nep-lma New Economics Papers
on Labor Markets - Supply, Demand, and Wages
Issue of 2013‒10‒02
sixteen papers chosen by
Erik Jonasson
National Institute of Economic Research

  1. Wage Adjustment in the Great Recession By Michael W. Elsby; Donggyun Shin; Gary Solon
  2. Drivers of Female Labour Force Participation in the OECD By Olivier Thévenon
  3. Has Atypical Work Become Typical in Germany? By Eichhorst, Werner; Tobsch, Verena
  4. Employee Trust and Workplace Performance By Sarah Brown; Jolian McHardy; Karl Taylor
  5. Market Mechanism and Skill Premiums in the UK 1972-2002 By Peng, Fei; Kang, Lili
  6. Is there a Double-Negative Effect? Gender and Ethnic Wage Differentials By Daniela Piazzalunga
  7. The Premium for Part-Time Work in Australia By Joan Rodgers; Iris Day
  8. Pay for Performance and Compensation Inequality: Evidence from the ECEC By Maury Gittleman,; Brooks Pierce,
  9. Non-Standard 'Contingent' Employment and Job Satisfaction: A Panel Data Analysis By Hielke Buddelmeyer; Duncan McVicar; Mark Wooden
  10. Wage, Income and Consumption Inequality in Japan, 1981-2008: from Boom to Lost Decades By Jeremy Lise; Nao Sudo; Michio Suzuki; Ken Yamada; Tomoaki Yamada
  11. Are Gender Differences Emerging in the Retirement Patterns of the Early Boomers? By Kevin E. Cahill,; Michael D. Giandrea,; Joseph F. Quinn
  12. Temporary employment, job satisfaction and subjective well-being By Chris Dawson; Michail Veliziotis
  13. Grandchild Care, Intergenerational Transfers, and Grandparents’ Labor Supply By Christine Ho
  14. Cheating in the workplace: An experimental study of the impact of bonuses and productivity By Gill, David; Prowse, Victoria; Vlassopoulos, Michael
  15. The Importance of Rank Position By Richard Murphy; Felix Weinhardt
  16. Social Norms on Working Hours, Work-Life Balance, and Fertility Choice By Kohei Daido; Ken Tabata

  1. By: Michael W. Elsby; Donggyun Shin; Gary Solon
    Abstract: Using 1979-2011 Current Population Survey data for the United States and 1975-2011 New Earnings Survey data for Great Britain, we study wage behavior in both countries, with particular attention to the Great Recession. Real wages are procyclical in both countries, but the procyclicality of real wages varies across recessions, and does so differently between the two countries. U.S. distributions of year-to-year nominal wage change show many workers reporting zero change (suggesting wage stickiness) and many reporting nominal reductions (suggesting wage flexibility), but both findings could be distorted by reporting error. The British data, which are based on employers’ payroll records, show much lower prevalence of zero wage change, but still show surprisingly frequent nominal wage cuts. The complex constellation of empirical regularities defies explanation by simple theories.
    JEL: E24 E32 J3 J64
    Date: 2013–09
  2. By: Olivier Thévenon
    Abstract: This paper analyses the response of female labour force participation to the evolution of labour markets and policies supporting the reconciliation of work and family life. Using country-level data from the early 1980s for 18 OECD countries, we estimate the influence of labour market and institutional characteristics on female labour force participation, and full-time and part-time employment participation. The relationship (interactions, complementarity) between different policy measures is also analyzed, as well as potential variations in the influence of policies across different Welfare regimes. The results first highlight how the increase in female educational attainment, the expansion of the service sector the increase in parttime employment opportunities have boosted women’s participation in the labour force. By contrast, there is no such clear relationship between female employment rates and the growing share of public employment. Employment rates react to changes in tax rates, in leave policies, but the rising provision of childcare formal services to working parents with children not yet three years old is a main policy driver of female labour force participation. Different policy instruments interact with each other to improve overall effectiveness. In particular, the coverage of childcare services is found to have a greater effect on women’s participation in the labour market in countries with relatively high degrees of employment protection. The effect of childcare services on female full-time employment is particularly strong in Anglophone and Nordic countries. In all, the findings suggest that the effect of childcare services on female employment is stronger in the presence of other measures supporting working mothers (as, for instance paid parental leave) while the presence of such supports seems to reduce the effectiveness of financial incentives to work for second earners. The effect of cash benefits for families and the duration of paid leave on female labour force participation also vary across welfare regimes. Cet article analyse la réponse de la participation des femmes à la force de travail aux évolutions des marchés du travail et des politiques favorisant la conciliation entre travail et vie familiale. Exploitant des données pour 18 pays de l’OCDE depuis le début des années 1980s, on estime l’influence des caractéristiques du marché du travail et institutionnelles sur la participation des femmes au marché du travail, et sur leurs taux d’emploi à temps plein et à temps partiel. Les interactions et complémentarités potentielles entre les mesures politiques sont aussi testées, tout comme les possibles variations de l’influence des politiques entre les différents Etats-Providence. Les résultats montrent, en premier lieu, comment l’élévation des niveaux d’éducation féminins, l’expansion de l’emploi dans les services et le développement du temps partiel ont favorisé la participation des femmes au marché du travail. En revanche, le développement de l’emploi des femmes n’est pas aussi clairement lié à la croissance de l’emploi dans le secteur public. Les taux d’emploi féminins réagissent aux variations de taux d’imposition, aux politiques de congés, mais l’offre de services d’accueil pour les enfants de moins de trois ans semble être le facteur clé du développement de la participation des femmes au marché du travail. Les différentes mesures politiques interagissent et leurs effets se renforcent mutuellement. En particulier, la couverture des services d’accueil de la petite enfance ont un effet plus important sur la participation des femmes au marché du travail dans les pays offrant une plus grande protection de l’emploi. L’effet des services d’accueil de la petite enfance sur l’emploi à temps plein des femmes est particulièrement important dans les pays anglophones et d’Europe du Nord. Par ailleurs, les résultats suggèrent que l’effet des services de la petite enfance sur l’emploi des femmes est renforcé lorsqu’ils sont associés à d’autres mesures favorisant les mères qui travaillent (comme par exemple le congé payé parental), mais que celles-ci réduisent l’efficacité des incitations financières à travailler pour le partenaire. L’effet des aides financières familiales et de la durée des congés payés sur la participation des femmes au marché du travail varie également entre les différents systèmes de prestations sociales.
    Keywords: family policy, work-life balance, institutional complementarity, female labour force participation
    JEL: J16 J18 J21
    Date: 2013–05–23
  3. By: Eichhorst, Werner (IZA); Tobsch, Verena (E-x-AKT WIRTSCHAFTSFORSCHUNG)
    Abstract: This paper gives an overview of the transformation of the German labor market since the mid-1990s with a special focus on the changing patterns of labor market segmentation or 'dualization' of employment in Germany. While labor market duality in Germany can partially be attributed to labor market reforms promoting in particular non-standard forms of employment and allowing for an expansion of low pay, structural changes in the economy as well as strategic choices by employers and social partners also play a prominent role.
    Keywords: Germany, non-standard work, low pay, labor market segmentation
    JEL: J21 J31 J58
    Date: 2013–09
  4. By: Sarah Brown (Department of Economics, The University of Sheffield); Jolian McHardy (Department of Economics, The University of Sheffield); Karl Taylor (Department of Economics, The University of Sheffield)
    Abstract: We explore the relationship between employee trust and workplace performance. We present a theoretical framework which serves to establish a link between employee trust and firm performance as well as to identify possible mechanisms through which the relationship may operate. We then analyse matched workplace and employee data in order to ascertain whether the average level of employee trust within the workplace influences workplace performance. We exploit the 2004 and 2011 Work Place and Employee Relations Surveys (WERS) to analyse the role of employee trust in influencing workplace performance in both pre and post recessionary periods. Our empirical findings support a positive relationship between three measures of workplace performance (financial performance, labour productivity and product or service quality) and employee trust at both points in time. We then exploit employee level data from the WERS to ascertain the determinants of employee trust as well as how trust is influenced by measures taken by employers to deal with the recent recession. Our findings suggest that restricting paid overtime and access to training potentially erode employee trust. In addition, we find that job or work reorganisation experienced at either the employee or organisation level are associated with lower employee trust.
    Keywords: employee trust; financial performance; labour productivity; product quality.
    JEL: J20 J50
    Date: 2013
  5. By: Peng, Fei; Kang, Lili
    Abstract: This paper examines the effect of shifts in the relative supply and demand of skills on the skill premiums and wage inequality in the British labour market 1972-2002. We test the Katz and Murphy (1992) hypothesis that the changes of skill premiums can be explained by their relative supply shifts, given stable or steadily growing relative demand. Alternatively, Machin (2001) hypothesis holds if the changes of skill premiums can be explained by relative demand shifts, given stable or steadily growing relative supply. From co-variation of relative skill wages and relative labour supplies of skills, we reject the hypothesis that the relative labour demand for skill is stable over time for either males or females. By using detrended relative skill wages and supplies, we infer that the acceleration of relative demand for skills caused a positive association between relative skill wages and labour supplies for males in the 1980s and the 2000s, and for females after the 1970s. Hence, the steadily growing relative demand in Katz and Murphy (1992) can only broadly fit with the cyclical co-variation of skill premiums and supply for males, but not for the long term increasing trend of skill premiums and supply of females. We find the acceleration of relative demand for skilled workers after the 1970s as suggested in Machin (2001) hypothesis.
    Keywords: wage inequality, labor supply, labor demand
    JEL: J22 J23 J24 J31
    Date: 2013–09–18
  6. By: Daniela Piazzalunga
    Abstract: This paper investigates the gender and ethnic wage differentials for female immigrants, applying the Oaxaca decomposition to estimate the level of discrimination. The gender pay gap is quite small (7.42%), but it's not explained by observable differences, whilst the ethnic wage gap is larger (27.11%), but the explained components account for about 30%. Ultimately, we will evaluate how the multiple levels of discrimination (due to being a woman and a foreigner at the same time) intersect, following the decomposition suggested by Shamsuddin (1998). The double-negative effect is estimated to be 56-62%.
    Keywords: Immigration, gender, wage discrimination, Oaxaca decomposition, double-negative effect
    JEL: J16 J31 J61 J71
    Date: 2013
  7. By: Joan Rodgers (University of Wollongong); Iris Day (University of Wollongong)
    Abstract: Booth and Wood (2008), using longitudinal data from 2001 through 2004, found a large part-time wage premium for both men and women in Australia. Longitudinal studies of the full-time/part-time wage differential in other countries find small penalties or premiums, or no significant wage differentials. The objective of this paper is to explain the nature of the premium in Australia. We find the premium is pervasive across age groups, occupations and industries. It is not explained by the way part-time work is defined, or by the pay loading received in Australia by employees on casual contracts. We find substantial hourly wage increases accompany a move into part-time employment and similarly large hourly wage decreases occur when moving into full-time employment. The magnitude of these wage changes is smaller when the change from full-time to part-time employment (or vice versa) occurs with a change of employer. For women, we found evidence that the contemporaneous effect on the wage of moving into, or out of, part-time employment is not sustained beyond one, or at most two, years.
    Keywords: Full-Time/Part-Time Work Wage Differentials
    JEL: J31 J32 J33
    Date: 2013
  8. By: Maury Gittleman, (U.S. Bureau of Labor Statistics); Brooks Pierce, (U.S. Bureau of Labor Statistics)
    Abstract: It is well known that earnings inequality in the United States has been on the rise over the last three decades. Compensation inequality, while much less studied, has been moving upward as well. Motivated in part by an attempt to explain a widening of inequality in the upper part of the distribution, Lemieux, MacLeod and Parent (2009) investigated the relationship between the use of performance pay schemes and wage inequality using the Panel Study of Income Dynamics. Viewing such a contractual arrangement as a channel through which rising demand for skill is translated into increased inequality, they estimated that pay for performance accounts for about one-fifth of the growth in the variance of male wages between the late 1970s and the early 1990s, and for almost all of the increase in wage inequality in the top quintile during the same period. In this paper, we also assess the relationship between performance pay and inequality, making a number of different contributions to the literature. First, the dataset we use, the Bureau of Labor Statistics’ Employee Costs for Employee Compensation (ECEC), allows us to look at a much broader concept of pay than that used by LMP, which consists largely of hourly earnings inclusive of performance pay (bonuses, piece-rates and commissions). It is important to relate methods of pay to total compensation because any effects noted on wages may be offset or amplified when one moves to broader definitions of compensation. Second, there are numerous types of bonuses, not all of which fall under the rubric of pay for performance. While LMP are forced by the limitations in the PSID to treat all types of bonuses as being the same, in some of our analyses, we are able to distinguish among them. Third, while the LMP analysis ends in the mid-1990s, our investigation is of a more recent time period, 1994 to 2010. Finally, allowing greater precision in our estimates, our dataset is significantly larger than the PSID. Our results suggest that while the presence of performance pay jobs is associated with higher levels of inequality, such jobs have made only a modest contribution toward an increase in inequality in the period under study.
    Keywords: pay for performance, compensation inequality
    JEL: J33 M52
    Date: 2013–09
  9. By: Hielke Buddelmeyer (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne); Duncan McVicar (Queen's University Management School, Queen's University, Belfast); Mark Wooden (Melbourne Institute of Applied Economic and Social Research, The University of Melbourne)
    Abstract: It is widely assumed that contingent forms of employment, such as fixed-term contracts, labour-hire and casual employment, are associated with low quality jobs. This hypothesis is tested using data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey, a nationally representative household panel survey covering a country with a high incidence of non-standard employment. Ordered logit regression models of job satisfaction are estimated that hold constant all time-invariant individual differences as well as a range of observed time-varying characteristics. The results indicate that, among males, both casual employees and labour-hire workers (but not fixed-term contract workers) report noticeably lower levels of job satisfaction. Restricting the sample to persons aged 20-59 increases the estimated magnitudes of these effects. Negative effects for women are mainly restricted to labour-hire workers. We also show that the relationships between job satisfaction and contract type vary with educational attainment and the length of job tenure. Working hours arrangements also mediate the relationship.
    Keywords: Contingent employment, job satisfaction, non-standard employment, HILDA Survey, panel data
    JEL: J28 J41 J81
    Date: 2013–08
  10. By: Jeremy Lise (University College London); Nao Sudo (Bank of Japan); Michio Suzuki (University of Tokyo); Ken Yamada (Singapore Management University); Tomoaki Yamada (Meiji University)
    Abstract: In this paper we document the main features of the distributions of wages, earnings, consumption and wealth in Japan since the early 1980s using four main data sources: the Basic Survey on Wage Structure (BSWS), the Family Income and Expenditure Survey (FIES), the National Survey of Family Income and Expenditure (NSFIE) and the Japanese Panel Survey of Consumers (JPSC). We present an empirical analysis of inequality that specifically considers the path from individual wages and earnings, to household earnings, after-tax income, and finally consumption. We find that household earnings inequality rose substantially over this period. Inequality in disposable income and in consumption also rose over this period but to a lesser extent, suggesting taxes and transfers as well as insurance channels available to households help to insulate household consumption from shocks to wages. We find the same pattern in inequality trends when we look over the life cycle of households as we do over time in the economy. Additionally we find that there are notable differences in the inequality trends for wages and hours between men and women over this period. Keywords: inequality trends; life-cycle inequality; wage dynamics.
    Keywords: inequality trends; life-cycle inequality; wage dynamics
    JEL: D31 D91 E23
    Date: 2013–09
  11. By: Kevin E. Cahill, (Sloan Center on Aging & Work at Boston College); Michael D. Giandrea, (U.S. Bureau of Labor Statistics); Joseph F. Quinn (Boston College)
    Abstract: Controlling for career employment later in life, the retirement patterns of men and women in America have resembled one another for much of the past two decades. Is this relationship coming to an end? Recent research suggests that the retirement patterns of the Early Boomers – those born between 1948 and 1953 – have diverged from those of earlier cohorts. Gender differences appear to be emerging as well in the way that career men and women exit the labor force, after nearly two decades of similarities. This paper explores these gender differences in detail to help determine whether we are witnessing a break in trend or merely a short-term occurrence. We use data on three cohorts of older Americans from the nationally-representative, longitudinal Health and Retirement Study (HRS) that began in 1992. We explore by gender the types of job transitions that occur later in life and explore, in particular, the role of four potentially relevant determinants: the presence of dependent children; a parent in need of caregiving assistance; occupational status on the career job; and self-employment status. We find that, among career men and women, child and parental caregiving are not significant drivers of the retirement transitions of the Early Boomers, all else equal. Gender differences that may exist with respect to these characteristics are therefore unlikely to lead to persistent gender differences in retirement patterns. In contrast, self employment continues to be a statistically significant determinant of bridge job transitions and phased retirement. This finding, combined with the fact that men are much more likely than women to be self employed later in life, could lead to some differences by gender going forward, though the impact is likely to be limited given that the large majority of older workers are in wage-and-salary employment. Older Americans – both men and women – are responding to their economic environment by working later in life and exiting the labor force gradually. While some determinants of these decisions likely impact men and women differently, gender differences with respect to the retirement patterns of the Early Boomers appear to be the result of broader macroeconomic forces. The evidence to date suggests that gender differences may dissipate as the recovery ensues.
    Keywords: Economics of Aging, Partial Retirement, Gradual Retirement
    JEL: J26 J14 J32 H55
    Date: 2013–09
  12. By: Chris Dawson (School of Management, University of Bath); Michail Veliziotis (University of the West of England, Bristol)
    Abstract: This paper is concerned with whether employees on temporary contracts in Britain report lower well-being than those on permanent contracts, and whether this relationship is mechanised by differences in certain aspects of job satisfaction. Previous research has identified a well-being gap between permanent and temporary employees but has not addressed what individual and contract specific characteristics contribute to this observed difference. Using data from the British Household Panel Survey (BHPS), this paper finds that a large proportion of the difference in self-reported well-being between permanent and temporary employees appears to be explained by differences in satisfaction with job security. Other dimensions of job satisfaction are found to be less important. This leads us to believe that an employment contract characterised by a definite duration lowers individual well-being principally through a heightened feeling of job insecurity.
    Keywords: Temporary employment, well-being, job satisfaction
    JEL: J28 J41
  13. By: Christine Ho (Singapore Management University)
    Abstract: One-fifth of children aged below five with employed mothers benefit from grandparent provided child care as their main source of daycare in the U.S. Using data from the Health and Retirement Study, we investigate how grandchild care needs relate to intergenerational transfers of time and money and grandparents’ labor supply behavior. We find that grandparents with a new born grandchild are more likely to provide grandchild care while married grandparents are also more likely to be employed and provide financial help. Grandparents with grandchildren living close by provided higher time transfers while married grandmothers with resident grandchildren also worked longer hours.
    Keywords: Grandchild care, Intergenerational Transfers, Grandparents’ Labor Supply
    JEL: D13 J13 J14 J22
    Date: 2013–09
  14. By: Gill, David; Prowse, Victoria; Vlassopoulos, Michael
    Abstract: We use an online real-effort experiment to investigate how bonus-based pay and worker productivity interact with workplace cheating. Firms often use bonus-based compensation plans, such as group bonuses and firm-wide profit sharing, that induce considerable uncertainty in how much workers are paid. Exposing workers to a compensation scheme based on random bonuses makes them cheat more but has no effect on their productivity. We also find that more productive workers behave more dishonestly. These results are consistent with workers’ cheating behavior responding to the perceived fairness of their employer’s compensation scheme.
    Keywords: Bonus, compensation, cheating, dishonesty, lying, employee crime, productivity, slider task, real effort, experiment.
    JEL: C91 J3 J33
    Date: 2013–07–04
  15. By: Richard Murphy; Felix Weinhardt
    Abstract: We find an individual's rank within their reference group has effects on later objective outcomes. To evaluate the impact of local rank, we use a large administrative dataset tracking over two million students in England from primary through to secondary school. Academic rank within primary school has sizable, robust and significant effects on later achievement in secondary school, conditional on national test scores. Moreover we find boys gain four times more in later test scores from being top compared to girls. We provide evidence for a mechanism using matched survey data, which shows that rank affects an individual's self-concept. The paper discusses other potential channels but concludes that malleable non-cognitive skills such as confidence and belief in own ability are most likely to generate these results. We put forward a basic model where rank effects costs and effort allocation when faced with multiple tasks. We believe this is the first large-scale study to show large and robust effects of rank position on objective outcomes of that have consequences in the labour market.
    Keywords: Rank, non-cognitive skills, peer effects
    JEL: I21 J24 D01
    Date: 2013–09
  16. By: Kohei Daido (School of Economics, Kwansei Gakuin University); Ken Tabata (School of Economics, Kwansei Gakuin University)
    Abstract: This paper studies the role played by the social norms of working hours in a household labor- leisure and fertility decision model. We suppose that social norms enforce workers not to deviate from the ideal level of working hours, which depends on past and current observations of working hours in workplaces. We show that the social norms lead to multiple equilibria: one with long working hours and a low fertility rate and another with short working hours and a high fertility rate. Our results may help to explain the long working hours and low fertility rate that are observed in Japan.
    Keywords: Fertility, Work-life balance, Social norms, Peer effects
    JEL: O40 J11 J22
    Date: 2013–09

This nep-lma issue is ©2013 by Erik Jonasson. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.