Wage posting: evidence from job ads

Abstract Recent studies of search theory examine how employers use a wage‐setting mechanism – either by bargaining or through the posting of a non‐negotiable wage offer in a job ad – to facilitate search. We contribute to this literature by examining wage posting in job ads in the US, the UK, and Slovenia. Despite considerable differences in the incidence of wage posting, employers in all three markets are less likely to post a wage offer when searching for skilled workers. The decision on whether or not to post a wage offer is only weakly related to the outcomes of employers’ search.     

DIRECTED SEARCH ON THE JOB AND THE WAGE LADDER*

We model a labor market where employed workers search on the job and firms direct workers' search using wage offers and employment probabilities. Applicants observe all offers and face a trade‐off between wage and employment probability. There is wage dispersion among workers, even though all workers and jobs are homogeneous. Equilibrium wages form a ladder, as workers optimally choose to climb the ladder one rung at a time. This is because low‐wage applicants are relatively more sensitive to employment probability than to wage and thus forgo the opportunity to apply for a high wage, with a lower chance of success.     

UNEMPLOYMENT POLICIES IN AN ECONOMY WITH ADVERSE SELECTION

This paper studies the effects of unemployment policies in a simple static general equilibrium model with adverse selection in the labour market. Firms offer a contract that induces the self‐selection of workers. In equilibrium, all unskilled workers are screened out and some skilled workers are rationed out. It is shown that the provision of unemployment insurance raises involuntary unemployment by encouraging adverse selection, while unemployment assistance – or subsidy to unemployment – reduces involuntary unemployment. A simple efficiency wage model is also presented to show that either of the two policies reduces employment by taxing effort and subsidizing shirking. The key is whether the social role of unemployment is a sorting device or a worker discipline device.     

Wage/tenure contracts with heterogeneous firms

This paper investigates equilibria where firms post wage/tenure contracts and risk averse workers search for new job opportunities whether employed or unemployed. We generalize previous work by assuming firms have different productivities. Equilibrium implies more productive firms always offer more desirable contracts. Thus workers never quit from more productive firms for less productive firms. Nevertheless turnover is inefficient as employees with long tenures at low productivity firms may reject outside job offers from more productive firms. A worker who quits to a more productive firm may accept a wage cut. Such wage cuts are compensated by faster “promotion” rates to higher wage levels in the future. We also generalize previous arguments by showing equilibria exist where the distribution of offers contains interior mass points and find equilibrium wage/tenure contracts need not be smooth.     

THE IMPACT OF THE MINIMUM WAGE ON FEMALE EMPLOYMENT IN JAPAN

This article examines the impact of the minimum wage on employment, focusing on women in their 20s and 30s, who are known to be typical low‐wage workers in Japan. The results, based on a panel estimation, suggest that the minimum wage has a measurable impact on employment; the workers whose current wage is below the revised minimum wage are about 20–30 percentage points less likely to be employed in the following year than comparable low‐wage workers who are not affected by the revision of the minimum wage. The estimation results are sensitive to the choice of the control group. (JEL J23, J38, J88)     

Comparing earnings profiles in urban areas of an LDC: rural-to-urban migrants vs. native workers

"We use Tanzanian data to test a recently proposed hypothesis that rural-to-urban migrants have an incentive to supply greater work effort than native urban workers, because of the migrants' positive probability of returning to the low-wage rural areas. We treat the choice between public- and private-sector employment as endogenous and, for theoretical and empirical reasons, distinguish migrants with access to rural land from those without access. Our results show that migrants in both sectors face lower initial wage offers than native urban workers. But, the wage gap is eliminated within a decade or less, and thereafter, migrants surpass the wage offers of native workers."     

Employer and Employee Ignorance in Developing Countries: The Case of Trinidad and Tobago

The authors examine the degree of employer and employee ignorance about reservation and offer wages in Trinidad and Tobago and find this to be considerable. On average employers pay more than 26% above workers’ reservation wages, while employees earn 22% less than the maximum wage on offer, ceteris paribus. However, there are some differences across sub‐groups of jobs, particularly with regard to individuals’ lack of information about the best wage offers. Some differences are also found compared to previous results for developed nations, although the level of ignorance does not appear to be higher in Trinidad and Tobago.     

The Return to Caring Skills: Gender,Class, and Occupational Wages in the US

Feminist economics has contributed to the understanding of the economic importance of care work. Most studies find a wage penalty associated with caring occupations. This study extends the feminist research on care work beyond caring occupations by identifying specific caring skills and activities derived from the 2014 O*NET job-evaluation data. Four caring skills – (1) Assisting and Caring for Others, (2) Establishing and Maintaining Interpersonal Relationships, (3) Service Orientation, and (4) Social Perceptiveness – were used in ordinary least-squares and quantile wage regressions for 623 occupations in the United States. Findings indicate that the return to caring and assisting skills results in a wage penalty for low-wage workers but a wage premium for workers in high-wage and male occupations. By identifying the impact of gender and class on the economic return to particular caring skills, the study broadens the understanding of care work, especially in relation to US wage inequality.     

Wage setting in the Colombian manufacturing industry

We show that wage setting in the Colombian manufacturing industry is not fundamentally driven by labour productivity in contrast to the standard theoretical prediction. On the contrary, internal institutional arrangements – payroll taxation, the minimum wage or the price wedge between manufacturing and consumption prices – together with a higher exposure to international trade – connected to the increasing globalization of the Colombian economy – appear as the crucial drivers. These findings lead us to question the political strategy followed to attain cost competitiveness in a context of growing exposure to international trade. Implementation of a true wage bargaining system is suggested as a critical policy target to prevent the disruptive economic consequences of the current wage‐setting mechanism and help rebalance the trade deficit.     

MINIMUM WAGE EFFECTS ON PERMANENT VERSUS TEMPORARY MINIMUM WAGE EMPLOYMENT

We estimate the effect of minimum wages on employment using the Master Files of the Canadian Labour Force Survey over the recent period 1997–2008. Particular attention is paid to the differences between permanent and temporary minimum wage workers—an important distinction not made in the existing literature. Our estimates for permanent and temporary minimum wage workers combined are at the lower end of estimates based on Canadian studies estimated over earlier time periods, suggesting that the adverse employment effects are declining over time for reasons discussed. Importantly, the adverse employment effects are substantially larger for permanent compared to temporary minimum wage workers; in fact they fall almost exclusively on permanent minimum wage workers. (JEL J30)     

IS MINIMUM WAGE AN EFFECTIVE ANTI‐POVERTY POLICY IN JAPAN?

This paper considers whether the minimum wage is a well‐targeted antipoverty policy by examining the backgrounds of minimum‐wage workers. Whether raising the minimum wage reduces employment for unskilled workers is also investigated. An examination of micro data from a large‐scale government household survey, the Employment Structure Survey (Shugyo Kozo Kihon Chosa), reveals that approximately half of minimum‐wage workers belong to households with annual incomes of more than 5 million yen as a non‐head of household. A regression analysis indicates that an increase in the minimum wage moderately reduces the employment of male teenagers and middle‐aged married women, while it encourages the employment of high‐school age youth.     

Worker displacement during the transition: Experience from Slovenia1

The Slovenian transition created labor displacements that were bigger than those experienced in North America in the 1980s. In Slovenia, probability of both layoffs and quits fell with worker tenure, firm profitability and expected severance costs. Individuals facing a higher probability of displacement accepted slower wage growth than otherwise comparable workers. The incentives to avoid displacement were strong – workers that actually were displaced faced a slow process of transiting out of unemployment with only one‐third finding re‐employment. Correcting for selection, real wage losses for displaced workers are comparable to those reported for displaced workers in North America.     

Search efficiency,wage dynamics and welfare

Advances in information technology have improved the job-search process in the labor market. We analyze the effects of this improvement by constructing a search-and-matching model with two sectors: a risky sector with firm-specific productivity shocks and a risk-free sector. The risky sector is characterized by a low level of commitment between employers and workers – either party can end the employment relationship. We show that a better job-search process generates more job matches in the risky sector, and this benefits workers by improving their outside options. The effect on employers is subtle: while it is easier to fill vacancies, workers become more expensive. At the same time, the ease of finding new workers makes it harder for employers to keep their wage promises to workers and increases wage volatility. Our paper contributes to the literature by offering a novel explanation for the observed rise in wage volatility.     

Unobserved Heterogeneity,Job Training and the Employer Size–Wage Effect in Australia

This study attempts to clarify the nature of the employer size–wage effect in Australia by determining the extent to which it can be explained by observed and unobserved quality differences of workers. Our empirical results show that, for men, quality‐adjusted employer size–wage effects are quite small and are mostly driven by lower wages for workers in the smallest firms (fewer than 20 workers). For women, size–wage effects disappear when unobserved quality differences are accounted for. We also find that accounting for differences in the incidence of job training has no effect on the structure of wage differences by employer size.     

劳动力转移与工资差距同时扩大的“悖论”研究——基于市场分割的视角

从市场分割的角度出发,对劳动力流动与工资差距同时扩大的"悖论"和中国市场化过程中的"迁移谜题"进行了深入分析,认为劳动力市场的地区分割和城乡分割导致了劳动者之间必然存在工资收入差距,而且即使存在劳动力转移,也不能使工资差距收敛。这种制度性偏好导致的劳动力市场分割,对劳动者工资收入差距的扩大起了推波助澜的作用,因此构建全国统一、自由竞争的劳动力市场是非常必要的,并提出有关的政策建议。     

Sex Differentials in Earnings in the South Korean Labor Market

We examine gender differences in earnings among South Korean workers in 1988 – the year the South Korean National Assembly enacted the Equal Employment Opportunity Act. Using the "88 Occupational Wage Bargaining Survey on the Actual Condition," we calculate women's mean earnings as a percentage of men's mean earnings by major industrial category and educational attainment. We find a larger wage gap among clerical and sales workers than production workers or professionals. Generally, the more education a woman has, the smaller the gap between her earnings and those of her male counterparts. Women with a middle-school education have a mean income 53.5 percent that of comparable men, while the female-to-male wage ratio among college graduates is 76.1 percent. We analyze wage differences separately for women and men. Following Ronald Oaxaca's (1973) work, we decompose male–female wage differentials. We also calculate a discrimination coefficient. Our work shows that, all else equal, men earn from 33.6 percent to 46.9 percent more than women with comparable skills. We attribute the difference to gender discrimination.     

Employment Protection Versus Flexicurity: On Technology Adoption in Unionised Firms*

We analyse how different labour‐market institutions – employment protection versus ‘flexicurity’– affect technology adoption in unionised firms. We consider trade unions’ incentives to oppose or endorse labour‐saving technology and firms’ incentives to invest in such technology. Increased flexicurity – interpreted as less employment protection and a higher reservation wage for workers – unambiguously increases firms’ incentives for technology adoption. If unions have some direct influence on technology, a higher reservation wage also makes unions more willing to accept technological change. Less employment protection has the opposite effect, as this increases the downside (job losses) of labour‐saving technology.     

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.     

Educational mismatch and promotions to managerial positions: a test of the career mobility theory

Career mobility theory suggests that given a certain occupation, schooling improves upward mobility in terms of promotion and wage growth. We are the first to test the implications of this theory for over- and undereducation by means of direct information about promotions to managerial positions. Using German administrative data entailing an employer-reported – and hence objective – measure of educational requirements, we show that overeducated workers are indeed more likely to be promoted and that this career mobility advantage is more pronounced in the early stages of their working lives. By contrast, undereducated workers are less likely to be promoted to managerial positions. Moreover, in terms of wage growth, while overeducated workers benefit more, undereducated workers benefit less from promotions than their well-matched educational peers. Altogether, these findings strongly support the career mobility theory. Furthermore, by differentiating between internal and external promotions, we provide evidence that promotions are more likely for overeducated workers within the establishment, whereas the opposite applies for undereducated workers. This finding indicates the relevance of both over- and undereducation as signals of true ability to other employers.     

WAGE AND EMPLOYMENT DETERMINATION THROUGH NON-COOPERATIVE BARGAINING

This paper investigates wage and employment determination by a group of workers or union and a firm, making use of the techniques of non-cooperative bargaining. Previous analyses have examined wage determination with an artificial restriction that employment is determined either before or after wage determination has occurred. Here, employment determination is made part of the bargaining process. With two variables being determined, there is bargaining with a variable pie and solutions correspond to equilibria without commitment. Two different notions of efficiency – exchange and pie efficiency – are relevant and serve to characterise equilibria. Multiple equilibria are shown to arise naturally once exchange inefficient proposals are possible. In all equilibria there is overemployment. Factors that restrict a firm's ability to alter the labour force during or after the wage-bargaining process are shown, paradoxically, to benefit the firm.