Decline In Wages Research Articles

Parenthood and gender inequality on labor market outcomes: Evidence from South Korea

AbstractThis study estimates the long‐term effect of parenthood on labor market outcomes and explores the variations within this effect by gender and education. We use the event study method to track changes in a range of labor market outcomes from 3 years before to 8 years after the first birth, with a sample of 556 married women and 528 married men from the Korea Labor and Income Panel Study (KLIPS). We find that women experience an immediate drop in wages following birth, whereas men experience continuous wage growth even before birth. The decline in women's wages arises largely from their withdrawal from the labor market, while the increase in men's wages could be explained by a positive selection bias among fathers. In addition, mothers' wage trajectories do not vary significantly by education level, whereas other labor market outcomes show discernible trends. These patterns are the opposite of those observed for men. The findings indicate that severe gender inequality in the Korean labor market lowers the wages of mothers, regardless of their education, while the wages of fathers are more likely to be affected by education. Based on the findings, we make policy suggestions for improving the work‐family balance for all genders.

The distributional effects of oil supply news shocks

This paper uses high frequency data on the distribution of US income to investigate the heterogeneous effects of oil supply news shocks. Using a FAVAR with an external instrument, We show that these shocks have large negative effects on the left and right tail of the distribution. For low income individuals, the effect is driven by a decline in wages and proprietor’s income, while a fall in corporate profits and interest income drives the effect for affluent individuals.

Food prices and the wages of the poor: A cost-effective addition to high-frequency food security monitoring

The affordability of nutritious food for “all people, at all times” is a critically important dimension of food security. Yet surprisingly, timely high-frequency indicators of food affordability are rarely collected in any systematic fashion despite price volatility emerging as major source of food insecurity in the 21st Century. The 2008 global food crisis prompted international agencies to invest heavily in monitoring domestic food prices in low and middle income countries (LMICs). However, food price monitoring is not sufficient for measuring changes in diet affordability; for that, one must also measure changes either in income or in an income proxy. We propose using the wages of unskilled workers as a cheap and sufficiently accurate income proxy, especially for the urban and rural non-farm poor. We first outline alternative measures of “food wage” indices, defined as wages deflated either by consumer food price indices or novel healthy diet cost indices. We then discuss the conceptual strengths and limitations of food wages. Finally, we examine patterns and trends in different types of real food wage series during well-known food price crises in Ethiopia (2008, 2011 and 2022), Sri Lanka (2022) and Myanmar (2022). In all these instances, food wages declined by 20–30%, often in the space of a few months. In Myanmar, the decline in real wages during 2022 closely matches declines in household disposable income. We strongly advocate tracking the wages of the poor as a timely, accurate and cost-effective means of monitoring food affordability for important segments of the world’s poor.

Balancing Study and Work: Heterogeneous Impact of the Bologna Reform on the Labour Market

AbstractThe Bologna reform, the largest European education reform, was implemented in Russia in 2011. The reform shortened the duration of some undergraduate programmes by 1 year and compressed their curricula. Using a difference‐in‐differences design, I find that the reform had no short‐ or medium‐term adverse effects on employment. However, I find that null average effects on wages mask considerable heterogeneity. I find that female students with high relative returns worked less during their studies, invested in their human capital, and secured stable wages. In contrast, male students with low relative returns underinvested in human capital and experienced a decline in wages.

The Interaction between Credit Constraints and Uncertainty Shocks

AbstractThis paper proposes a novel link between credit markets and uncertainty shocks. We introduce a role for credit uncertainty via collateral constraints in an otherwise standard real business cycle (RBC) model and show that an increase in credit uncertainty triggers a precautionary response that interacts with the collateral constraint to generate a simultaneous decline in output, consumption, investment, real wages, and hours; a feature that previous work on uncertainty shocks without credit constraints is unable to produce in a flexible‐price environment. We also empirically test the theoretical predictions and show that an unforeseen increase in credit uncertainty generates a simultaneous decline in a broad measure of real activity in recessions.

Labour Productivity, Wages, and Inflation: Evidence from Selected Central and South-East European Countries

The relationship between inflation, worker wages, and labour productivity growth has been a widely discussed topic among academics in recent decades. Labour productivity is a critical component for maintaining and improving the competitiveness of national economies and establishing sustainable economic growth. The increase in labour productivity serves as the foundation for increasing workers' wages, thereby enhancing their purchasing power and overall well-being. However, empirical data from Southeast European countries indicate that labour productivity growth rates have been insufficient to enable catch-up with their Western European counterparts. Additionally, these countries have experienced significant inflation rates in recent years, resulting in a notable decline in real wages for workers. Therefore, the gap between labour productivity and workers' wages has not only failed to diminish but has, in fact, widened over the past few decades.
 The primary objective of this paper is to examine the interrelationships among labour productivity, workers' wages, and inflation in Central and Southeast European countries, specifically the Balkan EU countries, Balkan non-EU countries, and the Visegrád group of countries. The findings reveal a short-term causality among inflation, labour productivity, and the statutory minimum wage in these three groups of countries. Furthermore, there is evidence of a bidirectional causal relationship running from the minimum wage and inflation to labour productivity, and vice versa, in the short term. Additionally, the introduction of a minimum wage shock significantly influences the future values of labour productivity and inflation. The adverse effects of an externally induced increase in the statutory minimum wage are particularly noticeable in Western Balkan non-EU countries.

DESTRUKTIVNI PROCESI PRIVATIZACIJE – EKONOMSKI I SOCIJALNI SUNOVRAT

In the world economy the historical conflict between labor and capital is intensifying in the process of the dominance of speculative financial capital. The rise of unemployment in the new global crisis leads to the spread of fear for the existence of the masses. There is a general decline in the share of employees' income in the national income, along with a real decline in salaries and wages. The functioning of globalized capitalism and the creation of the precariat are investigated. The aggravation of the conflict between labor and large speculative capital is the path to a permanent crisis. The relationship between private capital, profit and the welfare state are the basis of new crises in capitalism. A critical finding of the process of privatization and its destructive action in society is needed. A special part of the paper refers to the creation of a dependent and indebted economy, along with the discovery of the mechanism of creation of the debt burden. Finally, it investigates where modern economies and society have led to the devastating concept of neoliberalism, privatization and the separation of labor from capital and the results of development. Key words: economy, privatization, capital, debt economy.

THE EFFECT OF ECONOMIC GROWTH, PROVINCIAL MINIMUM WAGE, AND INVESTMENT ON EMPLOYMENT IN DKI JAKARTA PROVINCE IN 2018-2022

The employment problem in Indonesia is not just limited opportunities or employment opportunities and low productivity. The increase in unemployment rates is caused by limited demand for work, which is then associated with other external factors including the decline in the balance of payments, increasing foreign debt and other policies which result in a decline in economic growth, decline in wages, investment and decline in employment. The purpose of this study is to determine the effect of Economic Growth, Provincial Minimum Wage, Investment, and Covid-19 Dummy on Employment in DKI Jakarta Province in 2018-2022. This study used multiple linear regression method with Generalized Least Square (GLS) model. This study uses secondary data while Covid-19 is included in the dummy variable category. The results of this study show that economic growth has a positive and significant influence on employment. Meanwhile, the provincial minimum wage, investment, and Covid-19 dummy have a negative and insignificant effect on labor absorption in DKI Jakarta Province in 2018-2022.

Minimum wage and spillover effects in a minimum wage society

AbstractMinimum wage policies are widely implemented in developing countries, but their consequences remain uncertain. This study empirically investigates the impact of the minimum wage on monthly income inequality and its spillover effects in Turkey between 2004 and 2022, utilizing comprehensive micro data. We aim to shed light on the impact of national minimum wage policies by examining their diverse influences on the wage structure within the country. Our findings reveal that the minimum wage significantly reduces income disparities, particularly among formal workers at the lower and upper end of the wage distribution. While wage gaps below the median wage decline, those above it experience a slower growth rate, ultimately leading to wage convergence. Notably, this effect is more pronounced during macroeconomic instability from 2016 to 2022, compared with the relatively stable period of 2004–15. Moreover, the outcomes differ depending on individual attributes like gender, age, education, and other relevant factors. Furthermore, we observe tentative evidence of a lighthouse effect to some degree: the minimum wage seems to exert an equalizing influence on the wage structure of workers in the informal sector beyond a certain percentile.

Routine-biased technological change and employee outcomes after mass layoffs: evidence from Brazil

Abstract We investigate the impact of “routinization” on the labor outcomes of displaced workers. We use a rich Brazilian panel dataset and an occupation-task mapping to examine the effect of job displacement in different groups, classified according to their tasks. Our main result is that following a layoff, workers previously employed in routine-intensive occupations suffer a more significant decline in wages and more extended periods of unemployment. As expected, job displacement has a negative and lasting impact on wages. Still, workers in routine-intensive occupations are more impacted than those in non-routine occupations in terms of wages (an increase of one point in the routine-intensity index results in a further decline of 2% in workers’ relative wages) and employment. Furthermore, our results indicate that workers in routine-intensive occupations are more likely to change occupations after the shock, and those who do not switch occupational fields suffer a more significant decline in wages. Lastly, even though the loss of employer-specific wage premiums explains 13% of displaced workers’ drop in wages, it does not explain routine-intensive workers’ more substantial losses.

The structural-demographic theory revisited: An empirical test for industrialized societies.

The structural demographic theory for industrialized societies generates three testable predictions. The first prediction is that labor oversupply leads to declining (relative) wages. The second prediction is that labor oversupply leads to elite overproduction: as relative wages fall, elite incomes display a hump-shaped pattern while elite numbers increase. The third prediction is that elite overproduction leads to political instability. I test these predictions on US data by combining evidence from existing studies with empirical proxies for elite numbers and elite income. The predictions are not supported by the data. First, labor oversupply cannot explain the polarization of wages and the decline in relative wages. The largest share in wage variance is explained by automation. Second, the data shows that as relative wages fall, elite incomes increase, in contrast to the hump-shaped pattern displayed by the model. Third, elite overproduction did not predict political instability in the last decades. Political instability is modelled by the Political Stress Index (PSI). The reviewed evidence shows that the increase in the model based PSI in the last decades is driven by the increase in inequality. The rise in inequality was caused by technological change, globalisation and to a lesser extent by the erosion of labor market institutions. Attributing the rise in inequality and the resulting increase in political instability to labor oversupply rather than to the lost race between education and technology may weaken incentives to design effective policies addressing the inefficiencies in the US education system.

Impact of the COVID-19 Pandemic on Agricultural Production and Productivity in Banavaram Village of Vellore District of Tamil Nadu

The objective of this study is to evaluate the impact of the COVID-19 lockdown on agricultural production and productivity in Tamil Nadu. A total of 147 farmers was surveyed in Banavaram village of Vellore district (93% male; 28% 30-39 years old; 38% literates). About one in ten farmers (10%) did not harvest in the past month with primary reasons cited being unfavorable weather (36%) and lockdown-related reasons (26%). A total of 65% of farmers harvested in the past month (primarily paddy and vegetables), but only 45% had sold their crop; 13% were still trying to sell their crop and 38% had stored their crop, with more than half (55%) reporting lockdown-related issues as the reason for storing. Seventy-nine per cent of households with wage-workers witnessed a decline in wages in the past month and 49% of households with incomes from livestock witnessed a decline. Nearly all farmers reported less productivity (97%). These values are much lower than reported previously for farmers in Banavaram village around this time of year before COVID-19. In conclusion, we found that the COVID-19 lockdown in India has primarily impacted farmers’ ability to produce their crops and livestock products which directly affect their day-to-day activity and standard of living.

The Right to Work and American Inequality

Labor historians describe Right to Work (RTW) as among the most consequential pushbacks against the early twentieth-century ascent of labor unions. Yet research on the economic consequences of RTW remains mixed, with nearly all research centered empirically and theoretically on the time surrounding RTW passage. In the current study, I use 41 waves of longitudinal data from the Panel Study of Income Dynamics between 1968 and 2019 to empirically and theoretically extend the mechanisms that link RTW and economic outcomes. First, following the vast majority of research on RTW, I show the demobilizing effects for labor following RTW passage: mean wages decline, wage inequality increases, and the union premium is halved in the middle and lower portion of the wage distribution. Second, I move theoretical focus beyond the time surrounding law enactment, arguing for a second-order effect whereby RTW institutionalizes a logic of polarized economic distributions and low labor power. To test this mechanism, I develop a novel strategy of comparison across respondents who are differentially mobile across state boundaries. I find individuals who cross RTW contexts experience a unique decline in mean wages and increase in wage variance, but this distinct trend can be explained by state-level institutional variation across RTW and non-RTW states. Thus, RTW is not only consequential in the periods around its passage, but also in establishing a long-standing, high-inequality regime. Results reveal multiple mechanisms by which RTW contributes to the long-run processes of union decline and broadly shared inequality growth.

The Russian labor market: A statistical portrait on the crises background

The paper examines long-term trends in the evolution of the Russian labor market, as well as its short-term adjustments to negative economic shocks. The analysis covers a wide array of indicators, both quantitative and price ones. The results obtained show that the Russian labor market is in a process of restructuring. Labor force and employment are on long-term downward trends, unemployment has fallen to a record low, after a long period of stagnation, labor turnover has sharply intensified, and vacancies have reached an all-time high. At the same time, its algorithm of responding to negative shocks remained virtually unchanged. As before, short-term adjustments are brought about mainly through decline in wages and contraction of working hours, rather than through decrease in employment and increase in unemployment (“the Russian labor market model”).

Traversing the Macroeconomic Terrain: An Exploration of South Korea’s Economic Responsiveness to Cross-Border E-Commerce Production Technology Alterations in the Global Arena

The principal aim of this study is to discern the implications of technology shocks in the sphere of cross-border e-commerce on the macroeconomic indices of South Korea. Leveraging Bayesian estimation techniques, we scrutinized quarterly data from the inaugural quarter of 2000 through to the first quarter of 2022 to perform an empirical exploration. Deductions drawn from the impulse response function indicate that a positive perturbation in the technology of sustainable cross-border e-commerce production instigated a swell in output and investment for both non-tradable and cross-border e-commerce goods producers. Conversely, the sector of traditional tradable goods exhibited a decrease in output and investment. Additionally, this favorable technology shock appears to have amplified household consumption and employment, along with wages in the non-tradable and sustainable cross-border e-commerce goods sectors. In stark contrast, the traditional tradable sector demonstrated a decline in household consumption, employment, and wages. Intriguingly, the technology shock also exerted an influence on the pricing system, causing a rise in the prices of non-tradable goods and cross-border e-commerce goods. On the other hand, the prices of traditional tradable goods experienced a downward turn. These insights provide a pathway to an understanding of how advancements in sustainable e-commerce technology can mold an array of macroeconomic factors in a digitally evolved economy such as South Korea.

Decomposing the effect of trade on the gender wage gap

AbstractThis paper uses variation in exposure to increased Chinese imports in Brazil to investigate the impact of trade on gender wage inequality. First, using Brazilian census data, we find that rising imports reduced the gender wage gap in Brazilian local labour markets. Next, using Oaxaca–Blinder decompositions, we show that this reduction in the wage gap was largely explained by trade increasing the share of female workers in higher‐paying occupations. Finally, we use a matched employer–employee data set to investigate how individual workers adjust to the trade shock. Similar to the local labour market analysis, we find that male workers exposed to increased import competition saw a larger decline in both wages and cumulative earnings relative to female workers. In addition, we uncover an interesting asymmetry in that, while male workers exhibited much higher degrees of industry mobility in response to the trade shock, female workers exhibited an equal if not higher degree of occupational mobility.

Inequality, nominal rigidities, and aggregate demand

This paper studies the gains from wage flexibility in a New Keynesian model with price and wage rigidities and incomplete asset markets. When a fraction of households consume solely out of their labor income and have no access to financial markets, the real wage, and therefore, the relative nominal rigidities between wages and prices, directly determine the economy’s aggregate demand. We show that when wages are flexible relative to prices, economic downturns are accompanied by a pronounced decline in real wages, which depresses aggregate demand, and exacerbates the economy’s volatility. In this context, we conclude that enhancing wage flexibility when prices are highly rigid is an undesirable policy prescription.

The dynamic effects of monsoon rainfall shocks on agricultural yield, wages, and food prices in India*

AbstractThis paper shows that, first, the effects of monsoon rainfall shocks on agricultural yield in India are highly asymmetric: yield falls strongly after droughts, whereas excessive rainfall has only little effects. Second, our key novel finding is that the short‐lived yield loss after a widespread drought elicits a persistent decline (increase) in wages (food prices), which lasts for up to five years. Third, affiliation to the same National Sample Survey region (and thus to the same state) seems to be a key determinant of internal migration, whereas distance appears more relevant for food arbitrage trading.

Labor markets during war time: Evidence from online job advertisements

This study examines the short- and medium-term impacts of the ongoing Russia-Ukraine war on the labor market for Ukrainian workers. Using a unique dataset of 5.4 million online job advertisements for Ukrainian job seekers in Poland and Ukraine over the 2021–2022 period, we show a short-term surge in demand for Ukrainians to work in Poland, while the number of jobs available in Ukraine is relatively stable. Since February 2022, the demand for soft and analytical skills in Ukraine has increased, while the demand for such skills in Poland has remained the same. Moreover, the increase in Polish jobs available to Ukrainian workers is largest for medium/high-skilled jobs and female-oriented jobs. Further analysis suggests a persistent shift (to the left) in wage distribution driven by both the decline of wages within job titles and the change in the composition of jobs across Poland.

Extra‐EU immigrants and labour productivity: New evidence from Italian firms

AbstractThis paper investigates the impact of extra‐EU workers on labour productivity in Italy. To this aim, we take advantage of firm‐level data derived from the Rilevazione Imprese e Lavoro (RIL‐AIDA) surveys merged with the AIDA‐Bureau Van Dijk archive over the period 2007–2015. Using an econometric strategy that accounts for firms' observed heterogeneity and endogeneity issues, we obtain the following results. First, an increase in the share of extra‐EU workers leads to a decline in labour productivity. Second, the relationship between extra‐EU workers and productivity appears to be different between firms located in centre‐north and those in southern regions. Third, the share of extra‐EU workers is also associated with a decline in average wages and sales per employee, even though this effect is less than that observed for productivity. Our findings support the hypothesis that the demand of immigrants arises as a labour cost reduction strategy and hence tends to weaken firms' competitiveness.