SKILLED‐UNSKILLED WAGE INEQUALITY AND URBAN UNEMPLOYMENT

The impact of trade liberalization on the labor market in the North has drawn tremendous attention in the face of the growing skilled‐unskilled wage gap but in the South it has been somewhat neglected. One of the key structural differences between the North and the South is that the South experiences a pronounced rural‐urban migration in the presence of urban unemployment. We introduce this feature in the structure of a simple general equilibrium model to analyze the effects of trade liberalization and fragmentation on employment and the skilled‐unskilled wage differential in the South. In particular, we show that while fragmentation necessarily improves the unskilled wage and the skilled wage, more lucrative global opportunities for the skilled final product, in the absence of fragmentation, can reduce the rural wage and increase urban unemployment. The effect of fragmentation, ceteris paribus, on the skilled‐unskilled wage gap is sensitive to the degree of substitutability between land and unskilled labor. As such, fragmentation can magnify the increase in the skilled‐unskilled wage gap resulting from an improvement in the terms of trade. It is also shown that a technological progress in the intermediate goods sector increases the skilled‐unskilled wage gap and raises urban unemployment. (JEL F1, O1, F11, F12)     

A DUAL DEFINITION FOR THE FACTOR CONTENT OF TRADE AND ITS EFFECT ON FACTOR REWARDS IN US MANUFACTURING SECTOR

We introduce a dual definition of the Factor Content of Trade (FCT) using the concept of the Equivalent Autarky Equilibrium. Estimating a symmetric normalized quadratic revenue function for the U.S. manufacturing sector between 1965 and 1991, we find that the FCT for capital is positive, while the FCT for skilled and unskilled labor is negative, suggesting that the Leontief Paradox is not present. Then the growth rate of the factor rewards is decomposed to the FCT, endowments, and technological change effects. We find that technological change is the most important determinant in explaining wage inequality between skilled and unskilled labor. (JEL F11, F16, J31)     

TRADE,GEOGRAPHY AND THE SKILL PREMIUM IN U.S. MANUFACTURING

A number of studies have suggested that countries (or regions) with access to larger markets have higher wages. In this paper, we examine whether access to larger markets affects skilled and unskilled workers differently. We develop a model relating two key measures of market size, market and supplier access, to industry value added prices. We then estimate the effects of growth in these measures on factor returns in U.S. manufacturing industries between 1984 and 1996. We find that growth in these measures can explain around 5% of the rise in the skill premium over the sample period. (JEL F12, F16, L60)     

UNEMPLOYMENT RISK AND COMPENSATING DIFFERENTIALS IN NEW JERSEY MANUFACTURING

We present evidence that low-skill workers received larger compensating differentials than more skilled workers when facing unanticipated unemployment in an era without unemployment insurance. Using information from surveys of New Jersey workers conducted during the 1880s, we test the theory of compensating wage differentials. We find that workers who faced a higher probability of predictable unemployment received compensating differentials and that the size of the differential differed across industries and skill levels. With few firm- or industry-specific skills, unskilled workers were less subject to "informational capture" than skilled workers who had more but less easily transferable human capital. (JEL N31 )     

MODELING INFORMALITY FORMALLY: HOUSEHOLDS AND FIRMS

Informality is widespread in most developing countries. In Latin America, 50% of salaried employees work informally. Three stylized facts characterize informality: (1) small firms tend to operate informally while large firms tend to operate formally; (2) unskilled workers tend to be informal while skilled ones have formal jobs; (3) ceteris paribus, secondary workers (a worker other than the household head) are less likely to operate formally than primary workers. We develop a model that accounts for all these facts. In our model, both heterogeneous firms and workers have preferences over the sector they operate and choose optimally whether to function formally or informally. There are two labor markets, one formal and the other informal, and both firms and workers act unconstrained in them. By contrast, a prominent feature of the preexisting literature is that workers' decisions play no role in determining the equilibrium of the economy. In our model, policies that reduce the supply of workers in the informal labor market at given wages will increase the level of formality in the economy. This has noteworthy implications for the design of social programs in developing countries. We also show that an increase in the participation of secondary workers would tend to raise the level of informality in the economy. (JEL J24, J33)     

"BUMPING", LAYOFFS, AND WORKSHARING

This paper deals with an interesting but often-neglected labor practice prevalent in large North American firms with well-developed internal labor markets. Large North American firms typically respond to a decline in demand for their products by first reducing the number of hours worked (or worksharing). As the demand continues to fall, however, they begin to make skilled workers "bump onto" unskilled jobs, displacing unskilled workers. Skilled workers are laid off only after a considerable number have bumped. I develop an implicit contract model and explain the practice.     

MINIMUM WAGE EFFECTS WITH OUTPUT STABILIZATION

What are the effects of legal minimum wage rates on the U.S. economy? Does minimum wage legislation promote the economic self-interest of high wage union labor and impede the economic self-interest of capitalists as our earlier research [Cox and Oaxaca 1982] suggested? This paper uses a nine sector econometric/simulation model of U.S. industry from 1975–1978 to answer these questions in the context of stabilization policies which hold aggregate real output constant. While most simulated percentage effects are small, those for the unskilled workers themselves are not. A 15.7 percent increase in the average nominal wage rate of unskilled labor, as a result of minimum wage legislation, produced an 11 percent decrease in unskilled employment, 2.2 million jobs lost, while increasing the real wage of unskilled workers by 15 percent. Simulated changes in several key variables support our earlier observations that the self-interests of labor unions, with skilled workers, conflict with those of capitalists over the issue of minimum wage legislation.     

THE EMPLOYMENT EFFECT OF DEREGULATING SHOPPING HOURS: EVIDENCE FROM GERMAN FOOD RETAILING

We study the effect of deregulating weekday shop opening hours on employment in retailing. Using administrative data on all German food shops, a difference‐in‐differences analysis shows that relaxing restrictions on opening hours raised employment by 0.4 workers per shop corresponding to an increase by 4%. This effect is driven by part‐time employment and employment in large shops, and it implies an increase by 0.1 workers per additional actual weekly opening hour. While the wage bill increased by less than employment, the deregulation seems not to have reduced earnings of workers already employed in retailing before the deregulation. (JEL J23, L51, L81)     

Wage distribution and firm size: The case of the United States

Substantial literature has been produced on the increasing wage gap in the United States, invoking various possible factors, but largely ignoring the relationship between firm size and wage distribution. In this study, the author decomposes wage differences over time between large, medium and small firms, identifying the effects of observed characteristics (and their returns) along with residual inequality, i.e. inequality among workers with the same observed characteristics. From 1992 to 2012, trends at small, medium and large firms became more uniform, while wage inequality rose across the board. Significantly, it increased more quickly in the upper half of the wage distribution and at large firms, where residual inequality was highest.     

DO MINIMUM WAGE INCREASES INFLUENCE WORKER HEALTH?

This study investigates whether minimum wage increases impact worker health in the United States. We consider self‐reported measures of general, mental, and physical health. We use data on lesser‐skilled workers from the 1993 to 2014 Behavioral Risk Factor Surveillance Survey. Among men, we find no evidence that minimum wage increases improve health; instead, we find that such increases lead to worse health outcomes, particularly among unemployed men. We find both worsening general health and improved mental health following minimum wage increases among women. These findings broaden our understanding of the full impacts of minimum wage increases on lesser‐skill workers. (JEL I1, I11, I18)     

IMMIGRATION,SKILL HETEROGENEITY,AND QUALIFICATION MISMATCH

We investigate the effects of U.S. immigration in a comprehensive search and matching framework that allows for skill heterogeneity, imperfect substitutability between skilled and unskilled inputs, different search cost between natives and immigrants, cross‐skill matching, and imperfect transferability of foreign human capital. When we simulate the effects of the U.S. immigration that took place between the years 2000 and 2009, we find that both skilled and unskilled natives, as well as skilled and unskilled immigrants, gain in terms of income and employment. We also investigate the effects of an improvement in the transferability of human capital across borders and find that, although it has some redistributive effects, overall it benefits both immigrants and natives. (JEL F22, J61, J64)     

Sexual Orientation and Wage Discrimination in France: The Hidden Side of the Rainbow

This article is the first study to present an econometric evaluation of wage discrimination based on sexual orientation in the French labor market. Having identified same-sex couples using the French Employment Survey, we estimate the wage gap related to sexual orientation in the private and public sectors, in order to analyze whether or not lesbians and gays suffer a wage penalty. The results obtained show the existence of a wage penalty for homosexual male workers, as compared with their heterosexual counterparts, in both the private and public sectors; the magnitude of this discrimination varies from about ?6.5?% in the private sector, to ?5.5?% in the public sector. In the private sector, the wage penalty suffered by gay employees is higher for skilled workers than for the unskilled, and??in both sectors??the wage penalty is higher for older workers than for younger ones. As with many other countries, we do not find any evidence of the existence of a wage discrimination against lesbians.     

Have unions impeded growing wage dispersion among young workers?

Wage inequality is examined for young males over the period 1980–1993. While wage inequality increased substantially for nonunion workers over this period, wage inequality increased only modestly for union workers. In part, this difference results from divergent trends in skill prices—returns to skill rose in the nonunion sector but contracted slightly in the union sector. In particular, returns to education increased sharply in the nonunion sector while remaining stagnant in the union sector. At least for young workers, these findings suggest that unions have been largely successful in resisting market pressures for greater wage inequality. We also uncover evidence suggesting that, as relative returns to education decline in the union sector, highly educated young workers become less likely to choose union employment. We acknowledge the helpful comments of Dek Terrell, Steve Trejo, and Carol Horton Tremblay.     

INDUSTRIAL DYNAMICS AND THE NEOCLASSICAL GROWTH MODEL

This paper studies industry-level dynamics and demonstrates the ability of a modified neoclassical growth model to capture a range of empirical facts. The paper begins by using U.S. data to document skilled and unskilled labor trends within industry sector classifications as well as industry sector output trends. Using Current Population Survey data from 1968 to 2004, it is shown that the ratio of skilled workers to unskilled workers employed has risen in all industries. The absolute increase in this ratio was larger in the more skilled industries, while the growth rate was larger in the less skilled industries. Furthermore, using national income account data, it is shown that relatively high-skilled industries have accounted for an increasing share of output over time. A version of the neoclassical growth model is then constructed to match these observations. One important feature of this model is a structure that introduces new goods into the economy at each moment of time. The model is able to capture a rich set of labor market movements between sectors and between skill levels as well as changes in the relative output shares across industries, yet preserves many nice features of the neoclassical growth model. ( JEL E13, J20, 030)     

Fringe Benefits and Inequality in the Labor Market

This study shows that when fringe benefits are accounted for, inequality increases at a point in time and grew faster from 1987 to 1994. Several alternative explanations of the observed discrepancies between wage inequality and compensation inequality are assessed. The evidence is that the disproportionately greater decline in income for less skilled workers is responsible for the greater decline in health insurance coverage, which in turn contributes to greater inequality growth when fringe benefits are accounted for.     

Verteilungseffekte von Finanzialisierung

Financialisation is often associated with rising income inequality. The article describes the major aspects of financialisation in the foreign, financial, business and household sector, and identifies several hypotheses how financialisation affects functional income distribution. We discuss enhanced exit options of firms, rising financial overhead costs for businesses, increased competition in capital markets, and weakened bargaining power of workers due to indebtedness. The different hypotheses are operationalised through empirical measures and their effect on the wage share is tested econometrically by means of a panel data set of 14 OECD countries over the period 1992–2014. We find statistically significant negative effects of financial payments of firms and financial openness on the wage share.     

The regional distribution of skill premia in urban China: Implications for growth and inequality

Based on urban household survey data, the authors find that skill premia increased significantly across all regions of China between 1995 and 2002, but only in coastal regions between 2002 and 2007. By then, these regions also displayed much wider wage inequality and thus contributed more to overall urban wage inequality than non‐coastal regions. While privatization was the main driver of skill premia in 1995–2002, China's (regionally uneven) integration into the global economy became the dominant influence in 2002–07. Reducing skill premia and inequality, the authors argue, calls for reform of the Hukou registration system which impedes skilled labour mobility and possibly also growth.     

RECIPROCITY UNDER BRIEF AND LONG-TIME DELAYS

We report the results from three experiments embedded in the same overarching design, which extends the Gift Exchange paradigm for the study of worker–employer relationships. We focus on the effect of the length of the delay, between the time at which workers learn their wage and when they choose an effort level, on the relationship between wage and effort. We compare effort choices made within a few hours with those made several weeks afterward. We find that the strength of the wage-effort relationship decreases over time, and this change appears to be driven by workers who receive low wages. (JEL C91, J33, M52)     

BROADBAND INTERNET,FIRM PERFORMANCE,AND WORKER WELFARE: EVIDENCE AND MECHANISM

This paper examines the effect of high-speed internet on firm's productivity and worker's wage in China. We exploit a national policy reform and devise a difference-in-difference strategy to address the endogeneity. We find that high-speed internet significantly increases firm's productivity and worker's wage, and the estimate is larger for firms in industries with high skill intensity and for more educated workers. We provide suggestive evidence that the mechanism is likely from firm's increased use of skill-biased technology and the flattened management organization. (JEL O2, O3, J3)     

The Gender Wage Gap in the United States and Cross Nationally

Scholarship in sociology and economics has long explored the gender wage gap. Recent research suggests that these inequalities are indicative of important differences not only between men and women, but among women and men, reflecting rising levels of income inequality among workers in the post‐industrial era. We argue that the most interesting debates in the gender wage gap – those exploring differences among subgroups by class, race, and/or parenthood status (such as the motherhood wage penalty), as well as those considering differences across countries – can bring new insights to the study of wage inequality, as well as to understandings of what drives gendered wage inequality.