The Causal Effects of the Minimum Wage Introduction in Germany – An Overview

In 2015, Germany introduced a statutory hourly minimum wage that was not only universally binding but also set at a relatively high level. We discuss the short‐run effects of this new minimum wage on a wide set of socioeconomic outcomes, such as employment and working hours, earnings and wage inequality, dependent and self‐employment, as well as reservation wages and satisfaction. We also discuss difficulties in the implementation of the minimum wage and the measurement of its effects related to non‐compliance and suitability of data sources. Two years after the minimum wage introduction, the following conclusions can be drawn: while hourly wages increased for low‐wage earners, some small negative employment effects are also identifiable. The effects on aspired goals, such as poverty and inequality reduction, have not materialised in the short run. Instead, a tendency to reduce working hours is found, which alleviates the desired positive impact on monthly income. Additionally, the level of non‐compliance was substantial in the short run, thus drawing attention to problems when implementing such a wide reaching policy.     

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。     

Progressive Taxation and Wage Setting: Some Evidence for Denmark

The proposition that a progressive tax system contributes to wage moderation is studied using Danish earnings data disaggregated by occupation, gender and earnings level. Our main conclusions are that income-tax progression affects wage setting, but whether it moderates or exaggerates wage pressure is income dependent. An increase in progressivity reduces the pre-tax earnings of middle-income workers (manual male workers and moderate income earners among both male and female non-manual workers). The reverse is found for high-income earners (non-manual male workers), in that an increase in progressivity tends to raise pre-tax earnings. Finally, there is no significant effect of tax progressivity on the wages of low-income earners.
JEL classification : H 3; J 3; J 5; J 6     

Earning Curves and Wage Curves

Using British county data for full-time male manual workers we extend earlier work to investigate wage and earning curves. We distinguish between total earnings and hourly wages for standard hours, uncontaminated by overtime premium. Using data from 1980–1995 we find that earnings behaviour is dominated by volatile hours in the short run, while wage growth is highly sensitive to the level of unemployment as in the classical Phillips curve with macro data. Macro evidence for sticky wages is thus confirmed at the local level, and the wage curve of rapid adjustment is rejected for normal hourly wages.     

Hours risk and wage risk: repercussions over the life cycle*

We decompose earnings risk into contributions from hours and wage shocks. To distinguish between hours shocks, modeled as innovations to the marginal disutility of work, and labor supply reactions to wage shocks, we formulate a life-cycle model of consumption and labor supply. For estimation, we use data on married American men from the Panel Study of Income Dynamics. Permanent wage shocks explain 31 percent of total risk, permanent hours shocks 21 percent. Progressive taxation attenuates cross-sectional earnings risk, but its life-cycle insurance impact is much smaller. At the mean, a one-standard-deviation hours shock raises lifetime income by 11 percent, a wage shock by 13 percent.     

What Difference a Wife Makes: The Effect of Women's Hours of Work on Husbands' Hourly Earnings

This paper investigates the relationship between a wife's work-hours decision and her husband's hourly earnings. It is found that, among men in Managerial and Other Manual occupations, having a working wife significantly reduces the husband's hourly wage rate. The findings are robust to various estimation techniques and imply for these cases that productivity or discrimination effects associated with a wife working 40 hours per week lead to a reduction in the husband's hourly earnings of around 15 per cent.     

The optimal minimum wage with regulatory uncertainty

For two different regulatory standards, we examine the optimal minimum wage in a competitive labor market when the government is uncertain about supply and demand. Solutions are related to underlying supply and demand conditions, and to the extent of uncertainty and of rationing efficiency. With expected earnings maximization, greater uncertainty widens the range of parameter values for which a minimum wage should be set. With expected worker surplus maximization and sufficiently efficient rationing, a minimum wage should always be set. However, in both cases regulatory uncertainty may require a low minimum wage that may not bind in equilibrium.     

Assessing the Possible Antipoverty Effects of Recent Rises in Age‐Specific Minimum Wages in New Zealand

Real minimum wages increased by nearly 33 percent for adults and 123 percent for teenagers in New Zealand between 1999 and 2008. Where fewer than 2 percent of workers were being paid a minimum wage at the outset of this sample period, more than 8 percent of adult workers and 60 percent of teenage workers were receiving hourly earnings close to the minimum wage by the end of this period. These policy changes provide a unique opportunity to estimate the effects of the minimum wage on poverty. Although minimum wage workers are more likely to live in the poorest households, they are relatively widely dispersed throughout the income distribution. This is particularly true of teenage minimum wage workers. Furthermore, low‐income households often do not contain any working members. We estimate that a 10 percent increase in minimum wages, even without a loss in employment or hours of work, would lower the relative poverty rate by less than one‐tenth of a percentage point.     

Gender Employment Disparities,Financialization, and Profitability Dynamics on the Eve of Italy's Post-2008 Crisis

This study explores aggregate profitability in Italy from 1994 to 2008 in its connection with structural change and gender employment disparities. Using decomposition analysis, the study finds that aggregate profit rate declined, but the profit share did not. Male variables – such as earnings, output, employment, and working hours – tended to have more weight than female ones in explaining aggregate outcomes. Structural change also played a major role, as the economy specialized in sectors with falling real wages and wage shares, especially the financial sector and construction. Further falls in the wage share and widening wage gaps may not guarantee a rise in profitability. This result entails that “neo-mercantilist” approaches to solve the crisis might only prepare the next crisis, while a coordinated expansion of demand could be more successful. Moreover, gender issues should not be neglected in terms of favoring women's employment and entrepreneurship.     

Hourly wage rate and taxable labor income responsiveness to changes in marginal tax rates

Recently, a voluminous literature estimating the taxable income elasticity has emerged as an important field in empirical public economics. However, to a large extent it is still unknown how the hourly wage rate, an important component of taxable income, reacts to changes in marginal tax rates. In this study we use a rich panel data set and a sequence of tax reforms that took place in Sweden during the 1980s to estimate the elasticity of the hourly wage rate as well as the taxable labor income elasticity with respect to the net-of-tax rate. We also estimate elasticities with respect to the non-labor income in a way that is novel in the literature. While carefully accounting for the endogeneity of marginal tax rates we find a statistically significant response in wage rates both among married men and women. The estimates of the hourly wage rate elasticity with respect to the net-of-tax rate fall in the range of 0.14–0.16 for males and 0.41–0.57 for females, whereas the corresponding taxable labor income elasticity estimates hover between 0.19–0.21 for males and 0.96–1.44 for women. Moreover, for men we find that the taxable labor income elasticity with respect to non-labor income is statistically significant; the point estimate being ? 0.07. This implies that the compensated taxable labor income elasticity is about 5 percentage points higher than the uncompensated one. In general, we consider the estimates for males to be more certain and robust than the estimates for females.     

Ability Matters: Effects of Youth Labor‐Market Opportunities on Long‐Term Labor‐Market Outcomes

Utilizing registry data from cognitive ability tests for all Norwegian males born between 1962 and 1973, I study whether labor‐market conditions at the age of graduation have differential effects on earnings and employment for different ability groups. I find that low‐ability males are more vulnerable to local business cycles at the expected time of labor‐market entry. In particular, I demonstrate that low‐ability males suffer larger long‐term earnings losses than the rest of the population.     

How fragile are male labor supply function estimates?

We estimate male wage and nonwage income effects using linear specifications spanning three techniques (ordinary least squares, fixed effects, and random effects), two wage measures (reported hourly wages and average hourly earnings), and sample stratification by pay scheme (salaried versus hourly paid). Our regressions encompass the one-period static and perfect-foresight life-cycle models. The static model implies exogenous random person-specific effects, a negative nonwage income coefficient, and a positive labor supply substitution effect. The life-cycle model implies endogenous individual-specific effects, a positive wage coefficient, and a zero nonwage income coefficient. Neither the one-period static nor the perfect-foresight life-cycle models are implied by the data for salaried workers while the static model is consistent with the data for hourly paid workers if income taxes are ignored.     

Informal employment relationships and the labor market: Is there segmentation in Ukraine?

One of the most important factors that determine individuals’ quality of life and wellbeing is their position in the labor market and the type of jobs that they hold. When workers are rationed out of the formal segment of the labor market against their will, i.e., the labor market is segmented, their quality of life is limited, and their wellbeing is reduced. When they can freely choose between a formal or informal employment relationship, i.e., the labor market is integrated, their wellbeing can reach high levels even in the presence of informal employment. We, therefore, test whether the Ukrainian labor market is segmented along the formal-informal divide, slicing the data by gender and age. The analysis that we perform consist in the analysis of short-term and medium-term transitions between five employment states, unemployment and inactivity. We also analyze wage gaps of mean hourly earnings and across the entire hourly earnings distribution, controlling for time-invariant unobserved heterogeneity. According to our results segmentation is present for dependent employees: for a large part of informal employees informal employment is used as a waiting stage to enter formal salaried employment and is not voluntarily chosen. As far as self-employment is concerned the evidence is mixed regarding segmentation in the Ukrainian labor market. This heterogeneity in outcomes implies that not all informal work is associated with a low quality of life and reduced wellbeing in post-transition economies.     

Testing for uniform wage trends in West-Germany: A cohort analysis using quantile regressions for censored data

The rise of unemployment in West Germany is often attributed to an inflexibility of the wage structure in the face of a skill bias in labor demand trends. In addition, there is concern in Germany that during the 70s and 80s unions were pursuing a too egalitarian wage policy. In a cohort analysis, we estimate quantile regressions of wages taking account of the censoring in the data. We present a new framework to describe trends in the entire wage distribution across education and age groups in a parsimonious way. We explore whether wage trends are uniform across cohorts, thus defining a macroeconomic wage trend. Our findings are that wages of workers with intermediate education levels, among them especially those of young workers, deteriorated slightly relative to both high and low education levels. Wage inequality within age-education groups stayed fairly constant. Nevertheless, the German wage structure was fairly stable, especially in international comparison. The results appear consistent with a skill bias in labor demand trends, recognizing that union wages are only likely to be binding floors for low-wage earners.     

The effects of differences in year‐round,full‐time labor market experience on gender wage levels in the United States

This paper utilizes longitudinal information on annual hours worked to construct a more robust measure of labor market experience for young workers in the USA. This enhanced experience measure is then used to assess recent gender wage differentials. Our experience measure yields a dramatic improvement in the ability of standard earnings regressions to explain the variation in wages across individuals, especially for young women. In addition, our results indicate that approximately one‐fourth of the gender difference in average wages is attributable to the higher work experience levels of men.     

Labor Taxation in Search Equilibrium with Home Production

Conventional models of equilibrium unemployment typically imply that proportional taxes on labor earnings are neutral with respect to unemployment as long as the tax does not affect the replacement rate provided by unemployment insurance, i.e. unemployment benefits relative to after–tax earnings. When home production is an option, the conventional results may no longer hold. This paper uses a search equilibrium model with home production to examine the employment and welfare implications of labor taxes. The employment effect of a rise in a proportional tax is found to be negative for sufficiently low replacement rates, whereas it is ambiguous for moderate and high replacement rates. Numerical calibrations of the model indicate that employment generally falls when labor taxes are raised.     

Skills,Tasks and the Scarcity of Talent in a Global Economy

The scarcity of talent is a tremendous challenge for firms in the globalized world. This paper investigates the role of labor market imperfection in open economies for the usage of talent in the production process of firms. For this purpose, I set up a heterogeneous firms model, where production consists of a continuum of tasks that differ in complexity. Firms hire low‐skilled and high‐skilled workers to perform these tasks. How firms assign workers to tasks depends on factor prices for the two skill types and the productivity advantage of high‐skilled workers in the performance of complex tasks. I study the firms’ assignment problem under two labor market regimes, which capture the polar cases of fully flexible wages and a binding minimum wage for low‐skilled workers. Since the minimum wage lowers the skill premium, it increases the range of tasks performed by high‐skilled workers, which enhances the stock of knowledge within firms to solve complex tasks and reduces the mass of active firms. In a setting with fully flexible wages trade does not affect the firm‐internal assignment of workers to tasks. On the contrary, if low‐skilled wages are fixed by a minimum wage, trade renders high‐skilled workers a scarce resource and reduces the range of tasks performed by this skill type with negative consequences for the human capital stock within firms. In this case, trade leads to higher per‐capita income for both skill types and thus to higher welfare in the open than in the closed economy, whereas – somewhat counter‐intuitive – inequality between the two skill types decreases, as more low‐skilled workers find employment in the production process.     

Earnings Mobility during the Transition: The Case of Hungary

This paper tests the hypothesis that the economic transition if associated with earnings mobility that is higher than in mature market economies, and which offsets the increase in earnings inequality. It uses the Hungarian Household Panel Survey for the period 1992-1997. The paper finds that indeed five-year earnings mobility in Hungary in the early years of the transition was significantly higher than in OECD countries. However, there are sings that the mobility rate has begun to decline. The pattern of earnings mobility had a significant equalizing effect: low earners were raised up while high earners were leveled down. However, mobility was taking place against a backdrop of the fall in real wages and therefore in most cases it implied the worsening of the absolute earnings status. Unfortunately, mobility does not help much low-paid workers. In contrast to most OECD countries, in Hungary low-paid workers have little chances to move up the earnings ladder. Low-paid jobs tend to be a permanent trap rather than a stepping stone to better paid employment.     

Testing the great decoupling: a long memory approach

The disconnection between productivity and workers’ compensation after 1980 is a fact not only for the U.S., Canada, Japan but also for Europe. The level of the decoupling between labor productivity and real hourly compensation is highest in the U.S. and Japan and lowest in Norway and Germany. This study investigates the great decoupling phenomena between 1950 and 2014 for eight economies with available time series data. The results should assist policy makers in developing efficient wage-setting mechanisms and help researchers in the field of wage moderation policy and the great decoupling. For this purpose we use fractional integration and cointegration techniques. Countries with stagnating minimum wages, rigid wage moderation policy and a high level of technological progress (strong total factor productivity growth) register higher wage stagnation in relation to labor productivity. Policy makers should be extremely careful when using wage moderation policy to improve a country’s competitiveness and should monitor the wage stagnation behind labor productivity (great decoupling) since workers have been producing more but receiving significantly less since 1980. The great decoupling is more prominent today and it is constantly increasing not just in the U.S. and Japan but worldwide.     

The Gender Wage Gap in Paid- and Self-Employment in Australia

This paper presents an analysis of the gender wage gap in the highly regulated Australian labour market. It compares wage outcomes in the wage and salary sector with those for the self-employed. Comparisons with the United States are provided. The large gender pay gap in self-employment suggests that the aggregate gender wage differential will not be eliminated solely through wage determination for wage and salary earners. The greater gender wage gap in the self-employed sector may reflect liquidity constraints that are more difficult for self-employed women to overcome relative to self-employed men. The comparisons with the United States suggest that women will experience deterioration in relative earnings as the Australian labour market is deregulated.