The long-run and short-run impacts of global competition on U.S. union wages

Union opposition to trade liberalizing agreements suggests that international trade harms organized labor. Using union contract data, we assess both long- and short-run impacts of international trade on U.S. collective bargaining outcomes. Results indicate that, in the short run, increases in either imports or exports reduce union wages. This is attributed to risk aversion on the part of both unions and management. In the long run, however, trade has little net impact on average union wage settlements. In forming their opposition to more open U.S. trade policies, unions appear more concerned with short-run impacts of trade and are willing to trade-off immediate wage gains in lieu of future employment possibilities. We thank Dan Rickman, Bill Levernier, and the anonymous referee for their useful comments.     

Some Notes on Workplace Equality Renewal in the Swedish Labour Market

In 2001, Swedish authorities imposed a new obligation upon all firms with ten or more employees to undertake annual wage surveys, ‘workplace equality audits’ in which it is possible to ascertain, remedy and prevent unwarranted wage differentials and other unfair employment terms between men and women. An important implication of the new system, called ‘workplace equality renewal’ (självsanering), is that, at the level of the firm all Swedish employers must explain what they mean by work of ‘equal value’ as opposed to ‘different value’. This article discusses the practical pros and cons of the new system, and considers how the surveys can be used in research into the present state of gendered work division. A main finding is that the introduction of this new legislation in the long run might change the Swedish industrial relations system as well as the preconditions for many companies’ human resource management policies. Yet, neither the governmental agencies involved nor the parties’ confederate organizations have been able to clarify what the issue is really about to the single, small business employer or to the local trade union branches. Many employers find any interference, whatever it may be, threatening and trade unions have not realized the potentialities of the system from an employee perspective, potentialities connected to the fact that companies are now more or less forced to make transparent their wage policies at large.     

Impact of Political Risk and Uncertainty on FDI in South Asia

This study examines the potential effect of political risk and macroeconomic policy uncertainty on FDI in South Asia. To highlight the affect of political risk and macro policy uncertainty on FDI, we setup a theoretical framework based on oligopolistic and imperfect competition environment in host country. Autoregressive distributed lags (ARDL) is used to examine the impact of political risk and macro economic policy uncertainty index on FDI inflows. Macroeconomic policy uncertainty and political risk indices are constructed for this purpose. The long run results show negative affect of political risk and macroeconomic policy uncertainty indices on FDI inflows. Trade openness shows positive effect on FDI inflows only in short run while in long run it has negative impact on due lack of creditability regarding consistent trade liberalization policy and high trade cost. Furthermore, the market size significantly affects the inflow of FDI both in long run and short run which shows that FDI inflows in South Asia are mainly depend on market size. South Asian economies need to focus on political and macroeconomic factors along with FDI incentives policies to attract more FDI.     

J-Curve Dynamics and the Marshall–Lerner Condition: Evidence from Azerbaijan

Is there a J-curve for Azerbaijan? In answering this question, we are estimating a conventional trade model for Azerbaijan vis-à-vis its major trading partner—Europe. We are employing a Johansen approach to cointegration and error correction modeling. Our results suggest that a real depreciation of the Azerbaijani Manat will cause a decline in the balance of trade in the short run, and an increase in the long run. When we include the prices of exports and imports into the analysis, the new model shows that the terms of trade ratio diminishes following the devaluation but does not return to its pre-depreciation level in the long run. The balance of trade, however, continues to improve. This observation points at the presence of an underlying volume effect which is the key driver of the trade balance growth. Overall, the results of this study suggest a fulfillment of the Marshall–Lerner condition criterion, indicate the existence of the J-curve, and of the price and volume effects.     

Transnationale Lohnkoordination zur Stabilisierung des Euro? Gab es nicht,gibt es nicht,wird es nicht geben

Nominal de- and revaluations are impossible in currency unions. In order to prevent current account imbalances, the euro therefore requires the transnational synchronization of labor cost increases. Since the 1990s and especially since the introduction of the euro, European trade unions have announced their goal of coordinating their wage demands transnationally. Such announcements continue even though wage coordination continually fails. Pragmatist action theory makes us aware that actors solve the discrepancy between the desirable and the doable by de-coupling talk and action and that current attempts mainly aim at keeping the possibility of effective wage coordination a goal for the distant future. In the short and middle run, in contrast, nothing indicates that the distorted real exchange rates from which the eurozone suffers could be corrected by the means of wage coordination. The euro therefore lacks the crucial precondition for low-friction functioning.     

EMPLOYER RECRUITMENT STRATEGIES AND THE LABOR MARKET OUTCOMES OF NEW HIRES

The results in this article suggest, among other things, a strong association between recruitment choices and starting wages. The theoretical framework motivating the empirical analysis is a wage‐posting game in which firms make wage offers and choose recruitment strategies while recognizing a trade‐off between hiring speed and match quality. Introducing this theoretical framework to the recruitment literature, I present new evidence on employers' choices of recruitment methods to answer the questions “How do employer recruitment choices vary by firm and vacancy characteristics and the skill requirements of jobs?” and “How do vacancy duration and starting wages vary with recruitment choices?”(JEL MS1)     

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)     

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.     

Wage Gap Paradox: The Case of Immigrants from the FSU in Israel

The purpose of this article was to investigate whether some groups of immigrants are particularly disadvantaged in their earnings compared to other population groups, to what extent wage gaps arise from discriminatory remuneration, and how immigrants’ wages change over time. The contribution of this study is twofold: it conceptualizes a wage gap paradox and delineates the indicators of discrimination in terms of earnings. Data from the 2010‐2014 Social Surveys in Israel were used. The results revealed evidence of a wage gap paradox for immigrants from the former Soviet Union: the wage gaps between them and other population groups do not close during time living in the host country, despite the high level of their formal credentials. Applying the Blinder‐Oaxaca decomposition, the study revealed that a sufficient part of the wage gap is attributable to discrimination, which prevented immigrants from full economic integration.     

Wage Mobility in Israel: The Effect of Sectoral Concentration

Using a unique eight-year data set, merging population census and national insurance data, the paper examines and compares patterns of wage mobility in Israel. First, the public and the private sectors are compared. Second, within each of these sectors, a distinction is made between sub-sector groupings that exhibit a high level of concentration and those that are more diffuse and unregulated. Based on alternative measures of wage mobility, the central finding of the paper is that the extent of wage mobility in a given economic sector is negatively related to the degree of concentration in that sector.     

Is there a wage cost for employees in family‐friendly workplaces? The effect of different employer policies

This article assesses the wage impact of different family‐friendly employer policies: in‐kind or in‐cash child‐related benefits and flexible work schedule arrangements. We use French matched employee–employer data with a rich set of indicators of family‐friendly benefits, and we pay attention to the possible endogeneity of worker–employer matching. Our results show that the provision of in‐cash or in‐kind benefits is associated with higher wages for women, while flexible work schedules have no significant effect on wages. Our results lead us to reject the hypothesis of compensating wage differentials: women do not appear to face a trade‐off between wages and a better work–life balance. Our findings are more in line with the enhancing productivity theory: in‐kind benefits reduce the time devoted to household activities and alleviate conflict between professional life and family life, thereby improving women's work effort and productivity. This is not the case for flexible work arrangements, which may be perceived as negatively related to workers’ commitment to their job.     

WAGE DISCRIMINATION ACROSS ETHNIC GROUPS: EVIDENCE FROM ISRAEL

We investigate wage differentials between ethnic groups in Israel, proposing a new methodology and an illustration based on the latest Israeli census. By using separate wage equations for the various occupations, our methodology allows us to decompose the wage differential into three components: one reflecting human capital differences; one reflecting wage discrimination; and a third indicating occupational segregation. We find that 70 percent of the wage gap is due to segregation, 26 percent to wage discrimination and only 4 percent to human capital differences. Evidence is also found for the existence of duality in the Israeli labor market.     

The paradox of child poverty in israel

Data on the levels of child poverty in Israel indicate that it has remained consistently high and indeed is higher than that in most welfare states. This finding is paradoxical given the fact that, since its establishment fifty years ago, Israel has emphasized its commitment to the well-being of its children and to their welfare. Indeed, this approach has been reflected in a wide variety of social programmes aimed at bettering the living standards of children and of families with children. The reasons for the failure of the Israeli welfare state to deal more effectively with child poverty and deprivation over the last two decades can be linked to economic developments, such as high unemployment and inflation levels and wide wage disparities, to demographic trends such as the concentration of large, single income families among the Arab and orthodox Jewish sectors, and to policies that have encouraged privatization and have discriminated against Arab children. Social workers can play a major role in dealing with these developments by seeking more universal and equitable social policies for children in Israel.     

Explaining the Wage Gap: Intra-Industry Trade, Services Linkages and Falling Transportation Costs

In the debate on globalisation and wage inequality within countries, Heckscher–Ohlin theory has featured prominently, yet fails to take into account that globalisation comprises much more than increased trade between advanced and less-advanced countries. This paper develops a framework that takes better heed of the many aspects of globalisation and thereby addresses a new channel through which globalisation might influence wage inequality. Our results indicate that to understand the impact of globalisation on wage inequality, one needs insight in the nature and stage of globalisation and the relative size of a country.     

The Occupational Integration of Male Migrants in Western European Countries: Assimilation or Persistent Disadvantage?

This paper looks at the migrants' occupational integration process. Two main theoretical perspectives are tested: the first one (assimilation view) claims that in the short‐run migrants are penalized, but as they settle in the receiving country they get integrated into the host society; the second one (segmented assimilation view) claims that disadvantages persist in the long‐run. EU‐LFS and ESS data are described and modelled, in order to compare the labour market performances of migrants in four European old‐receiving countries (Germany, France, Great Britain and Sweden) and in two new‐receiving countries (Spain and Italy) both in a short‐term and in a long‐run perspective. We find that a) in the short‐run, migrants' labour market condition is worst with respect to the natives; b) this gap decreases with older migrants; c) the ethnic penalty disappears with the second generation, when they achieve a level of education comparable to that of the natives.

Policy Implications

• Labour market policies appear to face a trade‐off: policies oriented towards the flexibilization could improve migrants’ occupational integration, but such policies are also likely to increase the risk of poverty for the natives.
• In the case of the Southern new‐receiving countries, a similar tradeoff could emerge for policies aiming at stopping the underground economy.
• Concerning integration in the long run, our results definitely point to the importance of education. We would suggest policies oriented towards a full educational integration of the migrants’ offspring, since such policies could eliminate the gap separating them from the natives.

     

Sustainability and depth of outreach: Evidence from microfinance institutions in sub‐Saharan Africa

The feasibility of microfinance institutions (MFIs) to expand outreach to the poorest while remaining financially sustainable has long been debated. Using data from 206 MFIs in 33 African countries, we adopt the three‐stage least square technique to assess whether a trade‐off exists between sustainability and outreach depth. Our results confirm the existence of a trade‐off. The evidence also supports ongoing subsidies for MFIs with the aim of encouraging outreach. In addition, we examine whether there is an inflection point beyond which higher interest rates reduce profitability for MFIs. We find no evidence of a threshold beyond which profitability is reduced.     

Technology,international competitiveness,and union behavior

Union opposition to a free trade agreement with Mexico affirms the conventional wisdom that international trade damages the union movement. This study uses data from the March and May CPS for 1984 to 1987 to investigate this issue for production workers. The results indicate that union wages are not influenced by greater trade at medium union densities. However, at low union densities, greater imports (exports) reduce (increase) wages with the opposite pattern occurring at high union densities. The union wage pattern is consistent with product market considerations playing a strong role at low union densities and end game considerations playing a strong role at high union densities. In general, nonunion wages are not significantly impacted by greater trade. After controlling for imports and exports, nonunion wages are much greater in internationally competitive industries while union wages are not significantly greater in competitive industries. Nonunion wages appear to be more influenced by efficiency wage considerations. Thus, a Mexican free trade agreement will have little influence on union wages and should increase nonunion wages. I thank Wally Hendricks, Larry Kahn, Dan Rickman, and Doug Dalenberg for their very useful comments. All remaining errors are my own.     

TRADE-INDUCED SKILL POLARIZATION

We study how wage gaps across skills and the skill distribution in an economy respond to trade integration. Using administrative data of Denmark (1995–2011), we find that trade has a negative effect on the wage gap between secondary and primary education and a positive effect on the wage gap between tertiary and secondary education. We also show that trade affects skill distribution and induces skill polarization: trade has a positive effect on both the mean and standard deviation of skills. Wage-gap changes induced by trade shocks explain about 21%–30% of the effect of trade on skills.     

Comparative advantage and the welfare effects of uniform wage policies

This paper analyzes the theoretical impact of a commonly cited union goal — the elimination or reduction of wage differentials within occupations. By dropping the usual assumption of homogeneous labor, we show how, and under what market conditions, workers will receive rents due to individual comparative advantage. In competitive labor markets a union-imposed uniform wage may lower the earnings of workers holding a productive advantage, causing a reduction in employment and a welfare loss of comparative advantage rents. The implications of a strict uniform wage rule imply that unions may be forced to adapt their wage policy to allow more productive workers to receive wage differentials. This consideration helps explain some common trade union institutions.     

Trade and Wage Inequality in Developing Countries

In this article we provide a theoretical analysis of the possible impact of trade and fragmentation on the skilled–unskilled wage gap in a small developing economy. In particular, we illustrate the possibility of a decline in the relative wage of the unskilled labor following an improvement in the terms of trade. (JEL F1 , F11 , F12 )