Occupations,Human Capital and Skills

Economists have long recognized that occupations can be used as proxies for skills in wage regressions. Yet the potential existence of non-market factors such as discrimination and occupational choice (sorting) on the basis of job attributes that are separate from, but potentially correlated with, wages makes occupations an imperfect control for skills. In this paper, we consider whether inter-occupational wage differentials that are unexplained by measured human capital are indeed due to differences in unmeasured skill. Using the National Compensation Survey, a large, nationally-representative dataset on jobs and ten different components of job requirements, we compare the effects on residual wage variation of including occupation indicators and these skill requirements measures. We find that although these skill requirements vary across 3-digit occupations, occupation indicators decrease wage residuals by far more than can be explained by skill alone. This indicates that “controlling for occupation” does not equate to controlling for only these skill measures, but also for other factors. Additionally, we find that there is considerable within-occupation variation in skill requirements, and that the amount of variation is not constant across skill levels. As a result, including occupation indicators in a wage model introduces heteroskedasticity that must be accounted for. We suggest that caution be applied when using and interpreting occupation indicators as controls in wage regressions.     

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.     

Estimating sex discrimination in professional occupations with the dictionary of occupational titles

Although women have gained entrance into some of the top professional occupations, they appear to have achieved few economic gains from this progress. The extensive occupational segregation existing between men and women in all occupations handicaps investigations of the sources of this persistent inequality. This article proposes an exploratory method for identifying occupations containing comparable work and presents an analysis of male‐female wage differences within a subset of the highly skilled professional occupations. Using a cluster analysis of the characteristics of jobs available in the 1977 Dictionary of Occupational Titles, three clusters of high‐skill occupations are identified. Next, a sample of labor‐force participants, aged 25 to 35 years and employed in these occupations, is used in an ordinary least squares (OLS) regression of hourly wages on a standard set of labor market traits. These results are used to decompose the male‐female wage gap. A liberal interpretation of the decomposition estimates is that between 39.9% and 58.8% of the gap is attributed to comparable‐worth discrimination.     

Stagnation only on the surface? The implications of skill and family responsibilities for the gender wage gap in Sweden, 1974–2010

The wage differential between women and men persists in advanced economies despite the inflow of women into qualified occupations in recent years. Using five waves of the Swedish Level‐of‐Living Survey (LNU), this paper explores the gender wage gap in Sweden during the 1974–2010 period overall and by skill level. The empirical analyses showed that the general gender wage gap has been nearly unchanged for the past 30 years. However, the gender difference in wage in less qualified occupations fell considerably, whereas the gender pay gap remained stable for men and women in qualified occupations. The larger significance of family responsibilities for wages in qualified occupations is one likely explanation for this result.     

INTERNATIONAL TRADE AND LABOR‐MARKET DISCRIMINATION

Discrimination reduces the matching probability and output in the skill‐intensive differentiated‐product sector so that discrimination‐induced comparative advantage may overshadow technological comparative advantage in determining the pattern of trade. Trade liberalization generates a decrease in the skilled‐worker wage gap in the country that is an exporter of goods from the simple sector but increases it in the country that is a net exporter of differentiated products. Trade liberalization has an opposite effect on firms. In the country that is an exporter of simple goods, trade liberalization reduces the profits of the nondiscriminatory firms by more than those of the discriminatory firms. (JEL F16, F66, J71)     

MALE MARITAL WAGE DIFFERENTIALS: TRAINING,PERSONAL CHARACTERISTICS,AND FIXED EFFECTS

Using the National Longitudinal Survey of Youth 1979, we replicate previous estimates of the marital wage differential for white men, extend the analysis to African American men, then explain the within and between race differentials. We first control for formal job training, then for cognitive skills, parental background, and self‐esteem with little effect. By contrast, the white differential but not the black differential disappears in fixed‐effects estimation. We reconcile the cross‐section/panel differentials by focusing on the distinct identification conditions employed by each technique. Men who never change marital status play a significant role in white cross‐sectional estimates. (JEL J31, J12)     

The Continuing Significance of Race in the Occupational Attainment of Whites and Blacks: A Segmented Labor Market Analysis*

In this article we posit that racial discrimination is not uniform across the U.S. labor market. While it is likely that patterns of racial discrimination occur in some types of jobs more than others, little empirical research has examined the effect of race across segmented labor markets. Incorporating two decades of comparable General Social Survey data, this article revisits William J. Wilson's hypothesis that the significance of race in determining labor market outcomes is declining. We examine the effect of race within two dissimilar labor segments over time, dividing the labor market into technique‐versus social‐skills‐oriented segments. Using this theoretically useful dichotomy, we examine if the net effect of race (African American and white men) on occupational prestige has declined from the 1970s to the 1990s. Our multivariate analysis shows that the net effect of race is different in each labor market. This suggests that racial discrimination against African Americans is not uniform across the entire labor market, but instead is differentiately manifested within various labor market segments. Overall, our findings partially support Wilson's thesis indicating that while the effect of race is no longer a significant indicator of occupational prestige by the 1990s in a technique‐oriented job segment, it remains a significant predictive variable within a social‐skills‐oriented job segment, even when controlling for a range of social class and structural variables.     

Occupational downgrading and wages of New Member States immigrants to Ireland

This paper explores the importance of occupational downgrading in explaining the pay gap of New Member States (NMS) immigrants to Ireland by taking advantage of two data sources, the Census and the Survey on Income and Living Conditions (SILC). The study identifies biases in the coverage of NMS immigrants in SILC that dampen their estimated earnings disadvantage. Corrections to population weights are suggested. These adjustments have a significant impact on results, increasing both the size of the wage penalty of NMS immigrants and the extent to which the pay gap can be explained by occupational downgrading. A replication of published results for the UK reveals similar patterns of penalties for NMS workers in both countries. Factors that may explain the concentration of NMS workers in low‐skill/low‐wage occupations are discussed.     

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.     

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)     

SELF‐EMPLOYMENT,EFFICIENCY WAGE,AND PUBLIC POLICIES

Empirical evidence suggests that unemployed workers are much more likely to become self‐employed than wage‐employed workers. Also, higher unemployment benefits significantly reduce the rate of self‐employment. This article develops a model of self‐employment which incorporates transitions between unemployment and self‐employment. It integrates two strands of theoretical literature—models of occupational choice and the efficiency wage models. In this model, a higher unemployment benefit reduces the self‐employment rate and the transition rate of unemployed workers to self‐employment, which is consistent with empirical evidence. (JEL J23, J58, J64)     

Divorce,Race, and Military Service: More Than Equal Pay and Equal Opportunity

Several researchers have suggested that the persistently higher rate of divorce among Blacks may be due to hard‐to‐measure concepts such as culture or norms. To attack this problem, we use data from the NLSY‐79 to examine the risk of divorce among enlisted active‐duty military servicemen where economic differences and the negative effects of discrimination are minimized. Our results indicate that military service reduces the likelihood of marital dissolution among Blacks serving in the Army and that this finding is not likely the result of unobserved selectivity. We attribute the latter finding to the fact that the Army has a well‐defined career ladder for Blacks that fully integrates them into leadership positions providing role models and positive work environments that reduce stress associated with discrimination and promote stable marriages.     

The economic marginality of ethnic minorities: an analysis of ethnic income inequality in Singapore

This paper examines ethnic income inequality in Singapore from the perspectives of labour‐market segmentation and human capital. The findings of this study show that neither perspective is useful in explaining ethnic income inequality in Singapore. Further, the analysis shows that educational differences among the Chinese, Indians and Malays account for very little of the income gap. Much of the income difference is due to discrimination. The source of this discrimination lies in the segregation of ethnic minorities in lower‐paying jobs and occupations across all industries, reflecting Chinese domination in the economic and political spheres.     

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.     

How information technology affects wages: Evidence using internet usage as a proxy for IT skills

Many research studies have found a positive link between information technology (IT) in the work place and wages. Using data from the December, 1998 Current Population Survey, we examine the impact of IT, as proxied by on-the-job Internet usage, on wages. After controlling for selectivity bias, we estimate an average wage gain of 13.5 percent for on-the- job Internet usage. This wage advantage is consistent with estimates from studies based on data collected earlier in the 1990s examining the impact of computers in the workplace. We also tested for differences across industries in the manufacturing sector. We conclude that industries marked by less intensive use of technology offered significantly higher wage premiums than industries characterized by more intensive use of technology. This finding undermines the argument that higher wages go to those working in high-tech firms, not to those with high IT skills. We also find evidence that high-tech firms sort workers by skill level, which is also consistent with earlier studies.     

WAGES,EMPLOYMENT, AND STATISTICAL DISCRIMINATION: EVIDENCE FROM THE LABORATORY

We report results from laboratory experiments designed to examine statistical discrimination. Our design expands upon existing research by generating data both on wage contracts and unemployment rates of directly competing worker groups. We find some evidence for statistical wage discrimination against workers having an identical expected productivity but a higher productivity variance. However, those same subjects are less likely to be unemployed, suggesting that our employer‐subjects view hiring choice and wage contracts as substitutable. A clear implication is that field data discrimination estimates based on wages alone may overestimate the true impact of such discrimination. (JEL C90, J71)     

REDUCING PUBLIC‐PRIVATE SECTOR PAY DIFFERENTIALS: THE SINGLE SPINE PAY POLICY AS A NATURAL EXPERIMENT IN GHANA

Empirical studies have documented the existence of the public‐private pay differentials in both developed and developing countries. The implementation of policies aiming to reduce this gap has however been mitigated or inconclusive. This paper exploits the Single Spine Pay Policy (SSPP) in Ghana as a natural experiment to examine the effectiveness of wage policies in developing countries. The SSPP was implemented in 2010 by the Government of Ghana to address the public‐private sector wage gap and improve productivity in the public sector. Using a quantile treatment effect approach based on a difference‐in‐difference estimation, we show that the SSPP has yet to reduce the wage gap between the public and private sectors across the entire distribution of earnings in Ghana. The improvement observed is only at the lower tail of the distribution of earnings. However, the SSPP has a larger effect on the earnings of female workers than that of males in the education and health services sectors while male workers have benefited more in the administration sector, suggesting that the policy was successful in reducing the gender wage gap in the education and health services sectors but has widened this gap in the administration sector. Moreover, the SSPP has decreased the productivity of workers across the distribution of earnings, mainly due to a decrease in the effort of female public sector workers in the education and health sectors and male workers in the administration sector. (JEL C31, G15, J24, J31, J45)     

Does High School Employment Develop Marketable Skills?

While decades of academic research have consistently demonstrated a positive relationship between high school employment and adult earnings, the literature is empirically silent in regards to why this association exists. This study uses data from the National Longitudinal Survey of Youth 1997 (NLSY97) to examine the hypothesis that high school employment develops “marketable skills” in the form of occupation-specific human capital. By analyzing wage variation attributable to the commonality of skill portfolios across respondents’ high school and adult (age 20 and 23) occupations, this study fails to find consistent evidence that the types of skills utilized in high school employment are correlated with adult earnings. Within the framework of the human capital model, this would suggest that the positive, post-school economic gains of in-school work are largely attributable to increases in general human capital (e.g., workplace socialization, character building).     

“I Try Not to Depend on Anyone but Me”: Welfare‐Reliant Women's Perspectives on Self‐Sufficiency,Work, and Marriage*

Welfare reformers sought to reduce “dependency,” or reliance on state‐supported cash benefits and deployed a discourse of “self‐sufficiency” to promote the legitimacy of efforts to remove welfare recipients from publicly funded cash assistance through either wage labor or marriage. We use longitudinal, qualitative interview data collected from 38 initially welfare‐reliant women to examine what self‐sufficiency means to them and their perspectives on how work and marriage affect their ability to be self‐sufficient. Grounded theory analysis revealed that for these women, self‐sufficiency means formal independence from both the state (i.e., Temporary Assistance to Needy Families [TANF]) and men (i.e., marriage). Although they value marriage as an institution and would ideally marry, they do not consider marriage to be a likely route to self‐sufficiency given the pool of men available to them. Rather, they embrace their own market‐based wage labor as the means by which they can attain some measure of independence. Taking our lead from the women in this study, we challenge the emphasis on marriage in current welfare policy. We argue that employment training that results in better jobs for women and men and work supports that make low‐wage work pay are clearly the appropriate direction for policy aimed at the welfare‐reliant and working poor.