The Effect of the Minimum Wage on Covered Teenage Employment

Unlike previous studies on the minimum wage, which focused on its effect on total teenage employment, we examine its effect on covered employment. A covered job was defined to be one paying the minimum wage or more. Using contemporary wages to classify workers this way may inflate the estimated effect of minimum wages on covered employment. To avoid this bias, covered jobs are identified using a logit procedure run over years in which the minimum age was not increased. We find that minimum wages reduced covered employment significantly more than total employment. We also show that covered employment may be overstated in the period following an increase in the minimum wage.     

EFFICIENCY WAGES AND SUBJECTIVE PERFORMANCE PAY

This paper studies optimal relational contracts in motivating workers in a market setting. We find that labor markets with higher turnover costs will use more subjective performance pay and less efficiency wages and that in those markets, the total wage payment is lower and the equilibrium employment level is higher. Surprisingly, under certain conditions, an increase in turnover costs leads to higher social welfare. Incorporating workers' search costs, we show that wages are procyclical in booms and are either rigid or countercyclical during recessions. The predictions of the model are consistent with some empirical evidence. ( JEL D82, J33, J41, J63)     

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 POLITICAL ECONOMY OF MINIMUM WAGE LEGISLATION

Two questions are addressed in this paper. (A) Why do labor unions and certain employer organizations respectively promote and impede minimum wage legislation? (B) Do these groups have significant impacts on minimum wages? Question (A) is examined in the context of models that identify the economic self-interest of unionized skilled workers and capitalists in legal wage floors. Question (B) is approached by a median legislator utility maximization model that leads to Tobit estimation of the relationship between state minimum wage rates and measures of statewide organized labor and capital and average hourly earnings.     

The labor market effects of minimum wage laws: A new perspective

Economists almost uniformly argue that minimum wage laws benefit some workers at the expense of other workers. This argument is implicitly founded on the assumption that money wages are the only form of labor compensation. Based on the more realistic assumption that labor is paid in many different ways, the analysis of this paper demonstrates that all laborers within a perfectly competitive labor market are adversely affected by minimum wages. Although employment opportunities are reduced by such laws, affected labor markets clear. Conventional analysis of the effect of minimum wages on monopsony markets is also upset by the model developed. The author is indebted to Rex Cottle, Benjamin Hawkins, Hugh Macaulay, Michael Maloney, Thomas Schaap, Gordon Tullock, Gene Uselton, and Karen Vaughn for helpful comments on earlier drafts of this paper.     

INFORMAL LABOR MARKETS AND ON‐THE‐JOB TRAINING: EVIDENCE FROM WAGE DATA

This study examines whether informal sector jobs are a source of training for young less‐educated workers. Controlling for worker and job characteristics, it is found that, in the early years of workers' careers in Mexico, wage growth in the informal sector is higher than in the formal sector. This result is consistent with general human capital investment on‐the‐job if the informal labor market is more competitive than the formal labor market due to frictions generated by labor regulations. (JEL O17, J24, J310)     

The Effects of Prevailing Wage Laws: A Comparison of Individual Workers'' Wages Earned on and off Prevailing Wage Construction Projects

I evaluate the effects of prevailing wage laws using a unique data set that shows the wages paid to workers on prevailing wage projects and the wages paid to the same workers during the same time period for work on projects not covered by prevailing wage regulations. The wage comparison shows that workers are generally paid more for work on prevailing wage projects than they are for work on non-prevailing wage projects. Thus, prevailing wage laws likely do increase the cost of public construction. In addition, to the extent that the quality of construction is improved, prevailing wage laws appear to be an inefficient mechanism by which to achieve additional quality, as the regulations often result in workers being paid more than they earn in the private market.     

State minimum wage laws: Youth coverage and impact

Federal minimum wage statutes cover only 70 percent of the work force and 30 percent of all employers. State laws are designed to close some of these coverage gaps and in some cases to set higher wage floors. Hence, differences in state wage floors and coverage should affect employment rates and wage distributions, particularly among low-skilled workers. Evidence from the National Longitudinal Ssurveys of Youth is mixed, however: State wage floors appear to have no impact on youth employment or entry wages, but coverage exemptions appear to increase both employment and wages. These observations underscore the need to include state provisions in models of minimum wage impacts, particularly for later periods (e.g., 1988–1991) when state wage floors were relatively higher.     

The effects of prevailing wage laws: A comparison of individual workers’ wages earned on and off prevailing wage construction projects

I evaluate the effects of prevailing wage laws using a unique data set that shows the wages paid to workers on prevailing wage projects and the wages paid to the same workers during the same time period for work on projects not covered by prevailing wage regulations. The wage comparison shows that workers are generally paid more for work on prevailing wage projects than they are for work on nonprevailing wage projects. Thus, prevailing wage laws likely do increase the cost of public construction. In addition, to the extent that the quality of construction is improved, prevailing wage laws appear to be an inefficient mechanism by which to achieve additional quality, as the regulations often result in workers being paid more than they earn in the private market. This research was done originally for the Program Review and Investigations Committee of the Kentucky State Legislature. I thank the staff of the Program Review and Investigations Committee and the Legisla-tive Research Commission for assistance with data collection and Mark Berger for helpful comments. Due to confidentiality requirements, the data cannot be made available.     

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.     

Short Term Gain, Long Term Pain

This paper examines the role of informal job search methods on the labour market outcomes of displaced workers. Informal job search methods could alleviate short-term labour market difficulties of displaced workers by providing information on job opportunities, allowing them to signal their productivity and may mitigate wage losses through better post-displacement job matching. However if displacement results from reductions in demand for specific sectors/skills, the use of informal job search methods may increase the risk of job instability. While informal job search methods are associated with lower wage losses, they lead to increased job instability and increased risk of subsequent job displacement.     

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)     

FINANCIAL DEVELOPMENT AND WAGE INEQUALITY: THEORY AND EVIDENCE

We argue that financial market development contributed to the rise in the skill premium and residual wage inequality in the United States since the 1980s. We present an endogenous growth model with imperfect credit markets and establish how improving the efficiency of these markets affects modes of production, innovation, and wage dispersion between skilled and unskilled workers. The experience of U.S. states following banking deregulation provides empirical support for our hypothesis. We find that wages of skilled workers increased by between 0.5% and 6.3% following deregulation while those of unskilled workers fell by between 3.5% and 8.7%. Similarly, residual (or within‐group) inequality increased; the 90–50 percentile ratio of residuals from a Mincerian wage regression and their standard deviation increased by 4.2% and 1.7%, respectively. (JEL E25, J31, G24)     

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)     

Union density effects in the supermarket industry

Unions provide higher than competitive wages for members, but their effect on non-union wages is not clear. We investigate the effect of union density on supermarket wages from 1986 to 1993, a period of declining real wages and declining union membership. Full-information maximum likelihood techniques are used to estimate log wage equations for both the union and nonunion sectors. Decomposition techniques then separate the union wage premium into the relative effects of densities and union membership. We find a significant, positive effect of union density for both union and nonunion employees. This effect explains approximately one-third of the union-nonunion wage differential. This research was conducted while Johansson was a graduate research assistant at the University of Minnesota.     

Noncitizen Employment and the Wages of Healthcare Support Workers in the US

This study examines the relative wages of citizens and noncitizens employed as healthcare support workers as well as examines the effect of noncitizen support worker employment on the wages of citizen support workers. Relative wage findings reveal noncitizen support workers with less than eight years of US residency receive a noncitizen-citizen wage discount statistically significantly greater than the legal maximum of 5% below the local prevailing wage. These low relative wage levels could contribute to lower wages for citizen support workers, however elasticity of substitution findings suggest noncitizen support workers are not close substitutes for healthcare support workers who are US citizens. In addition, wage effect findings do not reveal a negative influence of noncitizen employment on the wages of native born US citizen support workers, while these findings reveal a relatively small wage decline for naturalized support workers. These findings are consistent with the citizen status job heterogeneity hypothesis. Nonetheless, finding noncitizen-citizen wage differences does not allow for ruling out the possibility of weak enforcement of prevailing wage legislation and possible employment of undocumented workers.     

The Indian informal sector: The impact of globalization and reform

Globalization and economic reforms typically affect the formal sector, the informal sector existing outside regulation. Yet, numerous links between them mean the informal sector is variously affected. Traditionally, the model used to explain the impact of these forces was labour market segmentation and migration: workers laid off in the formal sector increase informal labour supply, leading to wage decline and increased poverty. The author examines whether this pattern applies in India following economic reforms in the 1990s, and finds a more appropriate model, driven by expansion both in labour supply and in demand, through outsourcing, skill transfers and new enterprises.     

The relative effect of unionization and interjurisdictional competition on municipal wages

This study analyzes the effect on municipal employee wages of interjurisdictional competition in municipal service markets. The impact of market conditions are analyzed utilizing a bureaucracy model of local governmental decision making. The study develops hypotheses concerning the degree of competition in this market, constructs empirical measures of competition, and investigates the relationship between competition and wage levels for three categories of municipal workers. The empirical results suggest that local market conditions may be as important a determinant of local wages as local labor market conditions, including union membership. Also, the wage effect of unionization appears to be greater in less competitive local government environments. Financial support from the Earhart Foundation is gratefully acknowledged. We would also like to thank Werner Hirsch, Roger Folsom, and Geoffrey Nunn for helpful comments.     

The globalization of production,national labour regulations and income inequality in the global North and South, 1980–2013

A central concern over global value chains (GVCs) is whether the integration of national firms into GVCs exacerbates income inequality within countries. However, despite decades of research, the distributional consequences of GVCs remain unclear in the empirical literature. Drawing on panel data from 96 countries between 1980 and 2013, we examine the effects of GVC integration on market income inequality and whether national labour regulations moderate these effects. We find integration increases inequality in the global North and South. More importantly, we find labour regulations amplify the inequality effects of integration in Southern countries by expanding the size of the informal sector while suppressing these effects in Northern countries by promoting unionization. This suggests institutional power from national labour regulations may enhance the bargaining power of labour in the North through increasing collective resources while disempowering labour in the South through reinforcing labour market segmentation between formal and informal sectors.     

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.