The Early‐career Gender Wage Gap among University Graduates in the Finnish Private Sector

In the Finnish private sector, the gender wage gap increases significantly during the first 10 years after labour market entry, accounting for most of the lifetime increase in the gender wage differentials. This paper investigates the reasons for this gender difference in early‐career wage development. By focusing on university graduates the paper considers several explanations based on the human capital theory, job mobility, and labour market segregation. The results suggest that only about 20–26 per cent of the average early‐career gender wage gap is explained by gender differences in experience, the field of education, employer characteristics, and mobility. A substantial unexplained gap thus remains. Of the investigated factors gender differences in the field of education and work experience matter most.     

Equilibrium Wage‐Tenure Contracts

In this study we consider a labor market matching model where firms post wage‐tenure contracts and workers, both employed and unemployed, search for new job opportunities. Given workers are risk averse, we establish there is a unique equilibrium in the environment considered. Although firms in the market make different offers in equilibrium, all post a wage‐tenure contract that implies a worker's wage increases smoothly with tenure at the firm. As firms make different offers, there is job turnover, as employed workers move jobs as the opportunity arises. This implies the increase in a worker's wage can be due to job‐to‐job movements as well as wage‐tenure effects. Further, there is a nondegenerate equilibrium distribution of initial wage offers that is differentiable on its support except for a mass point at the lowest initial wage. We also show that relevant characteristics of the equilibrium can be written as explicit functions of preferences and the other market parameters.     

A Note on Job Tenure and Collective Contracts

Abstract. This paper analyses the relationship between individual tenure and the application of collective contracts at the firm level under the specific institutional settings in Germany. The empirical approach is based on a multilevel model and a linked employer–employee data set for the years 1990, 1995, and 2001. The main result is that elapsed tenure is longer in firms applying collective contracts than in companies with individual wage setting: workers in firms with collective contracts benefit not only from higher wages, but also from higher job stability. Furthermore, we find no significant changes in mean tenure during the 1990s as well as stable differences across wage‐setting regimes.     

Gender and nationality pay gaps in light of organisational theories

This paper analyses wage inequality with respect to gender and nationality within German establishments. It is a large-scale analysis based on linked employer-employee data from the Institute for Employment Research (LIAB). Wage inequality is measured as the intra-establishment pay gap by gender and nationality, taking into account that human capital may not be equally distributed across the different groups of employees. Consistent with economic theories of discrimination we find significant pay gaps by gender and nationality, even taking into consideration employees’ qualifications. We can show that pay differentials between men and women are much larger on average than those between Germans and non-Germans, and that both pay gaps exhibit a tremendous variation across establishments. Drawing on organisational theories we inquire as to how selected firm characteristics are related to the variation of these intra-firm pay gaps and derive hypotheses about which establishments have a greater incentive and/or are more able to pursue wage equality in their workforces. By use of regression analysis we then investigate whether variables that reflect the firms’ social, institutional and cultural environment and their resource requirements are empirically related to the sizes of the pay gaps. The results are rather ambiguous, suggesting larger, innovating and foreign-owned establishments with a larger share of non-German employees and with a collective bargaining agreement to have smaller gaps, particularly with respect to gender.     

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 Male–Female Wage Gap and the Firm Effect: The Case of Young Italian Workers

Abstract. The idea that wages are determined by firm and individual characteristics suggests that there is a firm effect that influences wage differentials. This paper presents the results of an empirical analysis of gender wage differentials — based on INPS data for people between the ages of 20 and 25 employed in the private sector in 1996 — which takes into account the characteristics of workers and firms using a two‐level random‐effects model. Firm variables proved to be significant, and the proportion of females in the firm showed a negative effect on the wages of both men and women.     

Gender and Economic Outcomes: the Role of Wage Structure

Abstract. Empirical research on gender pay gaps has traditionally focused on the role of gender-specific factors, particularly gender differences in qualifications and differences in the treatment of otherwise equally qualified male and female workers (i.e. labor market discrimination). An innovative feature of recent research is to focus on the role of wage structure — the array of prices set for various labor market skills — in influencing the gender gap. In this paper, I consider the determinants of gender differences in pay and summarize empirical evidence on the importance of various factors in explaining gender pay gaps, highlighting the role of wage structure. To illustrate how it can impact the gender gap, I summarize my research on international differences in male-female wage differentials, as well as preliminary findings on trends over time in gender differentials in the United States.     

The Impact of Worker and Establishment‐level Characteristics on Male–Female Wage Differentials: Evidence from Danish Matched Employee–Employer Data

Abstract. This paper uses matched employer–employee data from Denmark to examine how gender segregation at the level of occupation, industry, establishment, and job‐cell impacts the gender wage differential of full‐time, private‐sector salaried and manual workers. Wage effects of gender segregation at the above four levels are estimated through fixed effects or through controls for the proportion females within these structures. We find that occupation has a much larger role than industry or establishment in accounting for the gender gap for salaried but not manual workers, and that for both groups there is a significant within‐job‐cell gender wage differential.     

Analysing the Gender Wage Gap (GWG) Using Personnel Records

We use monthly personnel records of a large German company for the years 1999–2005 to analyse the gender wage gap (GWG). The unconditional GWG is 15 per cent for blue‐collar and 26 per cent for white‐collar workers. Different returns to entry age explain a substantial part of the GWG as well as segregation of men and women in different hierarchical levels. The relative GWG increases with increasing tenure for blue‐collar but declines for white‐collar workers. Taking into account the different impact of general and firm‐specific human capital on white‐collar and blue‐collar occupation, this is consistent with theories of statistical discrimination.     

Gender Differences in Formal On‐the‐Job Training: Incidence,Duration, and Intensity

This paper explores whether there is a gender gap in the incidence, duration, intensity, and number of events of on‐the‐job training. Overall, women appear to receive a higher incidence of on‐the‐job training whereas men receive on‐the‐job training of longer duration. Including measures intended to capture the extent of labor force attachment and expected tenure fails to reduce the gender gap in the duration of on‐the‐job training. Therefore, the gender gap in the duration of on‐the‐job training must be attributed to differences in unobserved worker characteristics that differ by gender or discrimination.     

Unionization and Labour‐market Discrimination: A Closer Look at Non‐unionized Workers

This paper introduces a model that examines the effects of unions on pay and hiring gaps between non‐unionized men and women in the context of imperfect competition. Although the model does not question the advantages unions obtain for their members, it does show that (1) unions increase wage and occupational discrimination for non‐unionized workers; (2) the non‐unionized sector does not constitute a good comparison group for use in analysing the impact of unions on gender discrimination; and (3) public policies targeting gender differences in occupational sorting can also have a positive impact on gender wage differentials.     

Does Rent‐sharing Profit Female and Male Workers? Evidence from Israeli Matched Employer–Employee Data

This paper analyses the impact of workplace characteristics on individual wages based on a unique cross‐section matched employer–employee data set for the Israeli private manufacturing sector in 1995. Specifically, we examine the effects of the interaction between profit‐sharing and wages on the gender wage gap. The empirical findings show that individual compensation is significantly and positively correlated with firms’ profits‐per‐employee, even when controlling for all of the following: group effects in the residuals, individual and firms’ characteristics, industry wage differentials and endogeneity of profits. Wage–profit elasticity is found to be 11 per cent and it does not significantly differ between genders. With respect to the overall gender wage gap (on average women earn 28 per cent less than men), the results show that within firms there is no gender discrimination and that 12 per cent of this gap can be explained by the wage–profits profile and by the fact that women are more likely to be employed in less profitable firms than men.     

Why Do Women's Wages Increase So Slowly Throughout Their Career? A Dynamic Model of Statistical Discrimination

Abstract. The aim of this paper is to explain the growing wage differentials between men and women during their working careers. We provide a dynamic model of statistical discrimination, which integrates specific human capital decisions: on‐the‐job training investment and wages are endogenously determined. We reveal a small wage differential at the beginning of women's career, but women's wages increase more slowly; this is partly due to a lower level of human capital investment by women and partly because firms smooth training costs between different periods.     

Temporary Contracts,Employment Protection,and Collective Bargaining

This paper examines the effect of employment protection in a matching model with endogenous job destruction, collective bargaining, and two types of employment contracts. Using this framework, we show that (i) the impact on job creation and job destruction caused by reducing the firing costs associated with temporary jobs depends on the labour unions' bargaining strength and the gap in firing costs between contracts; (ii) reducing the firing costs associated with permanent jobs unambiguously decreases equilibrium unemployment if labour unions have strong bargaining power; and (iii) the impact caused by the firing costs differs between collective and individual bargaining.     

Contract Length as Risk Management When Labor is not Homogeneous

This paper examines the choice of contract length for workers who possess unique skills. Uncertainty, facing both the worker and the firm, creates an incentive to reallocate risk. The uncertainty arises from two sources: variation in the market value of the worker's human capital and fluctuation in the worker's physical production. Long‐term contracts are typically modeled as compensating wage differentials, or as a solution to the problem of asymmetric information. This paper develops a model proposing more complex behavior in the reallocation of risk between the contracting parties. The model shows that long‐term labor contracts are most likely to be observed when price uncertainty in the labor market exceeds the worker's productive uncertainty.     

Firm Size and Employment Dynamics: Estimations of Labor Demand Elasticities Using a Fractional Panel Probit Model

This paper examines the comprehensive discussion on the relationship between job creation, or destruction and firm size. More specifically, the study will determine whether the argument about small‐ and medium‐sized enterprises (SMEs) showing higher employment dynamics is confirmed or not. As such, the following work applies elasticities from a standard labor demand model derived from the estimations of fractional probit models for panel data, as process recommended in Papke and Wooldridge [2008; Journal of Econometrics 145(1–2): 121–133]. Elasticities are a useful measure of employment dynamics, if it is assumed that SMEs act on the same markets. The elasticity results from German establishment data illustrate that firm size does matter for the increase or decrease of employment. SMEs with less than 10 workers exhibit a higher employment dynamic, compared with other entities, at each respective percentile in the distribution of the wage share. Additionally, the outcome of the analysis weakly confirms the hypothesis that smaller firms are more restricted to capital markets, compared with large entities. The results also illustrate that firm size only explains one aspect of job creation and destruction. As stated in the well‐known Hicks–Marshall rules for elasticities of factor demand, the results illustrate that the reaction of labor demand on economic changes increases with the share of labor. Firms with a high share of labor also have larger elasticities, compared with firms with a strong use of capital. Both effects, the size effect and the effect of the proportion of labor, would blend in reality, and therefore, possibly lead to controversial results for the relationship between firm size and employment dynamics. In addition, a model with a negative relationship among both variables is too simple to explain the behavior of firms.     

The Economics of Equal Value

Equal pay for work of equal value has come to be seen as the policy most likely to reduce the gender earnings gap. This paper explores the theoretical basis for widespread undervaluation of women's work and argues that institutionalised discrimination in the labour market also affects internal pay and grading structures. Recent recognition of the scope for discretion in pay determination undermines the “market forces” argument against equal value. The current wage structure reflects an outdated model of social and family organisation. Much poverty is now the result of women seeking economic independence in a market which rewards them as subordinate family members. However, the main obstacles to equal value lie in labour market institutions. The increasing fragmentation of pay bargaining and moves to performance-related pay will reduce rather than promote the relationship between pay and job content.     

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.     

Decentralizing Wage Bargaining in Germany — A Way to Increase Employment?

Abstract. The area‐wide wage agreement is at the centre of Germany's system of collective bargaining. In recent years, however, there has been a tendency towards the decentralization of collective bargaining. Individual wage agreements have led to more moderate wage developments, whilst collective agreements with individual firms, and agreements at the production unit level, have not had this moderating effect. On the other hand, collective bargaining has become more flexible, leading to greater pay differentiation. The further decentralization of collective bargaining, although desirable, has given rise to objections based in constitutional law and to resistance from employees and employers.     

Is There a Double‐Negative Effect? Gender and Ethnic Wage Differentials in Italy

This paper investigates the gender and ethnic wage differentials for female migrants in Italy by applying the Oaxaca–Blinder decomposition, with and without Heckman correction, to account for self‐selection into the labour market. The gender wage gap is nearly 15 per cent, more than 60 per cent of which is unexplained by observable differences. The ethnic wage gap is much larger (39 per cent), but endowments explain 53 per cent of the gap. We also estimate the double‐negative effect of being both female and a migrant. A female migrant earns 42 per cent less than an Italian male; the unexplained component is estimated to be 53–65 per cent. Results are robust to different specifications.