Accounting for Strikes: Evidence from UK Manufacturing in the 1980s

The decrease in the number of strikes in the UK during the 1980s has revived the discussion on the explanatory factors of strike frequency. This paper investigates explanations for the time variation of strike frequency in different industries of British manufacturing. The framework used is that of the joint cost model of strikes; strike frequency is inversely related to strike costs. The results from a panel of 90 manufacturing industries for the period 1983–88 show some support for the hypothesis that strikes decreased because they became more expensive. In the main, we find that factors that affect both employers and employees (such as revenue, inventories) are significant in explaining variations in strike frequency. Factors that affect only employees, however, such as the unemployment rate, are not.     

Do Teacher Strikes Harm Educational Attainment of Students?

This paper investigates the effects of a teacher strike on student achievement. From May 1990 until November 1990 teachers in the French community of Belgium stroked to obtain a salary increase. We exploit the political division of Belgium in a French community and a Flemish community, with similar educational institutions, for estimating the long‐term effects of the strikes. Based on a difference‐in‐differences approach, using data from two different surveys, we find some evidence that the strikes reduced educational attainment and increased class repetition. We also find that the strikes led to a significant reallocation of students to a lower level of higher education. Overall, the results suggest that teacher strikes can lead to substantial costs for those not involved in the conflict.     

Technology Effects on Wages in Finnish Manufacturing

In this paper we study the effect of technology on establishment‐level wages using a classification of manufacturing industries based on four technology levels. The technology wage premiums are estimated separately for non‐manual and manual workers using wage equations with available control variables for plant and workforce characteristics (human capital) over the time period 1974–93. The results do not show a straightforward increasing relationship between a plant’s average wages and its technology at higher technology levels. However, establishments with the lowest technology level paid the lowest wages during the whole period. We also find that the relative non‐manual to manual wage ratio increased over the time period in the highest technology levels. These findings are consistent with technology wage premiums and skill‐biased technological change found in studies for other countries     

An Equilibrium Theory of Learning,Search, and Wages

We examine the labor market effects of incomplete information about the workers' own job‐finding process. Search outcomes convey valuable information, and learning from search generates endogenous heterogeneity in workers' beliefs about their job‐finding probability. We characterize this process and analyze its interactions with job creation and wage determination. Our theory sheds new light on how unemployment can affect workers' labor market outcomes and wage determination, providing a rational explanation for discouragement as the consequence of negative search outcomes. In particular, longer unemployment durations are likely to be followed by lower reemployment wages because a worker's beliefs about his job‐finding process deteriorate with unemployment duration. Moreover, our analysis provides a set of useful results on dynamic programming with optimal learning.     

Does Industrial Composition Matter for Wages? A Test of Search and Bargaining Theory

Does switching the composition of jobs between low‐paying and high‐paying industries have important effects on wages in other sectors? In this paper, we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors. In this class of models, wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using U.S. Census data. We find that sector‐level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial. We interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages, and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes.     

Decentralized Public Sector Wage Determination: Wage Curve and Wage Comparison for Norwegian Teachers in the Pre‐WW2 Period

The recent trend towards decentralization of European public sector wage determination relaxes some of the central administered wage setting mechanisms developed in the post‐WW2 period. This paper discusses teacher wage determination in Norway in 1905–39, a period with a highly decentralized public sector wage formation. Separate wage equations for urban and rural areas are estimated. I find that the responsiveness to unemployment of the urban wage was of the same magnitude as in the post‐WW2 period private sector wage formation. In addition, the internal teacher labour market and local economic conditions influence the wage level. The rural wage mainly followed the urban wage.     

Price Effects of the Minimum Wage: A Survey Data Analysis for the German Construction Sector

Utilizing the link between employment and price changes as a result of minimum wages, we use firm‐level data to evaluate the effect of minimum wage introduction in the German construction sector. In East Germany we find significant positive price effects that exclude the possibility of rising employment. Rather, the results indicate the existence of a competitive sector‐specific labour market, and thus declining employment. In contrast, we cannot find any significant price reaction for West Germany. This suggests that the implemented minimum wage in West Germany is too low in comparison to the predominantly paid wages and is hence not binding.     

Discriminatory Barriers and the Gender Wage Gap in France

Abstract. In this paper, we propose a method of decomposition that identifies the wage effect of the gender discriminatory barriers in the allocation of grades and full‐time jobs. Standard decomposition techniques tend to interpret the explained portion as a non‐discriminatory component, though discriminatory barriers in the labour market also affect the characteristics of individuals. Using survey data generated by INSEE in France in 2000, we find some evidence that the gender discriminatory barriers within the French labour market explain much of the difference between men and women's attainment and full‐time employment. Our method substantially changes the traditional empirical conclusions since the discriminatory barriers in the allocation of grades and full‐time jobs account for one quarter of the gender monthly wage gap. When adding to the pure wage discrimination portion, we thus show that half of the gender monthly wage gap is not explained.     

The world strike wave

The years since 1969 have seen a major increase in strike activity in nearly all the countries which collect and publish data on strikes. This wave of strikes has largely been caused by strikes over pay, probably connected both with higher rates of price inflation and a higher incidence of direct taxation on households. In some cases, the changed level of strike activity has also led to substantial changes in the structure of strikes, as we shall show for the United Kingdom and Australia, two countries which have suffered most from the strike wave.     

Modes of Entrance by Gender and Wage Differential in the French Labour Market

Abstract. This paper explores the gender wage differential after the exit from school in France. Using survey longitudinal data on young men and women leaving the French school system in 1998, we show that the residual entrance‐level wage differential by gender may be explained by the expected gender differential of access to job opportunities. A hierarchical classification is used to estimate the probability to obtain easy access to non‐subsidized jobs. After control for hours worked and hierarchical levels, and for the predicted values of this previous estimation, we find no significant impact of gender on entrance‐level wages.     

Worker and Firm Heterogeneity in Wage Growth: An AKM Approach

This paper estimates a wage growth equation containing human capital variables known from the traditional Mincerian wage equation with year, worker and firm fixed effects included as well. The paper thus contributes further to the large empirical literature on unobserved heterogeneity following the work of Abowd, Kramarz, and Margolis [1999; Econometrica 67(2): 251–333]. Our main contribution is to extend the analysis from wage levels to wage growth. The specification enables us to estimate the individual‐specific and firm‐specific fixed effects and their degree of explanation on wage growth. The analysis is conducted using Danish longitudinal matched employer–employee data from 1980 to 2006. We find that the worker fixed effect dominates both the firm fixed effect and the effect of the observed covariates. Worker effects are estimated to explain 7–12 per cent of the variance in wage growth whereas firm effects are estimated to explain 4–10 per cent. We furthermore find a negative correlation between the worker and firm effects, as do nearly all authors examining wage level equations.     

Modeling Earnings Dynamics

In this paper, we use indirect inference to estimate a joint model of earnings, employment, job changes, wage rates, and work hours over a career. We use the model to address a number of important questions in labor economics, including the source of the experience profile of wages, the response of job changes to outside wage offers, and the effects of seniority on job changes. We also study the dynamic response of wage rates, hours, and earnings to various shocks, and measure the relative contributions of the shocks to the variance of earnings in a given year and over a lifetime. We find that human capital accounts for most of the growth of earnings over a career, although job seniority and job mobility also play significant roles. Unemployment shocks have a large impact on earnings in the short run, as well as a substantial long‐term effect that operates through the wage rate. Shocks associated with job changes and unemployment make a large contribution to the variance of career earnings and operate mostly through the job‐specific error components of wages and hours.     

How Selective Are Real Wage Cuts? A Micro‐analysis Using Linked Employer–Employee Data

Using linked employer–employee panel data for Germany, we investigate whether firms implement real wage reductions in a selective manner. In line with insider–outsider and several strands of efficiency wage theory, we find strong evidence for selective wage cuts with high‐productivity workers being spared even when controlling for permanent differences in firms' wage policies. In contrast to some recent contributions stressing fairness considerations, we also find that wage cuts increase wage dispersion among peers rather than narrowing it. Notably, the same selectivity pattern shows up when restricting our analysis to firms covered by collective agreements or having a works council.     

Preliminary Evidence on Wage Setting in Greek Manufacturing

Abstract. The negotiating power of the unions and their role in wage determination depends on the level of centralization of the wage bargaining system as well as on other institutional arrangements. In this study, we estimate a set of wage equations in order to study the employment effects of different unions’ stances in wage determination as well as to investigate other characteristics of employment in Greek manufacturing. We discriminate between workers and employees (blue‐ and white‐collar workers) and between sectors in order to capture differences in the relative supply as well as differences in the negotiating power among the staff of the same industry. Empirical findings reveal that the persistence of unemployment arises as a result of the great bargaining power of the unions in negotiations at a sectoral level. White‐collar workers exhibit a stronger negotiating power compared with blue‐collar workers because of differences in the institutional framework.     

Impact of the Minimum Wage on Youth Labor Markets

We study the effect of the minimum wage on labor market outcomes for young workers using US county‐level panel data from the first quarter of 2000 to the first quarter of 2009. We go beyond the usual estimates of earnings and employment effects to consider how differences across states in the minimum wage affect worker turnover via separations and accessions and job turnover through new job creation and job losses. We find that a higher minimum wage level is associated with higher earnings, lower employment and reduced worker turnover for those in the 14–18 age group. For workers aged 19–21 and 22–24, we find less consistent evidence of minimum wage effects on earnings and employment. But, even for these age groups, a higher minimum wage is found to reduce accessions, separations and the turnover rate.     

Residential Location,Work Location,and Labor Market Outcomes of Immigrants in Israel

We develop and estimate a comprehensive dynamic programming (DP) model for the joint decisions of residential location, employment location, occupational choices, and labor market outcomes. We use data on immigrants from the former Soviet Union (FSU). We provide an extensive empirical evaluation of policies that have been designed to affect the residential and employment location decisions of the migrant population. The results shed new, and important, light on several issues regarding this group of immigrants. We find large regional differences in wages for the white‐collar workers, but only little differences for the blue‐collar workers. A careful examination of a number of policy measures indicate that a direct subsidy, in the form of a lump‐sum transfer, is most effective in achieving the government stated goal of inducing people to reside in the northern region of the Galilee and southern region of the Negev. Other policies, such as rental and wage subsidies, can also be quite effective, but these are more difficult to administer.     

The Effect of Legislated Minimum Wage Increases on Employment and Hours: A Dynamic Analysis

We present a dynamic policy simulation analysing what would have happened to wages, employment, and total hours had the federal minimum wage increased in September 1998, a year after the last actual increase in our data. Prior work suggests that employment responses take 6 years to play out. Using a time‐series model for 23 low‐wage industries, we find a positive response of average wages over 54 months following an increase in the minimum wage, but neither employment nor hours can be distinguished from random noise. Ignoring confidence intervals, the adjustment of hours is complete after 1 year, the adjustment of employment after no more than two and one half years.     

Non‐linear Effects of Comparison Income in Quit Decisions: Status versus Signal!

This research note utilizes German matched employer–employee data to investigate the relationship between mobility and relative wage positions within establishments for workers without university degrees. The main innovation involves the examination of non‐linear effects, because previous literature mainly analyses mean linear effects. Our random‐effects probit estimates of mobility suggest a non‐linear U‐shaped effect with respect to relative standing. This is plausible because workers in low relative wage positions might quit because of their low status and those in high relative wage positions because of their low career advancement opportunities. Consideration of non‐linearities, thus, is a major improvement for the analysis of the effects of relative wage positions.     

Wage Bargaining with On‐the‐Job Search: Theory and Evidence

Most applications of Nash bargaining over wages ignore between‐employer competition for labor services and attribute all of the workers' rent to their bargaining power. In this paper, we write and estimate an equilibrium model with strategic wage bargaining and on‐the‐job search and use it to take another look at the determinants of wages in France. There are three essential determinants of wages in our model: productivity, competition between employers resulting from on‐the‐job search, and the workers' bargaining power. We find that between‐firm competition matters a lot in the determination of wages, because it is quantitatively more important than wage bargaining à la Nash in raising wages above the workers' “reservation wages,” defined as out‐of‐work income. In particular, we detect no significant bargaining power for intermediate‐ and low‐skilled workers, and a modestly positive bargaining power for high‐skilled workers.     

The Determinants of Blue CollarWage Rates: An Analysis of a DataSet Incorporating Observed Job Characteristics

There is wide agreement that one of the major problems in the estimation of wage equations, and in testing theories of wages, is the quality of the data available. In particular, the data used in almost all studies involve indirect or unsatisfactory measures of a variety of relevant factors, including working conditions. In this paper we exploit an unusual data set that includes measures of characteristics of jobs generated by observation (rather than self report, or through inference from the Dictionary of Occupational Titles). With these data we estimate a wage equation in which compensating differentials play a significant role in wage determination and, once working conditions and other characteristics are effectively controlled, all but one measure of previous labour market experience had no effect on the wage rate.