The national internal labor market encounters the local labor market: Effects on employee retention

Formal salary systems are commonplace among medium to large-sized firms and within the United States government. However, there is little evidence regarding the costs, if any, of such systems. This study analyzes the effects on retention within the United States Air Force from an inflexible wage system failing to adequately compensate personnel for local compensating wage differentials. Using location-specific Air Force personnel records, I compare the differences between military and civilian wages, by occupation, across locations to determine if local labor markets play a significant role in the stay or leave decisions for personnel. Results show that rigid wage constraints do in fact impose costs on the firm through increased turnover in locations that fail to adequately adjust wages for the cost of living and amenities.     

Earnings inequality narrows for young workers despite a widening wage structure

Inequality of wage rates has widened in the United States. But inequality of earnings also depends on the distribution of hour's worked. If the distribution of hours contracts sufficiently, earnings inequality may narrow despite a widening wage structure. The present study examines recent trends in inequality for young workers and, consistent with the preceding scenario, finds that rising inequality of wage rates has been overwhelmed by declining inequality of hours worked. As a consequence, earnings inequality of young workers declined during the 1980s.     

Food Deserts and Real‐Estate‐Led Social Policy

Since the early 2000s in the United States, food deserts—neighborhoods in which households have limited geographic access to full‐service supermarkets or grocery stores— have become conceptually central in public policy research on food security. Analyzing this phenomenon from a ‘policy mobility’ perspective, this article traces the food desert's emergence in policy discourse, locating it within an entrepreneurial social policy paradigm that privileges real estate development over direct economic relief. In the context of property‐led anti‐poverty efforts, the identification and mapping of food deserts catalyzes a logic that leads to subsidy to grocery store development in low‐income areas (or ‘fresh food financing’), while at the same time officials are cutting programs such as the Supplemental Nutrition Assistance Program (food stamps), which directly supplements household food budgets. The article contributes to widening critical discussion of the food desert paradigm and the policy interventions with which it is associated. It calls on urban researchers and practitioners to reframe discussions of food access and nutrition around the shortage of basic income and a need for higher wage floors.     

The cyclicality of effective wages within employer-employee matches in a rigid labor market

This study analyzes real wage cyclicality for male full-time workers within employer-employee matches in Germany over the period 1984-2004. Five different wage measures are compared: the standard hourly wage rate; hourly wage earnings including overtime and bonus pay; the effective wage, which takes into account unpaid overtime; and monthly earnings, with and without additional pay. None of the hourly wage measures exhibits cyclicality except for the group of salaried workers with unpaid overtime. Their effective wages show a strongly procyclical reaction to changes in unemployment. Despite acyclical wage rates, salaried workers without unpaid overtime experienced procyclical earnings movements if they had income from extra pay. Monthly earnings were also procyclical for hourly paid workers with overtime pay. These findings suggest that cyclical earnings movements are generated by variable pay components, such as bonuses and overtime pay, and by flexible working hours. The degree of earnings procyclicality revealed for the German labor market is comparable to the United States.     

Consequences of self-employment for women and men in the United States

Many self-employed workers return to the wage and salaried sector of the labor market after some time. It is possible that the self-employment spell will lead to lower earnings or earnings growth upon return, due to depreciation of firm or sector-specific human capital. Using longitudinal data from the National Longitudinal Survey of Young Women (NLS), this paper examines the effects of spells of self-employment on the future wage and salary sector earnings of male and female workers in the United States. The results indicate substantial penalties arise for women, in terms of returns to experience, while there is little or no impact for men.     

The Living Wage – Policy And Practice

A recent development in addressing the longstanding problem of low pay in the United Kingdom has been the emergence of a social campaign for a ‘living wage’. Using a case study approach this article explores an employer's decision to pay the living wage that, in turn, provided both challenges and opportunities for the unions in their dealings with contractors.     

Wage determination in urban Russia: Underpayment and the gender differential

A stochastic frontier wage equation is employed to examine labor-market efficiency and estimate workers’ potential wages in Russia after a decade of economic reforms using a nationally representative household survey. Dynamic monopsony underpayment, defined as the differences between the highest wage a worker with given characteristics could earn and the worker's actual wage, is a significant factor lowering real wages. The estimated degree of underpayment differs significantly depending on gender and substantially exceeds the estimates for Western economies. Workers’ potential wages are elastic with respect to the local cost of living. Women's mean potential wage is only 58% of men's.     

National skill-creation systems and career paths for service workers: hotels in the United States,Germany and the United Kingdom

Creating sufficient opportunities for individuals to develop their capabilities and earn a living wage is one of the central challenges facing all countries. However, some types of vocational education and training (VET) institutions may be more effective than others in promoting the development of career-enhancing ‘transferable’ skills. In order to investigate the links between national skill-creation systems and individual career paths, this study focuses on three countries with very different VET systems: the United States, the United Kingdom and Germany. The comparison is based on closely matched samples of three- and four-star hotels. The results suggest that individual career development and outcomes, such as wages and turnover rates, are strongly influenced by the interplay of three key elements – the breadth, relevance to employment and degree of standardization – of national initial VET systems. Our analysis identifies strengths and weaknesses of the different systems and key lessons for improvement.     

Liquefied Natural Gas: Redefining Nature,Restructuring Geopolitics,Returning to the Periphery?

The liquefied natural gas (LNG) industry began as a means of making use of natural gas resources in socially remote regions and of natural gas associated with oil production. Natural gas was transformed from a waste product into LNG that could be moved thousands of miles to market, redefining “waste” as a valuable raw material. As the newest large-scale LNG exporter, the United States entered the LNG industry based on another redefinition of nature: the extraction of natural gas previously economically and technologically inaccessible in shale formations. Hydraulic fracturing and new drilling technologies have created reserves of natural gas that are driving down prices with excess production and provoking a search for new markets via LNG exports. Liquefied natural gas is reshaping economies, communities, industries, and ecosystems in the United States and in other parts of the world. This article analyzes the role of the LNG industry with a particular focus on the economic and geopolitical consequences for the United States. The United States is returning to its historical role of energy exporter. Some view the return to this role as an economic and geopolitical boon that will enhance the U.S. economy and the nation’s global standing. A contrasting interpretation sees the United States sliding into the extractive periphery, serving the energy demands of a growing China, much like the United States once did for Europe and especially Great Britain. This view condemns what it views as the exploitation of U.S. natural resources to meet China’s energy needs while leaving large areas of the United States with depleted resources, damaged ecosystems, and disrupted communities.     

Is Child Work Necessary?*

This article investigates the hypothesis that child labour is compelled by poverty. It shows that a testable implication of this hypothesis is that the wage elasticity of child labour supply is negative. Using a large household survey for rural Pakistan, labour supply models for boys and girls in wage work are estimated. Conditioning on non-labour income and a range of demographic variables, the article finds a negative wage elasticity for boys and an elasticity that is insignificantly different from zero for girls. Thus, while boys appear to work on account of poverty compulsions, the evidence for girls is ambiguous.     

The effect of the minimum wage for tipped workers on firm strategy,employees and social welfare

Millions of workers derive much of their income from tips and are subject to the “tipped minimum wage” that differs from the regular minimum wage. This article examines the implications of the tipped minimum wage and shows that increasing it may lead restaurants to adopt a compulsory service charge in lieu of tipping to extract the economic rent enjoyed by waiters under tipping. Because servers are better off with tipping, this implies that increasing the tipped minimum wage in an attempt to increase servers' income may achieve the opposite result. Moreover, increasing the tipped minimum wage may reduce social welfare.     

The impact of minimum wages on wages,work and poverty in Nicaragua

In this paper we use an individual- and household-level panel data set to study the impact of changes in legal minimum wages on a host of labor market outcomes including: a) wages and employment, b) transitions of workers across jobs (in the covered and uncovered sectors) and employment status (unemployment and out of the labor force), and c) transitions into and out of poverty. We find that changes in the legal minimum wage affect only those workers whose initial wage (before the change in minimum wages) is close to the minimum. For example, increases in the legal minimum wage lead to significant increases in the wages and decreases in employment of private covered sector workers who have wages within 20% of the minimum wage before the change, but have no significant impact on wages in other parts of the distribution. The estimates from the employment transition equations suggest that the decrease in covered private sector employment is due to a combination of layoffs and reductions in hiring. Most workers who lose their jobs in the covered private sector as a result of higher legal minimum wages leave the labor force or go into unpaid family work; a smaller proportion find work in the public sector. We find no evidence that these workers become unemployed.Our analysis of the relationship between the minimum wage and household income finds: a) increases in legal minimum wages increase the probability that a poor worker's family will move out of poverty, and b) increases in legal minimum wages are more likely to reduce the incidence of poverty and improve the transition from poor to non-poor if they impact the head of the household rather than the non-head; this is because the head of the household is less likely than a non-head to lose his/her covered sector employment due to a minimum wage increase and because those heads that do lose covered sector employment are more likely to go to another paying job than are non-heads (who are more likely to go into unpaid family work or leave the labor force).     

Progressive Taxes and the Labour Market: Is the Trade–off Between Equality and Efficiency Inevitable?

Does an income tax harm economic efficiency more the more progressive it is? Public economics provides a strong case for a definite ‘yes’. But at least three forces may pull in the other direction. First, low–wage workers may on average have more elastic labour supply schedules than high–wage workers, in which case progressive taxes contribute to a more efficient allocation of the total tax burden. Second, in non–competitive labour markets, progressive taxes may encourage wage moderation, and hence reduce the equilibrium level of unemployment. And third, if wage setters have egalitarian objectives, progressive taxes may reduce the need for redistribution in pre–tax wages, and hence increase the demand for low–skilled workers. This paper surveys the theoretical, as well as the empirical literature about labour supply, taxes and wage setting. We conclude that in a second best world, the trade–off between equality and efficiency is not always inevitable.     

Do Reservation Native Americans Vote with Their Feet? A Re‐examination of Native American Migration, 1985–1990

Native Americans suffer some of the highest rates of poverty and unemployment and the lowest rates of human capital attainment among racial minority groups in the United States, but economists understand very little about the impact these conditions have on the migration patterns of Native Americans. In 1994, a seminal article on this topic appeared in this journal (Cebula and Belton 1994). In their article, the authors suggest that the low levels of human capital and poor conditions in Native American reservations should make Native American migration sensitive to interstate differences in AFDC spending levels. Their hypothesis is confirmed for Native American migration over the 1985–1990 period. This paper refines their analysis by using micro-level rather than aggregate data, and by controlling for reservation residence and the impact of informal social safety nets in the source region. It is found that human capital factors and expected wage differences overwhelm interstate differences in public welfare spending and that informal safety nets in the source region dampen off-reservation migration. These findings suggest that state AFDC spending levels cannot explain contemporary Native American migration patterns.     

A Simple Test for Convergence of Metropolitan Income in the United States

The prevalent test for income convergence used in many recent studies of convergence across spatial economic units in the United States is to use a regression equation in which income growth is regressed against the initial level of income (this is known as β convergence). That method, however, has been crtiticized as an instance of Galton's fallacy of regression. We devise a simple test for the income β-convergence hypothesis which does not suffer from “Galton's fallacy” and apply it to all of the metropolitan areas of the United States for the period 1969–1995. For the test we use two income measures: per capita personal income and average wages. Our results conclusively support convergence of per capita personal income and of wage per worker for metropolitan areas in the United States. We also test for σ convergence, the hypothesis of diminishing dispersion in income among places over time, and find no support for the hypothesis.     

Educational mismatch,wages, and wage growth: Overeducation in Sweden, 1974–2000

We examine the impact of educational mismatch on wages and wage growth in Sweden. The empirical analyses, based on cross-sectional and panel data from the Level of living surveys 1974–2000, are guided by two main hypotheses: (a) that educational mismatch reflects human capital compensation rather than real mismatch, and (b) that educational mismatch is real but dissolves with time spent in the labour market, so that its impact on wages tends toward zero over a typical worker's career. Our findings do not support these hypotheses. First, significant differences in contemporaneous economic returns to education across match categories remain even after variations in ability are taken into account. Second, we find no evidence that the rate of wage growth is higher among overeducated workers than others. Our conclusion is that the overeducated are penalized early on by an inferior rate of return to schooling from which they do not recover.     

Do inter-city differences in intra-city wage differentials have any interesting implications?

Recent research has related characteristics of cities to differences in the distribution of wages across workers with different skill levels. We demonstrate that these differences in wage differentials arise naturally as a compensating variation in Rosen’s theoretical model of inter-city wages. For example, if the income elasticity of demand for housing services is less than unity, cities with higher house prices will have smaller money wage differentials between low and high skill workers. This result has no implications for differences in either absolute or relative real productivity or welfare of unskilled workers. Similarly, changes in the amenity of an urban area may result in changes in relative wages of skilled and unskilled workers with no implications for real productivity or welfare differentials.Empirical tests in which housing cost differentials are added as a determinant of inter-city differences in an intra-urban wage differential model provide empirical confirmation of the theoretical expectations. It appears that intra-urban money wage differentials, differences in the quality of life, and variation in the cost of living in each city are jointly determined variables just as Rosen’s model of inter-city wage differentials predicts.     

Do inter-city differences in intra-city wage differentials have any interesting implications?

Recent research has related characteristics of cities to differences in the distribution of wages across workers with different skill levels. We demonstrate that these differences in wage differentials arise naturally as a compensating variation in Rosen’s theoretical model of inter-city wages. For example, if the income elasticity of demand for housing services is less than unity, cities with higher house prices will have smaller money wage differentials between low and high skill workers. This result has no implications for differences in either absolute or relative real productivity or welfare of unskilled workers. Similarly, changes in the amenity of an urban area may result in changes in relative wages of skilled and unskilled workers with no implications for real productivity or welfare differentials.Empirical tests in which housing cost differentials are added as a determinant of inter-city differences in an intra-urban wage differential model provide empirical confirmation of the theoretical expectations. It appears that intra-urban money wage differentials, differences in the quality of life, and variation in the cost of living in each city are jointly determined variables just as Rosen’s model of inter-city wage differentials predicts.     

The Harvard Living Wage Campaign: Origins and Strategy

A member of the Harvard living wage campaign explains its internal development. Begun in 1998, the campaign drew inspiration from the global justice movement, organized labor’s reawakening, and the flowering of college anti-sweatshop groups. Locally, it responded to a decade of attacks on Harvard workers’ livelihoods and unions, as well as the enactment of a living wage ordinance by the city of Cambridge. The article recounts the campaign’s organizing strategy and tactics, its oppositional relationship to the Harvard administration, and the university’s response. Finally, it discusses the campaign’s limited victory on wages and contracting policies, as well as its significance for campus unions, students who participated, and student-labor mobilization beyond Harvard.     

REGIONAL ECONOMIC INTEGRATION AND ITS IMPACTS ON GROWTH, POVERTY AND INCOME DISTRIBUTION: THE CASE OF VIETNAM

Trade liberalization and regional economic integration have recently accelerated in East Asia, where several free trade areas have been established or are under negotiation. Vietnam, after acquiring Association of Southeast Asian Nations (ASEAN) membership in 1995, has signed a bilateral trade package with the United States and participated in the China-ASEAN free trade area. This paper attempts to analyze the impact on Vietnam of ongoing regional economic integration, focusing on growth, poverty reduction and income distribution. For this purpose, we have constructed a globally linked Computable General Equilibrium (CGE) model and made use of Global Trade Analysis Project (GTAP) database version 6.0 and Vietnam's living standards surveys. The simulation analysis shows that the regional economic integration generally has a positive impact. It both enhances welfare and improves income-distribution for Vietnam. Household income and consumption increase, and poor and rural household groups benefit more than urban high income groups.