Mean Wage Research Articles

Equity-efficiency implications of a European tax and transfer system

This study simulates three income tax scenarios in a Mirrleesian setting for 24 EU countries using data from the 2014 Structure of Earnings Survey. In scenario 1, each country individually maximizes its own welfare (benchmark). In scenarios 2 and 3, total welfare in the EU is maximized over a common budget constraint. Unlike scenario 2, the social planner of scenario 3 differentiates taxes by country of residence. If a common tax and transfer system were implemented in the EU, countries with a relatively higher mean wage rate—particularly those in Western and some of the Northern European countries—would transfer resources to the others. Scenario 2 implies increased labor distortions for almost all countries and, hence, leads to a contraction in total output. Scenario 3 produces higher (lower) marginal taxes for high- (low-) mean countries compared to the benchmark. The change in total output depends on the income effects on labor supply. Overall, total welfare is higher for the scenarios involving a European tax and transfer system despite more than two thirds of all the agents becoming worse off relative to the benchmark. A politically more feasible integrated tax system improves the well-being of almost half of all the EU but considerably reduces the aggregate welfare benefits.

Demographic, health, and economic transitions and the future care burden.

The COVID-19 pandemic has caused millions of infections and deaths worldwide, forced schools to suspend classes, workers to work from home, many to lose their livelihoods, and countless businesses to close. Throughout this crisis, families have had to protect, comfort and care for their children, their elderly and other members. While the pandemic has greatly intensified family care responsibilities for families, unpaid care work has been a primary activity of families even in normal times. This paper estimates the future global need for caregiving, and the burden of that need that typically falls on families, especially women. It takes into account projected demographic shifts, health transitions, and economic changes in order to obtain an aggregate picture of the care need relative to the potential supply of caregiving in low-, middle- and high-income countries. This extensive margin of the future care burden, however, does not capture the weight of that burden unless the quantity and quality of care time per caregiver are taken into account. Adjusting for care time given per caregiver, the paper incorporates data from time-use surveys, illustrating this intensive margin of the care burden in three countries that have very different family and economic contexts—Ghana, Mongolia, and South Korea. Time-use surveys typically do not provide time data for paid care services, so the estimates depend only on the time intensity of family care. With this caveat, the paper estimates that the care need in 2030 would require the equivalent of one-fifth to two-fifths of the paid labor force, assuming 40 weekly workhours. Using the projected 2030 mean wage for care and social service workers to estimate the hypothetical wage bill for these unpaid caregivers if they were paid, we obtain a value equivalent to 16 to 32 percent of GDP in the three countries.

Методы декомпозиции гендерного разрыва в заработной плате: сравнительный анализ

This study introduces a comparative analysis of the gender wage gap decomposition methods with the Russian Longitudinal Monitoring Survey (RLMS) data for 2018. To decompose the differences in average wages, approaches based on the Oaxaca–Blinder decomposition are used. Apart from the mean wages, the study focuses on other distribution statistics. Using the quantile regressions, the wage gap between men and women is decomposed for the distribution parameters such as median, lower and upper deciles. The decomposition estimates of conditional and unconditional (based on recentered influence functions) quantile regressions are compared.

Human Capital Externalities or Consumption Spillovers? The Effect of High-Skill Human Capital across Low-Skill Labor Markets

Previous studies often interpret the positive impact of high-skill human capital on the mean wages of low-skill workers as evidence of human capital externalities. We uncover a distributional wage effect that is difficult to reconcile with standard models of human capital externalities: city-level share of college graduates has a positive impact on wages of low-skill workers at the lower quantiles of the wage distribution, but not the upper quantiles. We then provide a comprehensive assessment and discussion of the effect of high-skill human capital on wages of low-skill workers in different occupations. We find a large and positive effect in the service sector but not in the manufacturing sector. These findings invite reinterpretation of previous studies on human capital externalities in low-skill labor markets, as the positive effect in the service sector is more likely to be explained by consumption spillovers generated by college-educated workers.

Human capital externalities or consumption spillovers? The effect of high-skill human capital across low-skill labor markets

Previous studies often interpret the positive impact of high-skill human capital on the mean wages of low-skill workers as evidence of human capital externalities. Using a grouped IV quantile technique, we uncover a distributional wage effect of high-skill human capital that is difficult to reconcile with the standard models of human capital externalities: the city-level share of college graduates has a positive impact on the wages of low-skill workers at the lower, but not the upper, quantiles of the wage distribution. We then provide a comprehensive assessment and discussion of the effect of high-skill human capital on low-skill wages in different occupations. We find a large and positive wage effect in the service occupations but not in the manufacturing occupations. We argue that consumption spillover, instead of human capital externality, is the underlying mechanism. These findings invite reinterpretation of previous studies on human capital externalities in low-skill labor markets.

The changing composition of academic majors and wage dynamics: Beyond mean returns

This paper studies the effects of the changing composition of academic majors during expansion of higher education on the dynamics of wage distribution. Using a unique dataset constructed from open-ended responses in the Russia Longitudinal Monitoring Survey, we conduct a structural analysis of wage distribution dynamics for higher education graduates over 2002–2016. In addition to the standard mean wage estimations across majors we explore within-major and across-cohort variation, as well as major-specific permanent and transitory variance components and their time paths.The results suggest that changing wage inequality among university graduates is due to both changes in skill prices and wage shocks induced by economic fluctuations. Moreover, variation in skill prices relates to equilibrium effects induced by changes in the supply of graduates specialized in different fields. Uneven expansion in certain majors induces labor market saturation and leads to an increase in the wage variance of graduates from the fastest growing majors. The estimation results also show the importance of accounting for within-major heterogeneity across cohorts, which could reflect differences in student ability distribution, changes in academic content, and changes in educational quality over time. Finally, this study suggests that focusing only on mean wage returns, without assessing the distributional implications, might substantially understate the labor market impact of the changing major composition.

Wage Determination and the Bite of Collective Contracts in Italy and Spain: Evidence from the Metal Working Industry

In several OECD countries employer federations and unions fix skill-specific wage floors for all workers in an industry. One view of those “explicit” contracts argues that the prevailing wage structure reflects the labor market conditions back at the time when those contracts were bargained, with little space for renegotiation. An alternative view stresses that only workers close to the minima are affected by wage floors and that the wage structure reacts to current labor market conditions. We disentangle both models using a novel data set that combines more tan 1,000 signature dates and 15,000 wage floors set in the metal working industry with labor market histories of metal workers drawn from Social Security records in Italy and Spain. An increase in the contemporaneous local unemployment rate of 1 p.p. diminished contemporaneous mean wages by about 0.45 p.p. between 2005 and 2013 in both countries. Instead, a 1 p.p. higher unemployment rate back at the time of contract renewal reduced wages by 0.7 p.p., an impact driven by wages close to the negotiated wage floors. Even though the evidence for earlier periods is mixed in Italy, the results do not support the view that the wage structure reflects labor market conditions at the time of bargaining. The results support the hypothesis that (most) wages respond to local current unemployment rate, although the estimated elasticity falls short of the prediction of an off-the-shelf bargaining model.

Occupational Closure and Wage Inequality: How Occupational Closure Effects Vary Between Workers

Occupational closure continuously establishes, contests, or reinforces institutional boundaries around occupations. Occupational closure thereby interferes with wage-setting processes in the labor market. Recent research shows a substantial impact of occupational closure on wage determination processes in Germany. However, research on occupational closure is based on the assumption that all incumbents of an occupation benefit in the same way. We challenge this assumption by showing that occupational closure works differently for different workers. Using the 2006 sample of the German Structure of Earnings Survey, we distinguish nine worker profiles (three educational groups crossed with three career stages). For each of these profiles we investigate the effects of five closure sources (credentialism, standardization, licensure, representation by occupational associations, and unionization) on the expected mean wages of occupations, employing a two-step multilevel regression model. Our results show that occupational closure does indeed differ between workers. We can show that closure plays out differently throughout employees’ careers. For example, representation through occupational associations pays off the most as employees’ careers advance. Closure sources are unequally distributed across occupations and benefit employees with tertiary degrees more than employees with vocational qualifications. Credentialism also yields the largest advantages for workers with tertiary degrees regarding wage rents. However, our analyses also point to complex interactions between credentialism and standardization, demanding further research, to investigate the interplay between individual worker characteristics and the various sources of occupational closure.

Estimating effect of marriage on male wages in Russia

PurposePurpose of the article is to investigate the effect of marriage on male wages in Russia. The paper provides insight about contribution of observed and unobserved factors to wages of Russian men regarding their marital status.Design/methodology/approachDatabase is the Russian Longitudinal Monitoring Survey (RLMS) for 2016. We add to the literature by introducing Generalized Oaxaca–Blinder Decomposition of the difference in mean wages of married and unmarried men. This generalization is free of conditional mean independence assumption.FindingsWe reveal negative observed price effect and substantial positive effect of changes in unobserved characteristics of married and unmarried men in Russia.Originality/valueTo our knowledge, our study is the first one that gives estimation of the volume and structure of the male marriage wage premium in Russia. The proposed approach is applicable for estimating labor market premiums and penalties for various individual characteristics.

Cost and Reimbursement for Low Risk Prenatal Care in the United States [10K

INTRODUCTION: This study calculates the financial margins for delivery of routine antenatal care as reimbursed by Medicaid. Prenatal care cost varies with overhead, provider type, and number of office visits. Antenatal care is only one component of the global obstetric bundle, which also includes intrapartum and postpartum care. METHODS: Revenue was based on 2015 Medicaid reimbursement for the pregnancy global package (CPT 59400). All fifty states were represented. Provider time cost was estimated using mean wages for obstetricians and midwives, or using national mean wage data when state-specific data was unavailable. Staff time for provision of low risk prenatal care was determined prospectively from a study of 133 low risk patients. Sensitivity analysis was performed by varying overhead as a percentage of total revenue. Routine prenatal labs, ultrasounds, intrapartum care, and postpartum care were not included in our analysis. RESULTS: Patients received an average of 215 minutes of direct provider time per pregnancy. At the 50th percentile for physician payment and assuming overhead is 40% of revenue, practice margins varied by state from -$1,061 to +$785, with a median of -$161. This does not include the cost of intrapartum or postpartum care. The median margin for antenatal care was negative if overhead exceeded 18% of revenue. CONCLUSION: In a majority of states, reimbursement for the global obstetric package reimbursed by Medicaid is less than the actual cost of prenatal care alone. Improving reimbursement or decreasing costs is necessary to make maternity care cost-effective for obstetrics practices.

Social Policy and its Impact on Labour Productivity

The article deals with the impact of social problems and social policy on the efficiency of economic activity. By comparing social and economic indicators of Russia and OESR countries a conclusion was drawn that contrasting two goals of national economy development i.e. social justice and economic efficiency is artificial. As social problems affect directly the effectiveness of economic activity, economizing on problems of poverty, inequality, public health and education could lead to a drop in labour productivity and slowing-down of economic development. The authors propose concrete steps aimed at resolving the most acute social problems of today’s Russia, including limits of top management salaries in regions and companies in relation to the mean wage at organizations led by them, active social policy of state in the field of wages, the system of social guarantees for low-paid workers, a rise in state spending on public health and education. The article was written on materials of the School of Young Researcher meeting, which dealt with the development of Russian economy.

Wage-differentials and Their Determinants Across Industries in the Organized Manufacturing Sector of India

This article calculates the magnitude of wage differentials across industries in the organized manufacturing sector of India and identifies the major determinants of wage differentiation among the industries. Using data from Annual Survey of Industries in India for the period from 2000–2001 to 2015–2016, this study shows that mean wage is less in labour-intensive industries compared to the capital-intensive industries. The results of panel regression of annual average wage on various industry-specific factors show that productivity of labour is the most important factor in wage determination, and productivity largely depends on capital–labour ratio. The other significant factors in this regard are farm size, amount of profit and proportion of casual and female workers in total employment. Important policy implication of this study is that regulatory wage fixation and wage bargaining outcomes are not as significant as productivity differentials in explaining wage gaps across industries.

Gender wage inequality during Sri Lanka’s post-reform growth: A distributional analysis

Abstract This paper investigates gender wage inequality in Sri Lanka during 1992–2014, a period of robust economic growth following pro-market reforms. The gap in mean wages between men and women decreased steadily over this period. Unconditional quantile regression reveals the decline in gender wage inequality was driven by the upper half of the distribution, and was due to improvements in women’s observable human capital. Yet, the pay structure became more unequal, indicating widening gender gaps in the returns to labor market characteristics and in unobservable determinants of wages. The gender gap in pay structure widened disproportionately in the lower half of the distribution, coinciding with falling absolute and relative returns to women in manufacturing industries and production occupations facing greater international competition. The study also demonstrates selection bias underestimates the gender wage gap and overestimates the gains in equality over time. Factors that hinder gender equality in the labor market are discussed along with policy implications.

The Value of Time in the United States: Estimates from Nationwide Natural Field Experiments

The value of time determines relative prices of goods and services, investments, productivity, economic growth, and measurements of income inequality. Economists in the 1960s began to focus on the value of non-work time, pioneering a deep literature exploring the optimal allocation and value of time. By leveraging key features of these classic time allocation theories, we use a novel approach to estimate the value of time (VOT) via two large-scale natural field experiments with the ridesharing company Lyft. We use random variation in both wait times and prices to estimate a consumer's VOT with a data set of more than 14 million observations across consumers in U.S. cities. We find that the VOT is roughly $19 per hour (or 75% (100%) of the after-tax mean (median) wage rate) and varies predictably with choice circumstances correlated with the opportunity cost of wait time. Our VOT estimate is larger than what is currently used by the U.S. Government, suggesting that society is under-valuing time improvements and subsequently under-investing public resources in time-saving infrastructure projects and technologies.

The Value of Time in the United States: Estimates from Nationwide Natural Field Experiments

The value of time determines relative prices of goods and services, investments, productivity, economic growth, and measurements of income inequality. Economists in the 1960s began to focus on the value of non-work time, pioneering a deep literature exploring the optimal allocation and value of time. By leveraging key features of these classic time allocation theories, we use a novel approach to estimate the value of time (VOT) via two large-scale natural field experiments with the ridesharing company Lyft. We use random variation in both wait times and prices to estimate a consumer's VOT with a data set of more than 14 million observations across consumers in U.S. cities. We find that the VOT is roughly $19 per hour (or 75% (100%) of the after-tax mean (median) wage rate) and varies predictably with choice circumstances correlated with the opportunity cost of wait time. Our VOT estimate is larger than what is currently used by the U.S. Government, suggesting that society is under-valuing time improvements and subsequently under-investing public resources in time-saving infrastructure projects and technologies.

Real Wages of Lithuanian Construction Workers from 1913 to 1939 (Measured in Subsistence and Welfare Ratios) in a Cross-National Comparison

This article provides two comparisons: (1) a cross-time comparison of real wages of skilled and unskilled workers in Kaunas before the First World War and during the interwar period; and (2) a cross-national quantitative comparison of the wages of unskilled workers in Kaunas and the capital cities of most European countries during the same period. For the second comparison, we use the findings of researchers who applied Robert C. Allen’s methodology of real wage estimation. In this methodology, the wages of unskilled construction workers (known in interwar Lithuania as zimagoras) are used as proxies for the wages of unskilled urban workers, and those of construction site carpenters provide a sample for skilled workers’ wages. Real wages are measured in subsistence and welfare ratios, indicating the distances separating the purchasing power of wages from the subsistence level of a single worker (subsistence ratio = 1 meaning absolute poverty) or his family (welfare ratio = 1 meaning absolute poverty). Subsistence or absolute poverty levels are defined by regionally adjusted (to variations in survival needs) minimum consumption baskets. The main findings are: (1) although during the first decade of independence (in the 1920s) the real wages of unskilled construction workers in Kaunas were lower than in 1913, by 1938 they had markedly surpassed the pre-First World War level; (2) in no year with available data did the real wages of unskilled construction workers in Kaunas fall below the absolute poverty level; (3) the real wages of skilled construction workers in Kaunas had markedly surpassed the pre-First World War level even before the Great Depression in the early 1930s, and remained above this level even in the worst years of the depression; (4) the real wages of skilled and unskilled construction workers in Kaunas in 1913 were no lower than in metropolitan centres of the Russian Empire; (5) in the period 1927 to 1929, the wages of unskilled construction workers in Kaunas were lower than in Moscow, but largely surpassed Russian wages in the 1930s, when Stalin’s policy of industrialisation forced them below the subsistence level; (6) the real wages of unskilled construction workers in Kaunas in the 1930s surpassed those in Riga and Tallinn. While this finding is surprising, it concurs with earlier (2007) findings by Gediminas Vaskela, who compared the mean wages of workers and employees in the Baltic countries in the period 1938 to 1940.

Impact of the Minimum Wage on Wages and Wage Inequality in 2019

The Object of the Study. Wages in Russiya and in its regionsThe Subject of the Study. Levels and differentiation of wages The Purpose of the Study is examining the impact of raising the minimum wage up to the subsistence minimum level of the able-bodied population in 2018-2019 on the dynamics of the main characteristics of wages at the federal and regional levels. The Main Propositions of the Article. The problem of spatial inequality includes socioeconomic inequality of the population which primarily depends on work remuneration as the main source of monetary income of households. The problems of work remuneration in the post-Soviet period are well-known – low levels, relatively high wage differentiation including cross-sectoral and cross-regional disparities. These were caused to a large extent by the low level of the minimum wage in the country. In May 2018 the minimum wage was raised up to the subsistence minimum level (poverty line) of the able-bodied population. Using the data from the wage surveys conducted by Rosstat in 2017 and 2019 the authors analyse the shifts in wage distribution of workers in Russiya and in its regions. The increase in the minimum wage resulted in a decline in the general differentiation of wages across the country and in the vast majority of regions, in reduction of the intra-industry and cross-regional differences. In 2019 the funds ratio (ratio of mean wages of the upper and the bottom deciles) exceeded 10 only in six regions, while in 2017 there were 29 such regions. In 2017 that ratio was below 8 only in 6 regions, in 2019 – in 45 regions, and in most of them (26) the average wage was 3 times below the subsistence minimum level of the able-bodied population. The analysis has shown that the low level of wages of most employees still remains an urgent problem, and reduction in wage inequality also has the reverse aspect. We know from the Soviet experience that low (as well as high) level of wage inequality does not promote work incentives and socioeconomic development of territories.

Optimizing ventilation: Theoretical study on increasing rates in offices to maximize occupant productivity with constrained additional energy use

Ventilation affects building energy use and indoor air quality, with minimum rates prescribed by standards. However, research has demonstrated positive outcomes associated with increasing ventilation, including occupant productivity from increased work performance and reduced absenteeism. Herein, a novel ventilation strategy was proposed and simulated for offices, which optimized day-averaged ventilation rates over an annual time horizon to provide maximal amounts of outdoor air and so maximize occupant productive work hours, within varying energy use constraints. Energy use and productivity were often influenced by ventilation oppositely, so results were Pareto optimal. This optimization methodology was simulated in three locations for an average- and high-performance small office building, considering users with varying levels of confidence in ventilation-productivity relationships. To contextualize potential optimization impacts, four annual energy budgets were first determined for a typical year at constant ventilation rates of 8.5, 10, 20, and 30 L/s/occupant, and then for those four cases, day-averaged ventilation rates were optimized over annual trajectories considering the constrained energy budgets. Among all simulated cases, lost productive hours due to lower ventilation at constant rates were halved when using the optimized higher annual rates, with a gain of ~20 h/year per occupant on average, amounting to approximately $48/m2 at standard occupant density and mean wage. Offline optimization results were used to develop heuristic rules to predict a ventilation rate for any single day based on weather forecast that would adhere to a building- and climate-specific Pareto optimization, opening avenues for future control strategies that use this framework in real buildings.

All that glitters is not gold: Wages and education for US immigrants

Many destination countries consider implementing points-based migration systems as a way to improve migrants’ quality, but our understanding of the actual effects of selective policies is limited. We use data from the ACS 2001–2017 to analyze the overlap in the wage distribution of low- and high-educated recent migrants from different origins after controlling for other observable characteristics. When we randomly match a high- with a low-educated immigrant from the same country, more than one-quarter of time the low-educated immigrant has a higher hourly wage, notwithstanding a statistically significant difference in the mean wage of the two groups for most origins. For 98 out of 114 countries, this synthetic measure of the overlap in the two wage distributions stands above the corresponding figure for natives. We also find that at least 82% of the variance in log wages for migrants with a given number of years of schooling is due to differences within rather than across countries. This suggests that heavily relying on education to select immigrants might fail to markedly improve their quality.

A joint time-assignment and expenditure-allocation model: value of leisure and value of time assigned to travel for specific population segments

Based on a time-use model with a sound theoretical basis and carefully collected data for Austria, the value of leisure (VoL) for different population segments has been estimated. Through the combination of these results with mode-specific values of travel time savings from a related study based on the same data, the first mode-specific values of time assigned to travel (VTAT) were calculated. Data was collected using a Mobility-Activity-Expenditure Diary, a novel survey format which gathers all activities, expenditures, and travel decisions from the same individuals for 1 week in a diary-based format. The average VoL is 8.17 €/h, which is below the mean wage of 12.14 €/h, indicating that the value of work is, on average, negative. Regarding the reliability of the VoL, we show its sensitivity to the variance of working time in a sample, something that has been ignored in previous studies and could be used to avoid inadequate segmentation. We controlled this effect in the analysis of the heterogeneity of the VoL across the population by estimating the parameters from the total (unsegmented) dataset with single interaction terms. We find that the VTAT is strictly negative for walking, predominantly negative for cycling and car, and predominantly positive for public transport with 0.27 €/h on average. The positive VTAT for public transport is a strong indication for the importance of travel conditions, in turn suggesting that improvements in travel conditions of public transport might be as important as investing in shorter travel times.