Trends in Unemployment, Wages and Productivity: The Case of Japan

Wage determination in South Africa:what do we know? Miriam Altman Introduction Wages play an important role in the broader economy from both efficiency and equity perspectives. This article considers the state of knowledge on wage determination in South Africa. It asks the following questions: • Is wage setting appropriate for South Africa's development needs? Are wages determined in alignment with employment and growth needs to achieve full employment? Do they underpin incomes (for labour replacement)? Are they responsive to industrial competitiveness requirements? • Are wages set within a competitive framework? What constrains competition in the labour market? How important are racial and gender discrimination? What impact do high skill wage increases have on economic growth? What impact would competition have? • What are the roles of institutions such as unions and bargaining councils, and of minimum wages, on efficiency and equity? Figure 1 outlines factors that can impact on wage determination. This starts from 'supply-side factors' such as access to education, networks, transport or workers' general health. The demand for labour, and therefore wage levels, can be affected by industrial structure, general growth conditions and the behaviour of firms in their human resources practices. These supply and demand conditions are mediated by market institutions providing bargaining, regulation, networks, and information. Some flexibility to market conditions is often sought. However, flexibility is a term that is often misused. Most commonly, it refers to contract flexibility, or the ability to hire and fire. This should enable firms to adjust to changing market conditions. But flexibility or rigidity could also refer to [End Page 58] entrenched non-competing labour market segments. Patterns of wage determination may be segmented by occupation, industry, geographical area, gender or race. These can be important sources of inflexibility and have serious cost and efficiency implications. This article is structured as follows: the first section reviews general wage trends, and the distribution of wages. The second section considers explanations for wage trends attributed to economic structure. The third section reviews the impacts of unions and minimum wages on overall wages and equity. The final section looks at the evidence of racial and gender discrimination. Click for larger view View full resolution Figure 1. Factors impacting on wage determination. Overview of wage trends General wage trends Wage trends differed dramatically over the 1970s, 1980s and 1990s, as would be expected over a period of structural change, greatly varying rates of economic growth and political change. The distribution of value added between wages and employment growth will greatly impact on efficiency and equity outcomes. In the 1970s, there was rapid annual growth in real wages in mining (10.8 per cent), manufacturing (2.5 per cent) and agriculture (2.6 per cent). This exceptional growth in wages trailed behind that in real value added in agriculture and manufacturing. In services, real wages were relatively stagnant (0.2 per cent per annum), despite rapid growth in value added by about 3 per cent per annum (Mazumdar and van Seventer 2002). Mazumdar and van Seventer (2002:17) find that the 'tradeable sector divided the increase in output [End Page 59] almost equally between real wage growth and employment increase'. Mining in particular benefited from output price increases, enabling higher wages in a context of stagnant output and slow employment growth. In contrast, expansions of output in the services sector contributed mainly to employment growth and not to wage increases. The experience was very different in the 1980s. Real wage growth in the 1980s was generally very low, and mostly trailed growth in value added. According to Mazumdar and van Seventer (2002), the 1990s were marked by a re-emergence of wage growth, generally outstripping that in value added. The divergence was much more marked for mining and light industry than it was for services sectors. This was the case in both traded and non-traded sectors, although it is still more marked for the former. This means the fruits of any output growth would have favoured wages over employment. The context is one of fairly slow growth in value added over the 1990s, so rapid employment creation would not be expected. Real wage growth would need explanation in this context. Mazumdar and van...

Discussion

Male unemployment in Britain has risen from around 2 per cent in the 1950s to around 17 per cent in 1985 (see Figure 1). (The figures are for male unemployment because there is no consistent series for women.1) Even more remarkably, unemployment has fallen in only three years out of the last twenty (1973, 1978 and 1979). To account for this, we need a model that explains both changes in the natural (or non-accelerating inflation) rate of unemployment (NAIRU) and deviations from it. We use a three-equation supply-side model, centred on the labour market. This has two main features. The first concerns the determination of employment in the short run. The labour demand function that we use cuts through the fruitless debate now raging (especially in Europe) as to whether current unemployment is 'classical' or 'Keynesian'. According to the 'classical' view, employment is too high because real wages are too high. According to the 'Keynesian' view, real wages are not binding, and unemployment is high because the product market does not clear-with prices too high relative to nominal demand. The whole debate is set in the framework of perfect competition. Yet in perfect competition prices are set by impersonal forces, and it is not clear what could possibly stop prices clearing the market. It is much more reasonable to think of prices as being set by imperfectly competitive firms, existing prices being the best they can think of, given the demand they face. In this context, firms' demand for labour will depend on both the real product wage and the level of real aggregate demand. This is the demand function we estimate, and it conforms both to common sense and to the data. However, this does not imply that employment can be made to grow without limit by pumping up real demand. For in the medium term, when price surprises are eliminated, our model determines three variables (employment, real wages and real demand) on the basis of three equations (an employment equation, a price equation and a wage equation). Thus in the medium term there is a 'natural' level of employment and, corresponding to this, a 'natural' level of real aggregate demand. The second key feature of our model concerns the medium-term determination of unemployment. In the medium term the planned mark-up of wages over prices in wage settlements must be consistent with the mark-up of prices over wage costs in employers' pricing behaviour. For if wage-setters try to set real product wages higher than is consistent with employers' pricing behaviour, this generates ever-increasing inflation. Thus the key to understanding unemployment in the medium term is the behaviour of wage-setters. If events occur that push them towards too-high real wages, then unemployment has to rise to offset these influences. We shall call these influences 'wage pressure variables' or 'push factors,' and they are clearly crucial in understanding unemployment. The variables here include the social security system, employment protection

The main objective of sustainable economic growth policy is to achieve full employment in the labor market.While classical economic theory considers labor supply and demand as a function of the real wage, Keynesian economics argues that only labor demand is a function of the real wage.Therefore, determining the factors affecting labor supply and demand in emerging economies will help to formulate policies for the labor market.In this study, labor supply and demand functions in the Turkish economy are estimated with structural vector autoregression models using annual data for the period 1990-2022.According to the results of the empirical analysis, it is found that the minimum wage level is effective in labor demand, but average minimum real wages are not effective on labor supply.In the labor demand function, the views of Classical economics and Keynesian economics on the labor market are valid in the labor supply function.In line with these results, it is concluded that labor productivity is high in the Turkish economy, but real wages do not contribute to economic growth through aggregate demand and employment growth due to the institutional structure in the labor market.

One topic on which Keynes did not disagree with classical economists was the cyclical behavior of real wages. Keynes (1936) as well as various classical writers predicted that real wages should move countercyclically. Quoting the General Theory (p. 17): "in general an increase in employment can only occur through the accompaniment of a decline in real wages. Thus, I am not disputing this vital fact which the classical economists have (rightly) asserted as indefeasible." This prediction is based on the premise of competition and a given short-run capital stock. Increases in employment then correspond to more intensive use of capital and, through diminishing product, lower real wages. For this reason, evidence by Dunlop (1938) and Tarshis (1939) that real wages move procyclically was viewed as paradoxical. Both Dunlop and Tarshis based their findings on an observed positive correlation between real and money wages, which, given the procyclical movement of money wages, implies a positive correlation between

In standard models of the labor market, supply slopes upwards and demand slopes downwards in a real wage employment space. Supply and demand schedules mostly intersect at rather steep slopes to assure stability, although the empirical evidence on labor supply and labor demand elasticities in equilibrium cannot be pinpointed to single values. Knowing that narrow bandwidths for labor supply and demand elasticities do not exist, there is surprisingly little concern about what would happen in these models from a dynamic perspective if labor demand and supply intersect at flat angles. What are the features of a labor market where the supply of labor and the demand for labor are very elastic? If a real wage increase induces a comparably large increase in the supply of labor, and by the same time a large decrease in the demand for labor, a deviation from equilibrium might destabilize the market or lead to very long adjustment paths. After a negative productivity shock, for example, it might take a very long time until real wages and employment reach the new equilibrium. If the shift of the demand curve yields a new equilibrium where supply and demand intersect at even flatter angles, the equilibrium might become unstable. Maybe it is the more likely unstable equilibrium that lead to a minor interest in labor markets that have flat supply and demand curves, since when these curves are linear, the labor market would become globally unstable. Of course, an explosive system is not a desirable outcome. It can hardly explain anything. Nonlinear supply and demand curves bring in some new aspects. A labor market equilibrium with flat supply and demand curves may only be locally unstable. Furthermore, nonmonotonous supply and demand curves can intersect at more than one employment level or may not intersect at all. Such labor market models open the door to ‘fragile equilibria’ (Blanchard and Summers 1988) that may cope well with some of the stylized facts on European unemployment. Besides long adjustment periods and locally unstable equilibria, dynamics can become irregular. Real wages may never find their way to the labor market equilibrium. Time series would appear to be random, even though the underlying labor market model is deterministic. Real wage and employment dynamics would be endogenous and cycles self-sustained.KeywordsLabor MarketLabor SupplyReal WageLabor DemandPhillips CurveThese keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

I employ a production theory approach to investigate the effect of fluctuations in the prices of imports of different origin on the wage differential between skilled and unskilled labor in the United States. Unlike competing methodologies, the employed framework of analysis accounts for the economy‐wide effects of imports that derive from both domestic output substitution as well as downstream production. The results of this study suggest that the overall impact of imports, including those that originate in less developed economies, on the wage differential is negligible. Economy‐wide dynamic processes of capital accumulation and technical change appear to play a far more important role in wage dispersion.

T HE cyclical behavior of labor markets reveals a number of puzzling features for which there are no truly satisfying explanations. Included among these are (1) occupational differences in the stability of employment and earnings, (2) the uneven incidence of unemployment, (3) the persistence of differential labor turnover rates, and (4) discriminatory hiring and firing policies. I believe that the major impediment to rational explanations for these phenomena lies in the classical treatment of labor as a purely variable factor. In this paper I propose a short-run theory of employment which rests on the premise that labor is a quasi-fixed factor. The fixed employment costs arise from investments by firms in hiring and training activities. The theory of labor as a quasi-fixed factor is developed in Part I. In Part II, the implications of this theory are subjected to various empirical tests. Finally, Part III turns to an examination of alternative theories and an extension of my theory to a theory of occupational wage differentials. The concept of labor as a quasi-fixed factor is, in my opinion, the relevant one for a short-run theory of employment. Its implications are amenable to empirical verification and are, in the main,

The thesis is concerned with the construction and application of SAGE-H, a large-scale dynamic computable general equilibrium (CGE) model of the South African economy with a particular focus on HIV/AIDS. A key feature of the SAGE-H model is its detailed treatment of the labour market, with labour force participants distinguished by their labour market activity, age, gender, race and HIV status. The core theoretical structure of the SAGE-H model is based on the MONASH model (Dixon & Rimmer, 2002). SAGE-H describes the production of 28 commodities by 28 industries. It also defines factors of production, various technologies and preferences, taxes and margins, detailed descriptions of government accounts, the balance of payments accounts and net foreign liabilities. The model recognises a number of dynamic adjustment mechanisms, in particular, capital accumulation, net foreign liability accumulation and sticky wage adjustment. SAGE-H captures the structure and characteristics of the South African economy via the calibration of the model to South African Supply-Use Tables for 2002 (StatsSA, 2006c) and relevant South African parameter and elasticity values. The detailed modelling of the labour market in SAGE-H is based on that developed by Dixon and Rimmer (2009) to analyse the effects of immigration on the US economy. I adapt their theory of labour supply to enable it to treat the peculiar features of the South African labour market, particularly with respect to the influence of progressive stages of HIV on labour supply. The Dixon approach is to classify the working age population (WAP) at the start of each year into a number of labour market categories based upon their past labour market activities and end-of-year probabilities for transitioning between categories. I adopt the labour market function categories of employment (by occupation), unemployment and “permanently departed from the labour force” and add the HIV relevant additional classifications of age, gender, race and HIV status and stage. At the start of year t, people in each category decide to offer their labour to various labour market activities based upon relative wages and personal preferences/attributes. They make this decision by solving an optimisation problem. One invention of SAGE-H is that the supply of labour depends on the labour force participant’s HIV status and stage. For instance, a person who is HIV negative supplies labour more strongly to employment activities than a person who is HIV positive. Equilibrium in the labour market by occupation is determined by labour demand by all industries and labour supply by all categories. I carry out two simulations with the SAGE-H model to analyse the economy wide impact of an increase in condom use over the period 2002 to 2045. The first simulation is the baseline or business-as-usual simulation. This simulation models the growth of the South African economy and the HIV epidemic over time in the absence of the policy change under consideration. The second simulation conducted with the SAGE-H model is the policy simulation. This simulation generates a second forecast that incorporates all the exogenous features of the baseline forecast, but now also includes policy-related shocks reflecting the details of the policy under consideration. The impacts of a policy are typically reported in terms of percentage deviations away from the baseline simulation. In the absence of a cure for HIV/AIDS, preventing the transmission of HIV is the only known way of curbing the spread of the virus. Prevention is also important as it affects adults’ future health prospects. In this thesis, the policy under consideration is an increase in the proportion of sex acts protected by condom use via a publicly-financed program of condom distribution. More specifically, I analyse the impact of an increase in condom use on (1) the number of new HIV cases, (2) labour market adjustment via changes in the level of employment and the real wage and (3) the economy-wide impact of changes in the labour market. To get a better understanding of the impact of an increase in the proportion of sex acts protected from the HIV virus due to an increase in condom use, I first use the Actuarial Society of South Africa epidemiological model (the ASSA2003 model) (Actuarial Society of South Africa, 2005). This model suggests that an increase in the proportion of protected sex acts leads to a fall in the annual number of new HIV infections. In terms of the SAGE-H model, the prevention policy can be viewed as generating a decline in transition probabilities from HIV negative to HIV Stage 1, i.e. a fall in HIV incidence rates. In addition, I model government spending on the program via an increase in government demand which is financed by an equivalent decrease in private consumption in general. Over the simulation period, the policy leads to approximately 200,000 fewer HIV infections relative to baseline. Due to the staged transition path through the HIV stages, the results suggest that the number of people in Stage 1 falls prior to falls in Stages 2, 3 and 4. In the long run the total number of HIV positive adults is 0.82 per cent lower than baseline and the number of HIV negative adults is 0.46 per cent higher than baseline. Based on the underlying assumptions incorporated in the labour-market module, fewer people becoming HIV positive implies that labour market attachment increases i.e. labour offers to all employment activities increase. In the long run employment is 0.23 per cent higher than the baseline value and the real wage is 0.18 lower than the baseline value. The labour offers to employment activities depend largely on the age, gender and race-specific composition of these occupations. While all age, gender and race groups benefit from the prevention policy, the prevention policy has its largest initial impact on labour supply of young African adults. Hence, employment activities with a higher representation of young African adults in their labour force benefit the most from the prevention policy. In the long run the policy also generates an increase in capital stock and together with the increase in employment GDP is 0.17 per cent higher than in the baseline. Real private consumption, net of the cost of financing the program, is 0.15 percent higher than baseline in the long run. The framework presented in the thesis opens up a number of additional avenues for future research into HIV prevention programmes and treatment options. Two promising future avenues of research with the model are analysis of the labour market consequences of anti-retroviral treatment programmes, and detailed modelling of demand for and supply of finely-defined health services.

There has long been significant work available in the U.S. Indeed, unemployment rates have remained extremely low in recent years, but wages still have not. This has been a puzzle to most economists, who in the past have always expected that high employment should increase wages as organizations scramble for human resources. However, due to factors such as labor market density, inflation, technology, and the growth of gig economy jobs, the U.S. labor market has distorted this structure. This paper analyzes the trends in unemployment and wages, taking issues such as regional differences, low-skilled job polarization, and the effect of automation on the workforce into consideration. It also provides recommendations on how to deal with challenges, such as policies to support labor market flexibility, the creation of high-skill employment, and the ability to overcome inflation. The paper includes a synthesis of wage stagnation and realistic strategies to enhance wages in various sectors of the market economy.

Although there have been numerous attempts to study the cyclicality of real wages in the U.S., no consensus has formed as to the implications of the various findings for business cycle theory. This paper will demonstrate that separating the real wage into its nominal and price level components can shed new light on the interwar U.S. labor market. More specifically, we will show that an evolution from a relatively laissez-faire labor market during the 1920s, to a more highly regulated labor market during the 1930s, may have resulted in a more countercyclical real wage rate. If we could be certain that equilibrium business cycle models provided the correct specification of the labor market then interpretation of real wage cyclicality would be relatively straightforward; during periods dominated by labor demand shocks real wages would move procyclically and during periods dominated by labor supply shocks real wages would move countercyclically. In a disequilibrium model context, however, interpretation of real wage cyclicality is much more problematic. If nominal wages are sticky, then unanticipated price level changes can induce countercyclical real wage movements that mimic the real wage movements generated by shifts in the supply of labor. Perhaps the most famous (and controversial) example occurred during the first three years of the Great Depression when a massive decline in hours worked and production was associated with a sharp increase in the aggregate real wage rate (see Figure 1). Even greater complexity results from governmental attempts to influence the aggregate nominal wage. Policies that attempt to artificially change the nominal wage rate can result in either procyclical or countercyclical real wages depending on whether the direct impact of changes in the price of labor on the quantity of labor demanded outweighs the impact of wage changes on aggregate demand, and output. Separating the aggregate real wage rate into its nominal and price level components will allow us to discriminate between these two hypotheses. If labor markets are correctly characterized by equilibrium models, then the price level and real wage are determined independently and separating the real wage into its nominal and price

This paper explores labour market structure and employment links to poverty in Cambodia. Employment elasticity of growth, labour productivity and real wage growth are the main indicators of the labour market situation, while probit models estimate the connection between household employment and poverty likelihood. The paper combines macro and micro data to perform a descriptive analysis. For probit estimation, it uses the Cambodia Socio-Economic Survey (CSES) 2007-11. The results show that agriculture, albeit with a slow growth rate, absorbed a big part of the labour force, while the sector’s growth was driven mainly by productivity increases, as was that of services. Industry grew rapidly, but its capacity to employ labour was relatively small. The growth rate of industry depended on employment levels within the sector rather than on increases in productivity. Note that female workers had less chance of being employed than male workers: a 1 percent rise in GDP would increase the demand for female labour by 0.65 percent and the demand for male labour by 0.71 percent. The labour markets in industry and services were very competitive: growth in real wages rose along with increases in labour productivity, implying that expected real wages would increase with higher labour productivity and vice versa. In this case, firms seem to have benefited from hiring more labour to expand their outputs as long as wages remained manageable. This was not the case for agriculture, where changes in real wages and productivity reflect the possibility of labour being discarded. Employment creation in services is found to help the poor to have a better chance of overcoming poverty, but this is not the case in agriculture and industry. From the empirical results, households employed in agriculture have a higher chance of being poor than those employed in industry. Factors that help workers to avoid poverty are land and education. The study suggests that macro policy should seek to make farmland more accessible to farmers, and that investment in education should be increased so that every citizen at least finishes primary and lower secondary education, to increase workers’ capabilities and productivity.

Long run trends in unemployment and labor force participation in urban China

1. IntroductionThe high degree of geographic labor mobility is often thought to play a key role in the relative flexibility of the U.S. economy (Evans and McCormick 1994; Decressin and Fatas 1995). Regional mobility in the United States has been reported to be at least 3.5 times greater than that of the United Kingdom (Hughes and McCormick 1994) and two to three times higher than most European Union nations (Obstfeld and Peri 1998). Labor migration can equilibrate regional labor markets exposed to asymmetric demand shocks because employed or jobless individuals in areas that are experiencing a relative (to the national average) economic downturn can migrate to areas that are not as adversely affected, reducing the aggregate unemployment rate (Archibald 1969). The resulting net employment gains increase aggregate output. Thus, if migration flows mainly smooth over asymmetric demand shocks, greater regional labor mobility improves macroeconomic performance and enhances the effectiveness of a currency union or monetary policy (Mundell 1961; Bayoumi and Eichengreen 1993; Obstfeld and Peri 1998).An often-overlooked aspect is there may be shifts in population location unrelated to changing job fortunes, which implies that migration becomes an additional source of labor-market fluctuations. The dramatic modern shift in U.S. population to warmer and amenity-attractive areas in the South and West suggests that migration flows may be key sources of regional economic shocks (Graves 1979; Mueser and Graves 1995; Rappaport 2004). So, if U.S. migration flows are greatly influenced by other factors besides demand shocks, large aggregate migration flows may not be necessarily indicative of a more flexible labor market, and may even work against adjustment to regional demand shocks, which would contrast with prevailing economic wisdom.A related issue is migration's role in affecting economic development policies such as tax breaks, subsidies, educational support, and infrastructure. In assessing the effectiveness of economic development policies that alter labor demand, Bartik (1991, 1993) finds that migration is the primary supply response, but he also reports that demand shocks induce modest permanent changes in local unemployment and labor-force participation rates. To the extent that migrants take the new jobs, economic development policies are less effective in improving economic outcomes of a region's original residents. Conversely, Eberts and Stone (1992) report that increased labor-force participation is the primary supply response to demand shocks, suggesting that original residents benefit more from employment growth. Decressin and Fatas (1995) similarly find that shifts in labor-force participation are the primary short-run supply responses to demand shocks in Europe.In short, not only do migration fluctuations reflect responses to asymmetric regional demand shocks, they also reflect supply-side innovations and affect whether local economic development policies are successful in benefiting original residents. Therefore, this paper utilizes a structural vector autoregression (SVAR) approach to carefully examine the fluctuations in U.S. migration from the 1970s through the 1990s for the lower 48 states. In assessing the proportion of migration fluctuations that are responses to labor demand shocks versus being sources of shocks themselves, a primary goal will be to appraise migration's role in facilitating regional and overall U.S. labor-market flexibility in responding to asymmetric shocks. The results have implications for assessing both the transmission mechanism of macroeconomic policies and the effectiveness of state and local economic development policies. Indeed, one of the more interesting findings is that the underlying determinants of a particular state's migration flows can differ from the underlying causes of its employment growth (e.g., Partridge and Rickman 2003).1The next section discusses the theoretical underpinnings of migration fluctuations. …

From the Shortage of Jobs to the Shortage of Skilled Workers: Labor Markets in the EU New Member States