The Impact of Minimum-Wage Increases: Evidence from Fast-food Establishments in Illinois and Indiana

Fast-food establishments in Illinois and Indiana were surveyed during a period of state-mandated minimum-wage increases in Illinois. While entry-level wages of Illinois establishments rose substantially in response to the mandated increases, there is little evidence that Illinois establishments ameliorated wage increases by delaying scheduled raises or reducing fringe benefit offerings. There is little evidence of ‘labor-labor’ substitution in favor of women, better educated, or teenaged workers, or increased worker tenure at the new wage, but weak evidence of increased food prices. In contrast, there are large declines in part-time positions and workers’ hours in Illinois relative to Indiana. Aggregate figures from the Bureau of Labor Statistics support relative declines in total fast-food employment in ‘downstate’ Illinois counties, as hypothesized. However, establishments’ responses do not appear proportionate to the strength of the minimum wage change.     

Class Differences in Establishment Pathways to Fatherhood Wage Premiums

Organizations have been argued to favor fathers over childless men and skilled fathers over less‐skilled fathers, but group wage inequalities vary across as well as within establishments. This article theorizes class differences in the contribution of being employed in a high‐wage firm to the fatherhood wage premium. Analyses of linked employer–employee data from the Canadian Workplace and Employee Survey reveal that sorting into high‐wage establishments accounts for 60% of the economy‐wide premium for less‐educated and nonprofessional fathers, whereas high‐skilled fathers tend to work in lower wage establishments but receive the largest net fatherhood premium within firms. Among the subsample of fathers who changed employers in the past 5 years, less‐skilled fathers fared worse, whereas high‐skilled fathers sorted into high‐wage firms. Results thus suggest that employment in a higher wage firm likely enables less‐skilled men to transition to fatherhood, whereas high‐wage employers may discriminate in favor of only high‐skilled fathers in hiring.     

Cognitive skills and Black–White wages in the United States labor market

Using data from the National Longitudinal Survey of Youth (NLSY), this study analyzes the effects of cognitive skills on the wages of Whites and African Americans in white and blue collar occupations. The results show that cognitive skills, net of education, are important predictors of wages across all occupations. Mathematics skills, in particular contribute to significant wage premiums for workers in white and blue-collar occupations, with the exception of Blacks in blue-collar professions. English skills lead to significant wage premiums only for Blacks in blue-collar occupations. While the incorporation of cognitive skills narrows the Black-White wage gap considerably, the effects of skills on the wages of Blacks and Whites are far from uniform. The results also show that despite using detailed controls for the quality of education, an extra year of schooling yields the highest wage premium for Whites in all occupations.     

Workers, Unions, and Takeovers

How do takeovers affect workers?? wages and job security in the short-run? What role does the labor union play in mitigating these effects? I answer these two questions by analyzing wage and employment outcomes of over 4,000 public firms that were acquired between 1981 and 2002, using establishment-level data from the U.S. Census Bureau. I find that target establishments exhibit a net contraction in wages and employment, relative to comparable establishments after takeovers. Targets?? establishments in more unionized industries experience worse wage and employment outcomes after takeovers. These adverse effects are exacerbated when the establishment is located in a state with Right-to-work laws where unions face a less favorable bargaining environment. These findings indicate that target firms?? employees are negatively affected by takeovers and that their labor unions do not mitigate these negative effects.     

The relationship between employer‐provided training and the retention of older workers: Evidence from Germany

A substantial portion of Germany's workforce will soon retire, making it difficult for businesses to meet their human capital needs; training older workers may help to manage this demographic transition. The authors therefore examine the relationships between employer‐provided training programmes, wages and retirement among older workers. They find that when establishments offer special training programmes targeted at these workers, women – especially low‐paid women – are less likely to retire, possibly because of consequent wage growth. Their results suggest that such targeted training can indeed play an important role in retaining low‐wage older women and advancing their careers.     

Market hours,household work,child care,and wage rates of partners: an empirical analysis

The aim of this paper is to provide new evidence on the effect of partners’ wages on partners’ allocation of time. Earlier studies concluded that wage rates are an important determinant of partners’ hours of market and non-market work and also that house work may lower married women’s wage rates. However, the bulk of earlier literature in this area failed to account for the endogeneity of wages or the simultaneity of partners’ time allocation choices. Here we take a reduced form approach and specify a ten simultaneous equations model of wage rates, employment and hours of market work, house work and childcare of parents. Non-participants are included in the model. We exploit a rich time use dataset for France to estimate the model. We find that the own wage affects positively own market hours and negatively own house work and childcare hours. The wage of the father has a significantly negative effect on the mother’s market hours while her wage rate has a significantly positive effect on his house work hours.     

Individual and Organizational Determinants of Wage Disparities in Israel's Local Authorities

Abstract

In this study I compare hypotheses derived from a resource-based view of management with those based on an institutional perspective to test whether wage levels in local authorities are more likely to reflect technical or allocative efficiency measures, the former deriving from “autonomous” revenues from private sources, the latter from policy-based allocation of resources. A focus on wage variations for 5,033 employees from 83 local authorities shows that the level of autonomous revenues lowers the wages for women and Arab employees but not for men and Jewish employees. The results suggest that local authorities use a differential wage allocation, probably indicating increased access to privatized and outsourced employee recruitment. Moreover, the results show that equal opportunity notions, presumably inherent in social policy guidelines, do not ensure interorganizational homogeneity in wages: metropolitan and larger local authorities are more likely to use technical than institutional measures of organizational success. I conclude that neoinstitutional hypotheses that focus both on the competitive and institutional aspects of governance are differentially applied in regard to wages.     

Gender segregation and the wage gap in Portugal: an analysis at the establishment level

Using a large linked employer-employee data set, this paper aims at quantifying the trend in worker segregation at the establishment level and its impact on wages in Portugal over a fifteen year period. We concentrate on the gender dimension, to answer the questions: What is the level of gender segregation across establishments in the Portuguese labor market and how has it evolved over time? What is the impact of segregation on wages? Is that impact different for men and women? Systematic and random components of segregation are computed. We use standard wage decomposition techniques to evaluate the impact of the composition of the labor force at the establishment level on wages. The results reveal a high degree of systematic gender segregation. A higher proportion of females in the establishment lowers females’ wages while, on the contrary, it raises males’ wages. The evidence gathered is consistent with the taste-based model of employer behavior and with the theory of sorting of workers across establishments based on their productivity.     

Nontransferable rents and an unrecognized social cost of minimum wage laws

This paper identifies an additional social cost of minimum wage laws. The nontransferable sunk investments made in competing to obtain minimum wage jobs produce a social cost since individuals will remain in those positions as long as they obtain a positive return on this investment. This will be true even when more efficient providers of the service exist. The higher the minimum wage is, the greater the level of sunk nontransferable investments and, therefore, the greater the potential inefficient allocation of labor.     

Accountability and the fairness bias: the effects of effort vs. luck

According to the principle of accountability a person’s fair allocation takes into account the input-relevant variables she can influence, like effort, but not the variables she cannot influence, like luck. We study redistribution behavior in a real effort-task experiment, where luck influences production in three versions that differ in their effort-relatedness: luck comes either as wage luck, endowment luck or payment luck. We confirm that in a base treatment, i.e., in absence of luck, subjects base their allocation decisions largely on effort. When luck is present behavior changes. While we find that redistribution behavior of high performers in the real effort-task is affected by wage luck, we find that endowment luck affects mostly redistribution behavior of low performers. Furthermore, when introducing payment luck, i.e., redistribution of certain versus probabilistic payments, we find that allocations are more selfish for probabilistic payments.     

Anti-Discrimination vs. Anti-Poverty? A Comparison of Pay Equity and Living Wage Reforms

SUMMARY

Welfare reform focuses attention on the potential of pay equity and living wage strategies to move women out of the ranks of the working poor. In this study, we use data from a large municipality in the Northeast to simulate implementation of the two policies and compare their relative effectiveness in raising the earnings of female- and minority-dominated jobs, narrowing gender- and race-based earnings differentials, and lifting workers out of poverty. Results show that pay equity raises salaries across-the-board, but especially among low-skilled and minority-dominated jobs, and closes the wage gap. Both pay equity and living wage dramatically reduce the incidence of poverty; living wage, however, leaves virtually untouched the type of discrimination targeted by pay equity and has little impact on the wage gap. The implications of these results for addressing the needs of women transitioning off public assistance and wage justice are discussed. We conclude that both policies should be an integral part of welfare reform efforts, as well as key planks in an overall wage justice strategy.     

The (unexpected) structure of “rents” on the French and British labour markets

This paper considers the allocation of labour on the French and British markets, using objective wage and subjective satisfaction data. We show that, in some sectors, workers enjoy both higher wages and higher job satisfaction. We argue that this reflects labour market wage rents. Perhaps surprisingly, wage rents are typical of the British public sector and permanent contracts, but not of their French counterparts. In France, such rents are found in full-time, rather than part-time jobs. Hence, the data provide little support for the usual a priori that the French labour market is structured along insider–outsider model lines, whereby wage rents are captured by the insiders of the public sector to the detriment of the private sector. However, they do suggest that part-time employment is involuntary to a far greater extent in France than in Great Britain.     

The Within‐Job Motherhood Wage Penalty in Norway, 1979–1996

The motherhood wage penalty is a substantial obstacle to progress in gender equality at work. Using matched employer–employee data from Norway (1979–1996, N = 236,857 individuals, N = 1,027,462 individual‐years), a country with public policies that promote combining family and career, we investigate (a) whether the penalty arises from differential pay by employers or from the sorting of employees on occupations and establishments and (b) changes in the penalties during a period with major changes in family policies. We find that (a) the penalty to motherhood was mostly due to sorting on occupations and occupation‐establishment units (mothers and nonmothers working in the same occupation and establishment received similar pay), and (b) the wage penalties to motherhood declined substantially over the 18‐year period.     

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.     

Spatial variations in U.S. unemployment

Interstate unemployment rate differentials are large, tend to persist, and have not converged in recent times. The interstate differential in the natural rate of unemployment seems partially explained by several factors related to labor costs, including wage rates and such institutional factors as unionization, welfare, and probably tax policy. Differential welfare incidence may explain the black-white unemployment differential. Variations in intertemporal fluctuations in unemployment across states seem related to institutionalized wage rigidity caused by such factors as unions and welfare. For still unexplained reasons, unemployment tends to be higher in the West, deep South, and the industrial Midwest.     

Economic growth and inequality in Singapore: The case for a minimum wage

In the context of Singapore's ageing population, the employment of large numbers of low‐skilled foreign workers is proving to be a major challenge to inclusive growth because of the stagnation of low‐wage workers' incomes. In order to address this problem, the author makes the case for introducing a minimum wage to complement existing in‐work benefit schemes. After addressing the commonly voiced objections to a minimum wage system, he suggests ways in which a minimum wage could be implemented in Singapore. New measures to enhance the social safety net and foster more sustainable economic growth are also proposed.     

Merger activity and wage levels in U.S. manufacturing

This study uses micro data from the 1981 March Current Population Survey and incorporates industry merger information from the 1979 FTC Large Mergers and Acquisitions Series to examine the relationship between merger activity and wage levels in U.S. manufacturing. These data sources provide the opportunity to control the wage effect of workers’ differing personal qualities and to allow the investigation of wage levels in five merger categories. The findings suggest that in 1980, employees that work in industries composed of firms formed by horizontal, vertical, and product extension mergers received significantly higher wages than other workers. These results indicate that workers should benefit financially from the recent increase in the number of mergers, other than pure conglomerates. The author thanks William Jones, Peter Loeb, and Leo Troy for their valuable suggestions. The author is also grateful to the Rutgers University Research Council for support of this project.     

Education,Skills, and Wage Gaps in Canada and the United States

We analyse data from the Programme for the International Assessment of Adult Competencies to reveal that immigrants in Canada and the United States make over $200 less per month than native‐born workers. In the United States, immigrants disproportionately work in low‐wage occupations, leading to large mean national differences between immigrants and native workers. The wage differential disappears after accounting for education and cognitive skills, indicating policies must focus on reducing education and skill gaps in the United States. In Canada, an immigrant wage gap persists in nearly all occupational fields, suggesting that the better skilled and educated immigrants in Canada are not receiving the same wage premium as native workers. We close with implications for policy and future research.     

The gender gap in teenagers’ incomes. A 30-year trend in Finland 1983–2013

In this article, we examine the gender differences in disposable incomes of teenagers during a 30-year period 1983–2013, using large nationally representative survey data. Since the gender pay gap in working life has been rather persistent in Finland and the EU, it was necessary to see whether the gap persists in teenagers’ incomes as well. Although teenagers do not receive much income from work, they adapt to the structures of society during their teenage years and learn gender roles in consumption, education, and working life. Our results reveal that the gender pay gap has been rather persistent in Finland, particularly among 14- and 16-year-old teenagers. It is only among 18-year-olds that the gender difference in income has narrowed. There were interactions between gender and socio-economic indicators such as the father's education and family's place of residence. The persistent gender pay gap cannot be explained solely by wage differences in any age group, because full-time work of teenagers is nowadays very rare, and in Finland they do not work very much even part-time. Although it is rather obvious that boys get higher incomes than girls from external work, the allocation of money by parents seems to be unequal, too.     

Racial wage differentials among young adults: Evidence from the 1990s

This study seeks to decompose wage differentials between black and white male young adults into those related to labor market discrimination and those resulting from human capital endowments. The importance of testing for significant differences in wage equations before conducting decomposition analysis is emphasized. Study results demonstrate that ignoring correction for the sample selection bias resulting from black-white differences in the probability of being employed would lead to an underestimation of the size of wage differentials. The study also shows that the results of models based on different assumptions regarding the nondiscriminatory wage structure might lead to different conclusions pertinent to the extent of labor market discrimination. Implications for public policy development are discussed. His current research interests include consumption economics, income distribution, and international comparative analyses of households' resources allocation. He received his Ph.D. from the University of Missouri at Columbia. Her current research interests include family financial distribution and wellbeing and individual and family resource management. She received her Ph.D. from Iowa State University.