nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2012‒09‒22
thirteen papers chosen by
Erik Jonasson
Lund University

  1. Higher and Higher? - Performance Pay and Wage Inequality in Germany By Katrin Sommerfeld
  2. Convergence or Divergence? Immigrant Wage Assimilation Patterns in Germany By Michael Zibrowius
  3. Estimating the Impact of Minimum Wages on Employment, Wages and Non-wage Benefits: The Case of Agriculture in South Africa By Haroon Bhorat; Ravi Kanbur; Benjamin Stanwix
  4. The Returns to Education for Opportunity Entrepreneurs, Necessity Entrepreneurs, and Paid Employees By Frank M. Fossen; Tobias J.M. Büttner
  5. Wages, Employment, and Statistical Discrimination: Evidence from the Laboratory By David L. Dickinson; Ronald L. Oaxaca
  6. A Quasi-Experimental Approach to Indentifying Compensating Wage Differentials for Occupational Risks By Jonathan M. Lee; Laura O. Taylor
  7. The Aims of Lifelong Learning: Age-Related Effects of Training on Wages and Job Security By Julia Lang
  8. Heterogeneity and Long-Run Changes in U.S. Hours and the Labor Wedge By Simona Cociuba; Alexander Ueberfeldt
  9. English Deficiency and the Native-Immigrant Wage Gap By Alfonso Miranda; Yu Zhu
  10. Childcare subsidies and labour supply: evidence from a large Dutch reform By Leon Bettendorf; Egbert Jongen; Paul Muller (University Amsterdam/Tinbergen)
  11. The impact of TFP growth on the unemployment rate: does on-the-job training matter? By Moreno-Galbis, Eva
  12. A Study of the Extent and Potential Causes of Alternative Employment Arrangements By Peter Cappelli; JR Keller
  13. The Business Cycle Human Capital Accumulation Nexus and its Effect on Labor Supply Volatility By Diana Alessandrini; Stephen Kosempel; Thanasis Stengos

  1. By: Katrin Sommerfeld
    Abstract: Performance pay is of growing importance to the wage structure as it applies to a rising share of employees. At the same time wage dispersion is growing continuously. This leads to the question of how the growing use of performance pay schemes is related to the increase in wage inequality? German SOEP data for the years 1984 to 2009 confirm the large increase in the application of performance pay schemes. This in turn led to an upward shift of the wage distribution by about one log point. However, it did not contribute to the growth in wage inequality. Even though wage inequality grew within the group of employees who receive performance pay, it grew even more so within the group who do not receive it. Still, the wage difference between both wage schemes remained flat over the distribution. The empirical analysis employs sequential decompositions in a quantile regression framework.
    Keywords: Performance pay, wage structure, quantile regression, sequential decomposition
    JEL: J31 J33 C21
    Date: 2012
  2. By: Michael Zibrowius
    Abstract: Using a rich panel data set, I estimate wage assimilation patterns for immigrants in Germany as an example of a key European destination country. This study contributes to the literature by performing separate estimations by skill groups. Comparisons with similar natives reveal that immigrants’ experience earnings profiles are flatter on average, although clear differences exist between skill groups. The effect of time spent in the host country is significantly positive and thus partly offsetting the diverging trend in the experience earnings profiles. Still, wage differences between natives and immigrants remain. They are particularly noticeable for highly skilled immigrants, the group needed most in Germany’s skill intensive labor market.
    Keywords: international migration, wage differentials, assimilation, longitudinal data
    JEL: F22 J31 J61
    Date: 2012
  3. By: Haroon Bhorat; Ravi Kanbur; Benjamin Stanwix (Development Policy Research Unit; Director and Professor)
    Abstract: Assessments of the impact of minimum wages on labour market outcomes in Africa are relatively rare. In part this is because the data available do not permit adequate treatment of econometric issues that arise in such an assessment. This paper attempts to estimate the impact of the introduction of a minimum wage law within the Agriculture sector in South Africa, based on 15 waves of the biannual Labour Force Survey (LFS), starting in September 2000 and ending in September 2007. The chosen sample includes six waves before the legislations effective date (March 2003) and nine afterwards. All 15 waves are pooled and treated as repeated cross sections over time. In order to assess whether the changes experienced by farm workers are unique, we identify a control group that has similar characteristics to the treatment group. Our econometric approach involves using two alternative specifications of a difference-in-differences model. We test whether employers reduced employment, and whether they responded at the intensive margin by reducing hours of work. The law also required non-wage benefits to be implemented, and we track the response here in the form of one such provision, namely that of a written contract. The results suggest a significant reduction in employment in Agriculture from the minimum wage, an increase in wages on average, no significant change in hours worked and a sharp rise in non-wage compliance. Acknowledgements: The research, from which this paper emanates, was funded by the International Development Research Centre (IDRC).
    Keywords: Minimum Wage, Agriculture, South Africa, Wage, Employment, Hours of Work
    JEL: J23 J31 J32 J38 J41 J43
    Date: 2012–07
  4. By: Frank M. Fossen; Tobias J.M. Büttner
    Abstract: We assess the relevance of formal education for the productivity of the self-employed and distinguish between opportunity entrepreneurs, who voluntarily pursue a business opportunity, and necessity entrepreneurs, who lack alternative employment options. We expect differences in the returns to education between these groups because of different levels of control. We use the German Socio-economic Panel and account for the endogeneity of education and non-random selection. The results indicate that the returns to a year of education for opportunity entrepreneurs are 3.5 percentage points higher than the paid employees’ rate of 8.1%, but 6.5 percentage points lower for necessity entrepreneurs.
    Keywords: returns to education, opportunity, necessity, entrepreneurship
    JEL: J23 J24 J31 I20 L26
    Date: 2012
  5. By: David L. Dickinson; Ronald L. Oaxaca
    Abstract: When membership in a particular group conveys valuable information about an individual’s skills, productivity, or other human capital characteristics, a non-prejudiced agent may still find it rational to statistically discriminate. We frame statistical discrimination in a labor market setting for a series of laboratory experiments. A main objective of our experiments is to examine how varying productivity risk along several dimensions impacts outcomes across worker groups. Our design expands upon existing research by generating laboratory data both on wage contracts and unemployment rates of directly competing worker groups. We find some evidence for statistical wage discrimination against workers with identical expected productivity but higher productivity variance. However, those same subjects are less likely to be unemployed, suggesting that our employers view hiring choice and wage contracts as substitutable. These laboratory results have interesting implications for labor markets where employers select from workers belonging to distinct statistical groups, and suggest that statistical discrimination based on wages alone may overestimate the true effect of such discrimination. Key Words:
    Date: 2012
  6. By: Jonathan M. Lee; Laura O. Taylor
    Abstract: This research employs the first quasi-experimental design within a labor market setting to provide causal evidence on the existence and magnitude of compensating wages for workplace fatality and accident risks. Federal programmed inspections conducted by the Occupational Safety and Health Administration that randomly select plants for inspection (conditioned on known and measured plant characteristics) are used to instrument for plant-level risks. Inspection records are combined with confidential U.S. Census data on plant-level wages and worksite characteristics to estimate the compensating wages associated with riskier working conditions. Results strongly suggest that compensating wage differentials for risky working conditions do indeed exist as suggested by theory and explored empirically in the hedonic wage literature for over 40 years. However, our results also suggest that the empirical challenges inherent in estimating these differentials via cross-sectional or panel-data hedonic wage models have not yet been fully addressed. Data limitations, especially with regards to the measurement of risk faced by workers at their worksite, and correlated unobservables are likely the key impediments to identification of wage/risk tradeoffs. Our results are important for environmental, health and public safety policies that rely on labor market studies to provide measures of the value of reducing fatality risks. Our point estimates suggest that prior studies may substantially overstate the value workers place on reducing workplace risks.
    Date: 2012–09
  7. By: Julia Lang
    Abstract: This study analyses the effects of training participation on wages and perceived job security for employees of different ages. Based on data from the German Socio-Economic Panel, results indicate that only younger workers benefit from training by an increase in wages, whereas older employees’ worries about losing their job are reduced. This observation can also be explained by the fact that goals of training courses are related to the age of participants. Moreover, I differentiate between workers who permanently and only occasionally participate in training. The results indicate that there seem to be decreasing marginal returns to training with respect to job security.
    Keywords: Training, Wages, Job security
    JEL: J24 J28 J31 M53
    Date: 2012
  8. By: Simona Cociuba (University of Western Ontario); Alexander Ueberfeldt (Bank of Canada)
    Abstract: From 1980 until 2007, U.S. average hours worked increased by thirteen percent, due to a large increase in female hours. At the same time, the U.S. labor wedge, measured as the discrepancy between a representative household's marginal rate of substitution between consumption and leisure and the marginal product of labor, declined substantially. We examine these trends in a model with heterogeneous households: married couples, single males and single females. Our quantitative analysis shows that the shrinking gender wage gaps and increasing labor income taxes observed in U.S. data are key determinants of hours and the labor wedge. Changes in our model's labor wedge are driven by distortionary taxes and non-distortionary factors, namely the cross-sectional differences in households' labor supply and productivity. We conclude that the labor wedge measured from a representative household model partly reflects inaccurate household aggregation.
    Keywords: Female and Male Labor Supply; Labor Wedge; Gender Wage Gap; Labor Income Taxation; Household Aggregation
    JEL: E24 H20 H31 J22
    Date: 2012
  9. By: Alfonso Miranda; Yu Zhu
    Abstract: We focus on the effect of English deficiency on the native-immigrant wage gap for employees in the UK using the first wave of the UK Household Longitudinal Survey (Understanding Society). We show that the wage gap is robust to controls for age, region of residence, educational attainment and ethnicity, particularly for men. However, English as Additional Language (EAL) is capable of explaining virtually all the remaining wage gap between natives and immigrants. Using the interaction of language of country of birth and age-at-arrival as instrument, we find strong evidence of a causal effect of EAL on the native-immigrant wage gap.
    Keywords: native-immigrant wage gap; English as Additional Language (EAL); age-at-arrival
    JEL: J15 J61
    Date: 2012–09
  10. By: Leon Bettendorf; Egbert Jongen; Paul Muller (University Amsterdam/Tinbergen)
    Abstract: <p>Over the period 2005-2009 the Dutch government increased childcare subsidies substantially, reducing the average effective parental fee by 50%, and extended subsidies to so-called guestparent care. We estimate the labour supply effect of this reform with a difference-in-differences strategy, using parents with older children as a control group.</p><p>We find that the reform had a moderately sized impact on labour supply. Furthermore, the effects are an upper bound since there was also an increase in an earned income tax credit for the same treatment group over the same period. The joint reform increased the maternal employment rate by 2.3%-points (3.0%). Average hours worked by mothers increased by 1.1 hours per week (6.2%). Decomposing the hours effect we find that most of the increase in hours is due to the intensive margin response. A number of robustness checks confirm our results.</p><p> </p>
    JEL: C21 H40 J13 J22
    Date: 2012–09
  11. By: Moreno-Galbis, Eva
    Abstract: This paper seeks to gain insights into the relationship between growth and unemployment in a setting with heterogeneous skills, human capital accumulation, on-the-job training and capital-skill complementarity. We use an endogenous job destruction framework in the style of Mortensen and Pissarides (1998) with directed search. We show that, when growth accelerates, a larger share of unskilled workers seeks training, increasing firms’ incentives to update job-specific technology (rather than destroying it). By magnifying the impact of growth on employment, the introduction of human capital issues allows the model to more closely match the estimated sensitivity of unemployment with respect to growth. When calibrated, the model manages to reproduce the aggregate capitalization effect estimated using OECD data. We find that growth reduces unemployment for individuals receiving training, while it increases the unemployment rate of unskilled workers without training (creative destruction effect).
    Keywords: growth; unemployment; training; capital-skill complementarity; human capital depreciation; capitalization; creative destruction effect
    JEL: J23 J24 O33
    Date: 2012–09
  12. By: Peter Cappelli; JR Keller
    Abstract: The notion of regular, full-time employment as one of the defining features of the U.S. economy has been called into question in recent years by the apparent growth of alternative or “nonstandard” arrangements – part-time work, temporary help, independent contracting, and other arrangements. Identifying the extent of these arrangements, whether they are increasing, and where they occur is the first step for understanding their implications for the economy and the society. But this has been difficult to do because of the lack of appropriate data. We present estimates of the extent of these practices based on a national probability sample of U.S. establishments, evidence on changes in their use over time, and analyses that help us begin to understand why they are used.
    JEL: J2 J21 J41 M12 M51 M54 M55
    Date: 2012–09
  13. By: Diana Alessandrini (Department of Economics and finance, University of Guelph, Canada); Stephen Kosempel (Department of Economics and finance, University of Guelph, Canada); Thanasis Stengos (Department of Economics and finance, University of Guelph, Canada)
    Abstract: This paper studies the cyclicality of human capital accumulation by using a lifecycle RBC model with two types of heterogeneity: age and productivity in learning. Results show that individuals invest more in human capital during economic downturns. In particular, schooling acts as a buffer sector and allows agents to compensate for the shock by accumulating more human capital. However, human capital accumulation is more countercyclical for young and low-productivity individuals because they face lower opportunity costs of education and a higher marginal product of human capital. These results are confirmed empirically using US data from the Current Population Survey.
    Keywords: human capital accumulation, business cycles, labor supply
    JEL: J24 E32 J22
    Date: 2012–08

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