Full-time Earnings Research Articles

Gender gaps in early wage expectations

Using detailed data from a unique survey of high school graduates in Germany, we document a gender gap in expected full-time earnings of more than 15%. We decompose this early gender gap and find that especially differences in coefficients help explain different expectations. In particular, the effects of having time for family as career motive and being first-generation college student are associated with large penalties in female wage expectations exclusively. This is especially true for higher expected career paths. Resulting expected returns to education are associated with college enrollment of women and could thus entrench subsequent gaps in realized earnings.

Editors' Note

This issue's symposium on future research directions in forensic economics originated with papers that were presented at the January 4, 2020, National Association of Forensic Economics (NAFE) session “NAFE: An Agenda for Future Research” at the Allied Social Science Associations annual meeting in San Diego, California. The impetus for the session was to honor Jack Ward, the first editor of the Journal of Forensic Economics (JFE) by having him provide insights on what research in forensic economics has contributed to the current knowledge of practitioners, as well as his thoughts on the future directions of forensic economics research. This symposium contains papers on the topic of future research directions in forensic economics that were prepared by the presenters at the San Diego meeting.Jack Ward's paper suggests that there have been advances over the last three decades in forensic economics that include the Markov analyses of worklife expectancy; Expectancy Data's Dollar Value of a Day and Full-time Earnings in the United States that have advanced the projection of replacement household services and lost earnings; research based on Bureau of Labor Statistics Family Expenditure Survey data that has added greater precision to measures of self-consumption of earnings; and papers that have helped clarify differences between measuring probable earnings and earning capacity. Ward's paper concludes with a list of topics for further research in the forensic economics literature that includes more work on the role of race and gender in determining earnings; modeling dynamic changes in industry specific employment and wage growth; and the incorporation of Bayesian methodologies in lost wage projections, including the assignment of meaningful probabilities to outcomes.The paper by Michael Brookshire and Frank Slesnick discusses what their 10 surveys of NAFE members have revealed about important research topics. They argue that their surveys suggest that NAFE members place high importance on research on worklife of the disabled, worklife of the self-employed, personal consumption, and household services. Brookshire and Slesnick also offer, based on their experience as practitioners and researchers, the following agenda: whole-time approach to damages estimation; forensic economics in the classroom; a paper summarizing what is known as a result of the papers published in the JFE state paper series; tailoring, i.e., accounting for qualitative factors and variables omitted from standard economic models; the market for forensic economists; the definition of earning capacity; and what is meant by reasonable economic probability.The paper by Steven Shapiro suggests that despite the large body of published research in forensic economics, there are still controversial topics that are lacking consensus. Shapiro suggests that the controversial areas that should be the focus of research include the choice of interest rates for discounting; interest rates, earnings growth and inflation; interest rates, growth in medical costs and inflation; how many years of earnings history is necessary to project base earnings and earnings history; alternative approaches to hedonic damages; and punitive damages. Shapiro expresses the hope that research on these topics will improve the reliability and validity of the work of forensic economists.

Work–family reconciliation policies and women’s and mothers’ labor market outcomes in rich democracies

AbstractProminent research has claimed that work–family reconciliation policies trigger ‘tradeoffs’ and ‘paradoxes’ in terms of gender equality with adverse labor market consequences for women. These claims have greatly influenced debates regarding social policy, work, family and gender inequality. Motivated by limitations of prior research, we analyze the relationship between the two most prominent work–family reconciliation policies (paid parental leave and public childcare coverage) and seven labor market outcomes (employment, full-time employment, earnings, full-time earnings, being a manager, being a lucrative manager and occupation percent female). We estimate multilevel models of individuals nested in a cross-section of 21 rich democracies near 2005, and two-way fixed effects models of individuals nested in a panel of 12 rich democracies over time. The vast majority of coefficients for work–family policies fail to reject the null hypothesis of no effects. The pattern of insignificance occurs regardless of which set of models or coefficients one compares. Moreover, there is as much evidence that significantly contradicts the ‘tradeoff hypothesis’ as is consistent with the hypothesis. Altogether, the analyses undermine claims that work–family reconciliation policies trigger trade-offs and paradoxes in terms of gender equality with adverse labor market consequences for women.

Rounding in Earnings Data

Earnings data are often reported in round numbers. In fact, in the March 1995 Current Population Survey (CPS), 71% of all full-time earnings responses are some multiple of $1,000. Rounding is typically ignored in analyses of earnings data, which effectively treats it as noise in the data. Our GMM estimates of a simple model of rounding indicate that this behavior is highly systematic and correlated with the respondents’ earnings level. We find that the systematic nature of rounding can affect some commonly used statistics based on earnings data. The statistics we investigate in this analysis are inequality summary measures, earnings quantiles, kernel density estimates, and frequency plots of wage adjustments. We find that rounding alters most of these statistics substantially, that is, by more than the typical level of annual changes or reported standard errors.

Price and Income Elasticity of Australian Retail Finance: An Autoregressive Distributed Lag (ARDL) Approach

This paper models the price and income elasticity of retail finance in Australia using aggregate quarterly data and an autoregressive distributed lag (ARDL) approach. We particularly focus on the impact of the global financial crisis (GFC) from 2007 onwards on retail finance demand and analyse four submarkets (period analysed in brackets): owneroccupied housing loans (Sep 1985-June 2010), term loans (for motor vehicles, household goods and debt consolidation, etc.) (Dec 1988-Jun 2010), credit card loans (Mar 1990-Jun 2010), and margin loans (Sep 2000-Jun 2010). Other than the indicator lending rates and annual full-time earnings respectively used as proxies for the price and income effects, we specify a large number of other variables as demand factors, particularly reflecting the value of the asset for which retail finance demand is derived. These variously include the yield on indexed bonds as a proxy for inflation expectations, median housing prices, consumer sentiment indices as measures of consumer confidence, motor vehicle and retail trade sales, housing debt-to-housing assets as a measure of leverage, the proportion of protected margin lending, the available credit limit on credit cards, and the All Ordinaries Index. In the long run, we find significant price elasticities only for term loans and margin loans, and significant income elasticities of demand for housing loans, term loans and margin loans. We also find that the GFC only significantly affected the longrun demand for term loans and margin loans. In the short run, we find that the GFC has had a significant effect on the price elasticity of demand for term loans and margin loans. Expected inflation is also a key factor affecting retail finance demand. Overall, most of the submarkets in the analysis indicate that retail finance demand is certainly price inelastic but more income elastic than conventionally thought.

Focus: The erosion of a distinctive system

INTERNATIONAL union rights Page 6 Volume 21 Issue 2 2014 Wages must be enough to support the wage earner in reasonable and frugal comfort But in recent decades, a disturbing trend has emerged and persisted. Until 2005, the Australian minimum wage bite (the relationship of minimum wages to average full-time wages or median full-time earnings) was the highest in the OECD. But over the last two decades, this has changed. In that period, our minimum wage bite has fallen sharply (see Figure 1), earnings inequality has grown and the incidence of low pay has risen. While Australia has not experienced a recession since the early 1990’s, the minimum wage bite has declined during both economic booms and times of slower growth. It has declined under each of the three institutions that have had responsibility for adjusting minimum wages over that time. While the real value of minimum wages has grown modestly since the late 1990s, the bite has still continued to fall. Australia is now rapidly converging with other OECD countries. If the trend of a declining minimum wage bite continues , Australia’s distinctive minimum wage system will have been lost. Our wage floor will, in a few short years, be akin to those of Canada or the UK (see Figure 2). This changes our country, for the worse. It means a significant decline in the relative living standards of low- paid workers, and it presents a profound contemporary challenge of the trade union movement. And yet despite this trend, more than a century after Harvester, the decision of Higgins still echoes through our system. His principles, modified and adapted, can still be found in our national labour law which directs the Fair Work Commission (who conduct the annual wage review) to have regard to the relative living standards and needs of the low-paid (Fair Work Act 2009, section 484). Heavily contested at the time, the Higgins view that business has an obligation to pay living wage A ustralia has historically been something of an outlier on minimum wages, even when measured against the rest of the developed world. Australia’s relatively high minimum wage and our essentially unique system of awards arbitrated by workplace tribunals has been a key reason why our country has had a relatively low inequality in earnings. The institutional arrangements adopted at both a State and Federal level ensured that our labour market exhibited a (relative) egalitarianism. Today, around 16 percent of Australian employees are paid exactly at the national minimum wage or an award minimum wage and the Annual Wage Review conducted by our national workplace tribunal indirectly influences the pay of many more. But bit-by-bit, in the current era, the traditional egalitarian character of Australia’s labour market is being eroded and the relative living standards of Australia’s lowest paid workers are declining. Australia adopted a form of minimum wage in November 1907. In the landmark Harvester 1 decision , Justice Higgins of the Commonwealth Court of Conciliation and Arbitration (applying a statue that said wages had to be ‘fair and reasonable’) held that workers were entitled to a living wage. He defined this by reference to ‘the normal needs of an average employee living in a civilised community ’. Higgins, using language that also appears in the famous 1891 Papal Encyclical on the working class Rerum Novarum, said that wages ‘must be enough to support the wage earner in reasonable and frugal comfort’. Harvester established a male basic wage. The intention was to support a minim standard of living for a male breadwinner and his family. But equal pay was not on the agenda. A 1919 case determined that women were entitled to 54 percent of men’s wages, a standard that persisted until World War II, when the standard rose to 75 percent.2 It wasn’t until key tribunal decisions in 1969 and 1972 that the principles of equal pay for equal work and (to more practical effect) equal pay for work of equal value were adopted, ensuring that he minimum wage system did not exacerbate the gender pay-gap. Shamefully, the last race-based differential in our system of minimum wages (in relation to...

Price and Income Elasticity of Australian Retail Finance: An Autoregressive Distributed Lag (ARDL) Approach

This paper models the price and income elasticity of retail finance in Australia using aggregate quarterly data and an autoregressive distributed lag (ARDL) approach. We particularly focus on the impact of the global financial crisis (GFC) from 2007 onwards on retail finance demand and analyse four submarkets (period analysed in brackets): owneroccupied housing loans (Sep 1985-June 2010), term loans (for motor vehicles, household goods and debt consolidation, etc.) (Dec 1988-Jun 2010), credit card loans (Mar 1990-Jun 2010), and margin loans (Sep 2000-Jun 2010). Other than the indicator lending rates and annual full-time earnings respectively used as proxies for the price and income effects, we specify a large number of other variables as demand factors, particularly reflecting the value of the asset for which retail finance demand is derived. These variously include the yield on indexed bonds as a proxy for inflation expectations, median housing prices, consumer sentiment indices as measures of consumer confidence, motor vehicle and retail trade sales, housing debt-to-housing assets as a measure of leverage, the proportion of protected margin lending, the available credit limit on credit cards, and the All Ordinaries Index. In the long run, we find significant price elasticities only for term loans and margin loans, and significant income elasticities of demand for housing loans, term loans and margin loans. We also find that the GFC only significantly affected the longrun demand for term loans and margin loans. In the short run, we find that the GFC has had a significant effect on the price elasticity of demand for term loans and margin loans. Expected inflation is also a key factor affecting retail finance demand. Overall, most of the submarkets in the analysis indicate that retail finance demand is certainly price inelastic but more income elastic than conventionally thought.

Earnings Inequality and the Gender Gap: An Accounting Exercise for Sweden 1975–1991

Using the Household Income Survey, the earnings of full time, full year workers in Sweden are studied. Earnings inequality as well as the gender earnings gap were found to decrease up to the beginning of the 1980s, when both started to increase. The following questions are also addressed: How much has the changed earnigns gap contributed to changes in earnings inequality? How much should earnings inequality decrease in the case of men and women having the same mean income while keeping inequality within each gender category constant?

Part-Time Work: A Reassessment for a Changing Economy

Part-time work is growing, fueled by the changing characteristics of the labor market, changing family structures, and a changing focus of social policies that now emphasize education and training for welfare recipients rather than simply providing income maintenance with no work requirements. By combining part-time work with prorated wages and benefits and subsidized part-time training, public welfare and training policies and private-sector training can provide benefits for employers, workers, and society. Part-time work can increase production flexibility, reduce pressures on doubly burdened family heads, and make possible an increase in worker productivity, thus helping to raise full-time earnings above poverty levels.

Regional Change in Middle Class Earnings and Standards of Living

ABSTRACTThis research examines key components of the broad national debate over the decline of the middle economic class of the United States at the regional level. Full‐time and part‐time workers’distributions of earnings among the low‐, middle‐ and upper‐earner groups are examined for the four major Census regions from 1967 to 1987. The premise is that the postwar boom era was a period in which the earnings of one full‐time worker could purchase a middle standard of living (using home ownership as a proxy) for a household. Thus, change in the purchasing power of full‐time earnings for home ownership is tracked between 1967 and 1987 at the regional level. In addition, regional changes in levels of fringe‐benefit recipiency are examined.Full‐time workers have seen a dramatic upwards shift in their earnings disiributions in all regions, accompanied by substantial erosion in their purchasing power. Earnings distributions across regions have converged, but the costs of home ownership have diverged. As a result, certain regions offer locational advantages for consuming the middle standard of living. Arising from these findings, this paper concludes with a set of questions for policymakers.

Dependency and interdependency: the incomes of informal carers and the impact of social security.

Consideration of the income and social security needs of informal carers has remained conspicuously absent from discussions about 'community care'. Similarly, carers have been more or less invisible in the development of social security policies. This paper reports on a study of the financial circumstances of a sample of working age carers, who were living with and providing substantial amounts of help and support to a disabled person in the same household. The study highlights first, the substantial work-related costs incurred by carers with full time employment; and second the financial dependency of carers without full time earnings, on their spouse, sibling or on the person being cared for. The implications of these findings are discussed in the light of recent developments in social security policies.

Managing Unemployment: The Role of Union Business Agents and the Use of Work Sharing

When work sharing was proposed in the United States in the early 1930s, unions rejected the idea as “misery sharing.” Forty years later, California unions overwhelmingly accepted a short-time program known as Shared Work Unemployment Insurance, in spite of its conflict with the seniority provisions of labor contracts. This paper examines the role of union business agents in the decision to use the California program. Using agents' reports of program acceptance and rejection, I conclude that workers accept work sharing because they face labor cutbacks under duress, and because agents play an important role in flexibly administering seniority rules. But workers reject the program when senior workers rely heavily upon full-time earnings or believe management to be acting in bad faith. I also find that, although agents and workers may have diverging interests, when it comes to unemployment, their interests are similar and they share a similar fate.

A Simulation of the Impact of Introducing Equality for Males and Females into Social Security

Section 1(2) of the 1976 Supplementary Benefit Act states that for a married couple only the husband shall be entitled to claim supplementary benefits (henceforth abbreviated to SB). This rule implies that a family with an unemployed husband and a wife in employment may claim benefits but a family with a husband in employment with equally low earning power and an unemployed wife may not. Thus benefits may be payable to supplement a married woman's full-time earnings, if family income is low enough, but not a married man's. The introduction of equality of treatment for the sexes in other areas, specifically pay and employment conditions, serves only to highlight the inadequacy of the treatment of women for SB. This conclusion has been reinforced by legislation in the EEC which in 1976 adopted a directive covering equal treatment in matters of social security including SB schemes. Internal and external pressure to modify the current system has resulted in the directive being implemented in the UK's Social Security Act 1980. Equality of treatment for SB claimants is to be phased in by November 1983. Previous discussion of this issue by the Supplementary Benefits Commission (1976) has indicated considerable concern over the potential costs of the new arrangement. It is the aim of this paper to indicate the number of families not at present claiming SB who may benefit if the wife could claim it under the same conditions currently facing the husband. In effect, we are asking what number of families will find their incentives to work altered. Such information is essential in any evaluation of the costs involved in the prospective change. On the basis of the traditional work-leisure choice model, we simulate the budget constraint facing each family, and from this simulation we can generate estimates of the number of families who may find their utility levels altered if the wife could claim SB. The remainder of the paper is divided into three sections. Section I discusses the theoretical implications of introducing equality. Section II describes our method of budget simulation, and Section III contains a description of the data set used and the results of the simulation.

Three-and-a-Half Million U.S. Employees Have Been Mislaid: Or, an Explanation of Unemployment, 1934-1941

A major conceptual error in the standard BLS and Lebergott unemployment estimates for 1930-43 is reported. Emergency workers (employees of government contracyclical programs such as WPA) were counted as unemployed on a normal-jobs-to-be-created instead of job-seekers unemployment definition. For 1933-41, the corrected unemployment levels are reduced by 2-3.5 million people and the rates by 4-7 percentage points. The corrected data show strong movement toward the natural unemployment rate after 1933 and are very well explained by an anticipations-search model using annual full-time earnings.