage growth slowed during the second half of the 1980s, although it picked up again in the 1990s. The paper discusses the relationship between various episodes of economic growth and labour market developments which might have contributed to patterns of wage change in various sectors. It also examines the influence of price deflators on real wage change, and compares trends in real earnings with trends in wage rates.     

Books and publications received

ABSTRACT

Economic theory predicts that regional wages will converge as transport and communication technologies bring labour markets together. An exploration of this transition from labour market segmentation to unification requires long-term evidence of nominal wages and cost of living by region. This paper presents new evidence of wages for male manufacturing workers and cost-of-living indices across 24 Swedish counties between 1860 and 2009. Our findings indicate that the Swedish regional wage differentials were a great deal larger in the 1860s than in the 2000s. Most of the compression took place between the 1860s and World War I, as well as in the 1930s and during World War II. Differences in expenditures on housing impact on our assessment of convergence in the post-World War II decades: the nominal measure declines, while the real one stays constant. Our concluding discussion engages with the assumption that before World War I, regional wage convergence was associated with labour mobility, spurred by improved communication and transportation technologies as well as by the implementation of modern employment contracts. In the 1930s and 1940s, in contrast, regional wage convergence can be traced to high unionisation and centralised collective bargaining in the labour market, two distinguishing features of the Swedish Model.     

Working hours in the European periphery: The length of the working day in Spain, 1885-1920

This paper studies the decline of the working day in Spain from 1885 to 1920. The decline was more continuous than previously thought. Differences in hours reinforce wage differentials, showing labor markets were not well integrated. Cross-sectional and time-series analysis suggests that hour reductions reflect a labor supply rather than a labor demand effect. Given the comparatively slow growth of real wages in Spain from 1870 to 1920, the Spanish case shows that international convergence in hours of work must have been stronger than convergence in wages.     

Product market competition, unemployment and income disparities

Product Market Competition, Unemployment and Income Disparities. — We discuss how promoting competition in product markets affects unemployment and wage differentials. We examine a general equilibrium model with real wage rigidities in labor markets and market power in product markets. We illustrate how more intense competition reduces unemployment. A decrease of markups would induce an increase of real wages if real wages were flexible. This enables the employment of more low-skilled people above a real reservation wage. More intensive competition, however, widens wage and income differences between low-skilled and high-skilled workers. Differences of income distributions across countries could also be caused by differences in the intensity of product market competition.     

Real Wages in Australia and Canada, 1870–1913: Globalization versus Productivity

Australia's and Canada's real wage experiences between 1870 and 1913 were distinctive. Faster productivity growth underpinned Canada's overtaking of Australia's wage levels. The globalization forces of migration and trade also shaped their comparative wages, principally by reducing wage growth in Canada. Immigration increased slightly Australia's real wages, but reduced wage levels in Canada, and tempered there the beneficial effects of rising productivity and improving terms of trade. In contrast, wage earners' share of national income rose after 1890 in Australia, with the productivity slowdown hitting chiefly rents and profits. Distributional shifts favouring wage earners in Australia, and the depressing effects of mass immigration on wages in Canada, limited Canada's wage lead before 1914, despite her faster productivity growth.     

Regional wages in industry and labour market integration in Sweden, 1861–1913

Abstract

This study examines the extent to which wages of industrial workers converged during the period of Sweden's industrial breakthrough, thereby relating to the international discussion on market integration. About 350 local wage series for nine regions in Sweden for the period 1861–1913 are used, deflated by regional cost-of-living indices. The main result is that there was a general wage convergence during the period of study. Wage differentials decreased across occupations and regions, but also within occupational groups and regions (sigma-convergence). There was also a general tendency of initially lower wages to grow more quickly than initially higher wages (beta-convergence). The convergence pattern in this respect differed between sub-periods, which may be related to the pattern of industrial and infrastructural development in Sweden. The occurrence of wage convergence may be interpreted as evidence of an integration of the labour market, which corresponds to the integration of product and capital markets presented in other investigations.     

Labour Market Flexibility,Wages and Incomes in Sub‐Saharan Africa in the 1990s

Abstract: This paper provides an overview of how African labour markets have performed in the 1990s. It is argued that the failure of African labour markets to create good paying jobs has resulted in excess labour supply in the form of either open unemployment or a growing self‐employment sector. One explanation for this outcome is a lack of labour market ‘flexibility’ keeping formal sector wages above their equilibrium level and restricting job creation. We identify three attributes of labour market flexibility. First, whether real wages decline over time; secondly, the tendency for wages to adjust in the face of unemployment; and thirdly, the extent of wage differentials between sectors and/or firms of various size. Recent research shows that real wages in Africa during the 1990s may have been more downwardly flexible than previously thought and have been surprisingly responsive to unemployment rates, yet large wage differentials between formal and informal sector firms remain. This third sense of the term ‘inflexibility’ can explain a common factor across diverse African economies — the high income divide between those working in large firms and those not. Those working in the thriving self‐employment sector in Ghana have something in common with the unemployed in South Africa — both have very low income opportunities relative to those in large firms.     

The evolution of wages in early modern Normandy (1600–1850)

This article presents new estimates of wages for Normandy between 1600 and 1850. We use a vast array of primary and secondary sources to assemble two new databases on wages and commodity prices to establish a new regional consumer price index (CPI) and twelve regional wage series. We find that unskilled labourers earned similar wages across the agricultural, maritime, and textile sectors. Historical evidence suggests that Norman employers grappled with a tight labour market, which placed more pressure on wage increases. We posit that this situation is best explained by the combination of the early fertility transition, resulting in slow demographic growth and the rapid development of the textile industry accelerated by the arrival of cotton. Finally, we also provide tentative evidence suggesting that labourers with stable employment could have earned a little less than their English counterparts during this period.     

Domestic service,gender, and wages in rural England,c.1700–18601

Domestic service was a vital occupational sector in England in the eighteenth and nineteenth centuries—particularly for women. This article uses a new series of wage observations from across England, focusing on rural areas. Analysis of the dataset shows that wages paid to servants in rural England slightly increased over the period considered, but at uneven rates dependent on region and precise occupation of servant. The majority of servants, particularly maids, did not experience any significant increase in the wages they were paid. This article also shows a widening wage gap between male and female servants. When differences between regions were analysed, it was shown that the wages paid to servants did not match the model of the north becoming the high wage zone of England by the mid‐nineteenth century, although rates of growth there were the highest. For servants the south generally remained an area of higher wages even in the mid‐nineteenth century. Geography was probably not the key variable in determining wage levels. The type of household in which a servant was employed was more important than where it was located. The most important variables were the servants' gender, and their occupations in the household.     

Does Hukou pay? Evidence from nanny markets in urban China

This paper quantifies the effect of the Chinese Hukou (household registration) on expected wage of nannies in urban China. Using a novel data set with detailed individual information of nannies from 12 Chinese cities during 2015–2016, this study finds that a 1% increase in Hukou Index, a measure of inter-regional migration restrictions, leads to a 0.05% increase in expected wage of nannies. The effect is heterogeneous for sub-categories of Hukou policies and among different types of nannies. Migration networks also play a significant role, and the effects are different for migration networks of different sizes. These findings reveal the unexpected consequences of China’s tight control of internal migration and the change in wages of a relatively low-skill service sector.     

Wage misalignment in CFA countries: were labour market policies to blame?

Wage rigidity, stemming from highly distortive labour marketpolicies, is a natural candidate to explain the overvaluationof the CFA franc after the adverse external shocks of the 1980s.This paper uses a variety of data sources to assess wage rigidityin CFA countries until the 1994 devaluation, and to analysewhether it was due to labour market policies. The paper showsthat wages were high in CFA countries, compared with both wagesin similar countries and the labour earnings of similar individualswithin the same countries. It also shows that wages were rigidin real terms, in the sense of following closely the fluctuationsof government wages and consumer prices, but it finds no evidenceof nominal wage rigidity, though. From an international perspective,minimum wages were not high enough to account for the observedwage misalignment. Moreover, their adjustment over time washighly responsive to real shocks. Private sector unions, inturn, seemed more instrumental in achieving wage moderationthan wage drift. Their members usually had lower wages thansimilar, non-unionised workers, which probably reflects the'subordinate' nature of the labour movement. The most likelycandidates to explain wage misalignment and real rigidity inCFA countries in the 1980s and early 1990s are therefore governmentpay policies and (possibly) limited competition in product markets.     

Labour market response to globalisation: Spain, 1880–1913

This paper analyses the impact of globalisation (trade and migration) on the Spanish labour market between 1880 and 1913 by examining the influence that globalisation factors had on agricultural and industrial wages. Our results show that the nineteenth century grain invasion had a negative impact on agricultural wages, whereas the fall in wheat prices did not benefit industry workers. We also found that migration pushed up real agricultural and industrial wages. As agriculture was the main sector in the economy, the final impact was a wage decrease. The negative impact of trade on agricultural and industrial labour markets partly explains the trade policy response of “integral protection”. However, other alternatives that would have been effective in raising living standards, such as migration policy, were not used.     

The labor market in Tokugawa Japan: Wage differentials and the real wage level, 1727–1830

Tokugawa economic history provides quite an interesting example of the workings of the labor market: In the Tokugawa period a contraction in occupational wage differentials occurred concurrently with a rise in real wages. This paper deals with these aspects of wage change and a general set of problems which has arisen about them. The first section sets out these problems; the second deals with the evidence on wage differentials and real wages in Kinai from 1727 to 1830. The third provides a theoretical framework to explain the findings; finally the last section examines the implications of the findings.     

Wage increases, wage convergence, and the Lewis turning point in China

We examine the wage trends of ordinary workers and the wage convergence between unskilled and skilled workers in China. First, we find that wages in all non-agricultural sectors, wages of migrant workers, and wages of hired workers in the agricultural sector have increased dramatically since 2003. Second, through comparing wage differentials between migrant and urban resident workers and between heterogeneous education groups within migrant workers, and by investigating the changes in the contribution of the returns to education to wage differentials, we find that the wages of unskilled and skilled workers have converged. Both the increasing wage trends and wage convergence are interpreted as evidence supporting the hypothesis that China has passed what can be called the Lewis turning point in the industrial sector. We conclude that the sustainability of economic growth in China requires an upgrading of labor market institutions to accommodate the merging of the rural and urban labor forces.     

Migration and regional wages

"This paper presents a new method of using wage data in a model of U.S. interregional migration. This method makes better use of human capital theory than has been done in previous studies. By restricting the variability of real predicted individual regional wages, more satisfactory estimates of a migration model are obtained using microdata than when no restrictions are imposed. A multiple choice conditional logit model is applied to migration as a choice among the four U.S. census regions. Two U.S. microdata sets are used to estimate the model."     

Did firms cut nominal wages in a deflationary environment?: Micro-level evidence from the late 19th and early 20th century banking industry

This paper examines wage adjustment in the late 19th and early 20th centuries using personnel records from the Union Bank of Australia and Williams Deacon’s Bank (England). During the period of this study there was steep and prolonged deflation. Firm-specific and industry-specific demand shocks also put downwards pressure on wages. Although it was common for individual wages at the banks to remain unchanged from year to year, wage cuts were very rare even for senior workers. Turnover at both banks was extremely low and, thus, despite flexibility in the wages of incoming workers, did not offset the effects of individual-level wage rigidity. Consequently real wages moved counter-cyclically.     

Efficiency Wages,Interfirm Comparison,and Unemployment

The paper presents an efficiency wage model where worker effort depends on own wages relative both to wages of other workers in the firm and to similar workers in other firms. First, we show how the Solow conditions are modified if internal comparison effects are at work. Second, we discuss the effect of internal wage comparison on wage inequality within firms. Third, we study unemployment and relative wage determination within a general equilibrium model, and analyze the effect of technological change and various tax policies on equilibrium unemployment and relative wages. Finally, the short-run effects of aggregate demand shocks are analyzed.     

Unskilled wage gaps within the Japanese Empire

This study calculates the cost of subsistence and respectability consumption baskets to derive ‘welfare ratios’ for 11 cities in the Japanese Empire as defined by Allen and his colleagues. Nominal wages tended to be higher where higher prices prevailed, and vice versa. Prices and nominal wages remained highest in Japan and lowest in Manchuria, with Korea and Taiwan being placed in between. Welfare ratios remained roughly comparable in the 1910s in the imperial cities outside Manchuria, where unskilled workers enjoyed substantially higher living standards. Interwar decades saw real wages rise in Tokyo, but fall in Dalian, which caused convergence in workers' income levels. Wage divergence occurred within Manchuria, as workers in Shenyang and Changchun enjoyed an improving welfare ratio. Real wages rose more slowly in Korean and Taiwanese than in Japanese cities. Replacing a subsistence lifestyle with a ‘respectable’ lifestyle yields a significantly different picture of the evolution of the real wage gap within the empire, which contradicts findings reported by existing studies in important respects.     

WAGES THROUGH BOOMS AND RECESSIONS: A CASE STUDY OF ZIMBABWE

This paper examines developments in the wage system in Zimbabwe. The analysis focuses on the wage formation process and wage differentials. The paper observes that real wages have been flexible and have fallen sharply. Wage inflexibility is thus ruled out as a cause of unemployment. The collapse of wages has given rise to non‐standard labour market practices as workers try to cushion themselves against rapid wage declines. Wages also exhibit wide gender, racial and occupational differentials. The paper also argues that a wage policy in Zimbabwe must be pillared on decentralised, coordinated and synchronised collective bargaining.