Actual Wage Research Articles

Profit Sharing in the German Metalworking and Electrical Engineering Industries

Profit sharing is an increasingly important component of pay in Germany and is the main reason for the intensification of wage drift that has been observed in recent years. However, little is known about how widespread it is, how it is collectively regulated, the regulatory practices that accompany it and the effects those practices have on works councils and unions. These questions are analysed with respect to the development of profit sharing in the German metalworking industry, where it is relatively widespread. Our analysis shows that profit sharing is characterized by ambiguities and contradictions. On the one hand, it is contributing to the ongoing process of wage modernization; on the other hand, however, profit sharing is fuelling trends towards the fragmentation and financialization of pay. Moreover, although driving up actual wages, profit sharing is also a manifestation of an increasing redistribution of income between capital and labour, between firms and between different categories of employee.

Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands

In this study, we investigate the anatomy of older workers' wages. The central question is whether the wage cushion – i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages – contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006-2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers' wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.

Minimum wage levels across Southeast Asia: Trends and issues

This study examines the minimum wage system of major Southeast Asian countries and the trends and issues of minimum wages across Southeast Asian countries. In addition, a minimum wage determining model is set up with regard to macroeconomic variables, and the minimum wage determining mechanism is analyzed based on the estimation. By comparing the actual minimum wage growth and expected one in the years of 2012 and 2013, the difference is discussed in this regard. We examine the causes of minimum wage increase as well. The rapid increase in minimum wages in many Southeast Asian countries, indeed, is different from the existing change patterns. In particular, the difference between the actual minimum wage growth and expected one in Indonesia, Thailand and Vietnam is outstandingly higher than the previous averages. Such a rapid minimum wage increase indicates the greater effect of political and non-economic factors than that of conventional economic deciding variables.

Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands

In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006–2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.

Wage Determination in China During the Reform Period

The purpose of this paper is to ascertain how wages are being determined in China during the reform period. The paper focuses on the development of the regulatory framework since 1978 and proceeds by examining official regulations regarding labor market institutions and wage setting, and by evaluating their potential implications for actual wage setting.

Do Wages Continue Increasing at Older Ages? Evidence on the Wage Cushion in the Netherlands

In this study, we investigate the anatomy of older workers’ wages. The central question is whether the wage cushion—i.e., the difference between actual wages and collectively agreed-upon (maximum) contractual wages—contributes to the fact that wages continue increasing at older ages. We follow the wages of individual workers in twenty-two sectors of industry in the Netherlands using administrative data for the period 2006 – 2010. In the public sector, we find no evidence of a wage cushion. Wage scale ceilings set in collective agreements are guiding for older workers’ wages, and workers earning a contractual wage equal to a wage scale ceiling are not compensated with higher additional wages. In the private sector, we do find evidence of a wage cushion. Wage scale ceilings are less restrictive and workers earning a contractual wage exceeding the highest wage scale ceiling experience higher contractual wage growth. The private sector wage cushion enhances wage differentiation and allows for wages that continue increasing at older ages.

Socio-Demographic Model of Gender Gap in Expected and Actual Wages in Estonia

Socio-Demographic Model of Gender Gap in Expected and Actual Wages in Estonia

Relación de largo plazo y análisis de causalidad y sensibilidad entre los salarios reales y la productividad laboral en el sector manufacturero a partir de cifras de los departamentos en Colombia

Este artículo se enfoca en identificar la relación entre los salarios y la productividad. Para comprobar si existe una relación de largo plazo entre estas variables, se realizan pruebas de raíz unitaria y cointegración para determinar si las series comparten tendencias estocásticas comunes. También se estimó un modelo de vectores autorregresivos (VAR) para realizar un análisis de causalidad y sensibilidad, y así determinar cuál es el efecto futuro de los choques en cualquier variable del sistema, sobre ella misma y sobre la otra. Para el ejercicio empírico, se emplearon las series de productividad y salarios de 24 departamentos de Colombia, calculadas a partir de la información de la encuesta anual manufacturera. Los hallazgos empíricos permiten concluirque en Colombia existe un conflicto en la distribución de la riqueza porque los cambios en la productividad no se reflejan en incrementos de los salarios reales de los trabajadores. Por otra parte, a los empresarios no les conviene aumentar el salario real porque ese incremento no tiene un efecto futuro positivo sobre la productividad.

The effect of working time preferences and fair wage perceptions on entrepreneurial intentions among employees

To date, little is known about how working time preferences and fair wage perceptions affect employees’ entrepreneurial intentions. Using data from the German Socio-Economic Panel Study, we provide first evidence that the difference between the actual and desired amount of working hours in paid employment is positively related to the propensity to switch to self-employment. Furthermore, our analysis supports the hypothesis that employees who perceive their current wage level as very unfair are more likely to have higher entrepreneurial intentions. However, the closer actual wages get to the wage levels perceived as fair, the more employees are likely to remain in their current employment situation. We also tested the interaction effect of working time preferences and fair wage perceptions. In line with our theoretical considerations, we find that employees who perceive their wages as unfair and, simultaneously, prefer different work hours have the strongest entrepreneurial intentions.

MINIMUM WAGE HIKES AND THE WAGE GROWTH OF LOW‐WAGE WORKERS

ABSTRACTThis paper presents difference‐in‐differences estimates of the impact of the British minimum wage on the wage growth of low‐wage employees. Estimates of the probability of low‐wage employees receiving positive wage growth have been significantly increased by the minimum wage upratings or hikes. However, whether the actual wage growth of these workers has been significantly raised or not depends crucially on the magnitude of the minimum wage hike considered. Findings are consistent with employers complying with the legally binding minimum wage but holding down or offsetting the wage growth that they might have awarded in periods of relatively low minimum wage hikes.

Frank Bieleu. The Big Banana. 2011. Cameroon. French, with English subtitles. 85 min. ArtMattan. $295.00

Frank Bieleu. The Big Banana. 2011. Cameroon. French, with English subtitles. 85 min. ArtMattan. $295.00Frank Bieleu's The Big Banana critiques the human and environmental impact of banana plantations in Cameroon. The documentary's opening voice-over introduces the viewer to the Njombe-Penga community where the banana wealth goes to the multinational company, Plantation du Haut Penja (PHP), while most members of the community remain poor. We see PHP workers as they labor to cut down the bananas and transport them to the processing station amidst the voice-over's reminder that Cameroon is the highest producer of bananas and principal supplier to Europe, and that PHP's income for 2009 alone was $106 million. This profit, of course, comes at the expense of the workers, who are paid paltry wages in contrast to the high salaries and benefits of the expatriates. It is not surprising, then, that European consumers of the bananas are appalled upon hearing the actual wages of the laborers who produce the commodity. A consumer aptly calls the situation slave labor, while another expresses her disgust at the laborers' working conditions. These workers are not only underpaid; their health is at risk from exposure to toxic chemicals (pesticides, fungicides, fertilizers, and other agro-chemicals). The film indicates that four out of five farmers suffer from eye problems due to PHB's toxic materials and features a former worker who has become blind. He was fired by PHP because of his disability and without adequate compensation.The health of members of the larger community is also endangered by PHP's operations, specifically, the aerial spray of chemicals, which is detrimental to humans, plants, animals, and bodies of water. One community member recalls having been sprayed and admitted to the hospital for some days; unsurprisingly, PHP refuses either to pay the hospital bill or compensate the victim. Another laments how the aerial spray contaminates their food. The banana processing system washes off the chemicals, but the soiled water is not disposed of properly and contaminates the people's water supply.Displacement of the people is another consequence of the plantation's procedures. As a multinational corporation, PHP succeeds in stifling competition from smaller companies. The company's low-cost production and export-friendly incentives enable it to crush the local farmers. While some of them are pressured to sell or lease their lands to PHP, the more resilient ones witness their lands being forcefully expropriated by government officials colluding with PHP. …

Spatial panel data estimation, counterfactual predictions, and local economic resilience among British towns in the Victorian era

We explore the relative ability of local economies to retain their long-run growth dynamics when faced by the destabilizing effects of major shocks. Taking annual wage series for nineteen U.K. towns over the historical period 1871–1906, we fit a spatial panel data model to 1871–1890 data and use estimated coefficients to obtain counterfactual predictions of wage levels after the 1890 shock to the end of the post-shock period. This allows us to analyze how actual wages in different towns performed in relation to their counterfactual paths, and to assess their relative resilience to the 1890 and subsequent crises. The key conclusion is that the sectoral composition of local employment is important for economic resilience; our evidence suggests that towns with excessive and increasing specialization in one dominant industry are relatively prone to shocks, because they lack the structural flexibility needed to replace declining sectors with productive and competitive activities, whereas economies with a diversified industrial mix have more scope for restructuring and renewal, and thus are more able to adapt to and tolerate shocks.

Executive Superstars, Peer Groups and Over-Compensation – Cause, Effect and Solution

In setting the pay of their CEOs, boards invariably reference the pay of the executives at other enterprises in similar industries and of similar size and complexity. In what is described as “competitive benchmarking”, compensation levels are generally targeted to either the 50th, 75th, or 90th percentile. This process is alleged to provide an effective gauge of “market wages” which are necessary for executive retention. As we will describe, this conception of such a market was created purely by happenstance and based upon flawed assumptions, particularly the easy transferability of executive talent. Because of its uniform application across companies, the effects of structural flaws in its design significantly affect the level of executive compensation. It has been observed in both the academic and professional communities that the practice of targeting the pay of executives to median or higher levels of the competitive benchmark will naturally create an upward bias and movement in total compensation amounts. Whether this escalation has been dramatic or merely incremental, the compounded effect has been to create a significant disparity between the pay of CEOs and what is appropriate to the companies they run. This is not surprising. By basing pay on primarily external comparisons, a separate regime which was untethered from the actual wage structures of the rest of the organization was established. Over time, these disconnected systems were bound to diverge. The pay of a chief executive officer, however, has a profound effect on the incentive structure throughout the corporate hierarchy. Rising pay thus has costs far greater than the amount actually transferred to the CEOs themselves. To mitigate this, boards must set pay in a manner in which is more consistent with the internal corporate wage structures. An important step in that direction is to diminish the focus on external benchmarking. We argue that: (I) theories of optimal market-based contracting are misguided in that they are predicated upon the chimerical notion of vigorous and competitive markets for transferable executive talent; (II) that even boards comprised of only the most faithful fiduciaries of shareholder interests will fail to reach an agreeable resolution to the compensation conundrum because of the unfounded reliance on the structurally malignant and unnecessary process of peer benchmarking; and, (III) that the solution lies in avoiding the mechanistic and arbitrary application of peer group data in arriving at executive compensation levels. Instead, independent and shareholder-conscious compensation committees must develop internally created standards of pay based on the individual nature of the organization concerned, its particular competitive environment and its internal dynamics.

Junior doctors’ preferences for specialty choice

A number of studies suggest that there is an over-supply of specialists and an under-supply of general practitioners in many developed countries. Previous econometric studies of specialty choice from the US suggest that although income plays a role, other non-pecuniary factors may be important. This paper presents a novel application of a choice experiment to identify the effects of expected future earnings and other attributes on specialty choice. We find the implied marginal wage estimated from our discrete choice model is close to the actual wages of senior specialists, but much higher than those of senior GPs. In a policy simulation we find that increasing GPs’ earnings by $50,000, or increasing opportunities for procedural or academic work can increase the number of junior doctors choosing general practice by between 8 and 13 percentage points. The simulation implies an earnings elasticity of specialty choice of 0.95.

Reassessing China: Awaiting Xi Jinping

Reassessing China: Awaiting Xi Jinping

Understanding wage determination in a multi-level bargaining system: a panel data analysis

This article presents an estimation of the elasticity of actual wages to industry-level collective bargaining thereby quantifying empirically the role of industry-level bargaining on wage determination. For this purpose, we use a unique employer–employee panel dataset covering the entire Belgian employment population over 9 years (1998–2006). Like several other European countries, e.g. Germany, France, Italy and the Netherlands, Belgium has a relatively centralised wage bargaining system, with the industry level playing the most important role. Regression results confirm that wage increases collectively decided at the industry level are, on average, fully passed on to individual wages. In addition to industry-level bargaining, we are interested in the supplementary wage increases granted at the firm level, referred to as wage drift or wage cushion in the literature. Our estimates show that wage drift is affected by company size, by the economic performance of the industry and to a much lesser extent by labour market tensions as measured by the local unemployment rate. Interestingly, our results show that industry-level bargaining also takes most of these features into account.

Do UK Higher Education Students Overestimate Their Starting Salary?*

AbstractThe wage expectations of university students have relevance for human capital theory, models of student enrolment, and public policy on the provision of higher education. However, these expectations have been the subject of relatively little research in European countries, with no contemporary evidence available in the UK. There has also been little consideration in the literature thus far of how much estimates may be biased by non‐response and sample selection. This paper thus makes an original contribution to the literature by comparing UK undergraduate students' wage expectations with the actual wages earned by the same cohort on graduation, after attempting to correct for the aforementioned statistical issues in terms of observable characteristics. In contrast to other European studies, I conclude that, on average, full‐time students overestimate their starting salary. Yet I also find substantial variation in the extent of overestimation between different subgroups.

Empirical Study on Minimum Wage Level in China: the ELES approach

In this paper, an attempt is made to determine the minimum living requirements (or poverty lines) of workers in China by adopting the Extended Linear Expenditure System. Comparison between the actual minimum wage levels implemented by the Chinese government and the estimated minimum living requirements in this paper reveal that, in early 2010, workers in 23 out of 35 sample cities were paid minimum wages below the estimated lowest poverty line. This group of workers is unable to afford minimum payments to meet basic living conditions for survival as their minimum wages were below the estimated survival line. To protect workers, the Chinese government is advised to address employee provisions for basic living needs.

‘UPSTAIRS, DOWNSTAIRS': AN ANALYSIS OF LOW PAID WORK IN AUSTRALIAN HOTELS

In spite of recent research, it remains difficult to obtain accurate data regarding low paid work in Australia. This research generates an initial baseline of data reflecting the legally enshrined and actual wages and conditions of employment, characteristics and work experiences of a poorly understood group of low paid workers employed in hotels housekeeping departments. Overall, the case study evidence reveals that room attendants' work is indeed low paid and it is typically performed by females from a wide range of non-English backgrounds working full-time hours and finding it difficult to get by financially. The work is hard, repetitive and increasingly intensive. While many room attendants take great pride and pleasure in their work, others tend to find it demoralizing and less rewarding. Most significantly, the data reveal a proliferation of illegal underpayment associated with an increasing reliance on temporary work agency employment and the need for more effective enforcement mechanisms.

Tax Evasion, Minimum Wage Non-Compliance and Informality

We study the impact of tax and minimum wage reforms on the incidence of informality. To gauge the incidence of informality, we use measures of the extent of tax evasion, the extent of minimum wage non-compliance, and the size of the informal workforce. Our approach allows us to examine (i) the distinction between determinants of firm-level reported wage distribution and actual wage distribution, (ii) the complementarity of tax and minimum wage enforcement, (iii) the impact that a minimum wage reform has on tax and minimum wage compliance, and (iv) the impact that a tax policy reform has on tax and minimum wage compliance. We conclude with the design of optimal minimum wage and tax policies (even in the complete absence of minimum wage enforcement). We do so based on two objectives derived from popular concerns associated with an unchecked expansion of informality: tax revenue maximization, and poverty alleviation among workers.