Net Wage Research Articles

The value of commuting time in an empirical on-the-job search model – an application based on moments from two samples

This article estimates the Value of Commuting Time (VOCT) among Swedish males in an empirical on-the-job search model. It uses a large sample of employee-establishment linked data obtained from administrative registers. The sample lacks information on mode choice for the journey to work. We therefore estimate a mode choice model on another sample and use this model to link the administrative data to the relevant set of travel times, costs and distances. The VOCT is found to be 1.8 times the net hourly wage rate in the sample. The relatively high estimate results from a high VOCT among cohabiting men.

Price-wage nexus and the role of a tax system

The presented study was aimed to test empirically major economic hypotheses dealing with long-term relationships between wages, producer prices, prices of consumer goods and services, the consumer price index, productivity of labour, unemployment and payroll expenses other than wages themselves. It is particularly important for this approach to distinguish between net wages shaping employees’ decisions and gross wages driving employers’ decisions. Because the variables are generated by non-stationary stochastic processes integrated of order 1 and 2, the analytical tool applied was a vector equilibrium correction model, VEqCM. The findings demonstrate that prices and payroll expenses are the major sources of shocks in the system in question. Wages and prices (particularly producer prices) are the most sensitive to this type of stochastic trends. In the Polish economy prices are integrated of order two, so they can be effectively influenced by anti-inflationary policy.

What Role do Safety Net Wage Adjustments Play in Alleviating Household Need?

The strength of the relationship between low wages and household needs has become an important measure of the effectiveness of Australia’s employment safety net. This paper reviews the recent treatment of the needs issue in safety net wage cases of the Australian Industrial Relations Commission, and provides a statistical analysis of data from two nationwide household surveys. I develop a method of identifying low-wage earners in sectors with high award reliance, and use it to describe the characteristics of their households. The workers of interest are predominantly found in households near the middle of the income distribution, rather than at the bottom end, because they typically live with other, higher-paid workers. The minority living in single-income households are more likely to be below the median income and to experience financial stress. A safety net maintained partly on the basis of a ‘needs’ criterion should be especially focused on the circumstances and prospects of this single-income group.

Welfare Policy in the Presence of Unionised Labour and Internationally Mobile Firms*

AbstractTo what extent does the welfare state exacerbate the loss of jobs due to offshoring? We consider a model with oligopolistic sectors that are exposed to offshoring, as well as a unionised labour force that is entitled to unemployment benefits. We find that deeper economic integration induces wage moderation to the point that wages become independent of workers' outside options. Because the entire incidence of redistribution falls on net wages, the unions' willingness to moderate wages is constrained by the level of redistribution. Beyond an upper limit of redistribution, extending the welfare state compels unions to oppose wage moderation at the cost of losing jobs to offshoring. Below that upper limit, however, redistribution becomes less rather than more distortive.

The Effects of Tax Salience and Tax Experience on Individual Work Efforts in a Framed Field Experiment

We conduct a framed field experiment with 245 employed persons (no students) as subjects and a real tax, which is levied on the subjects' income from working in our real effort task. In our first three treatments, the net wage is constant but gross wages are subject to different constant marginal tax rates (0, 25%, 50%). It turns out that the effort is significantly higher under the tax than in the no tax treatment. Subjects perceive a too high net wage because they underestimate the tax. We conjecture that tax perception depends on the tax rate, the presentation of the tax and the experience subjects have with taxation. These conjectures are confirmed in four further treatments employing a direct and an indirect progressive tax scale. It turns out that simple at taxes are particularly prone to being misperceived because their simplicity reduces the tax salience.

Let's Take Bargaining Models Seriously: The Decline in Union Power in Germany, 1992-2009

Building on the right-to-manage model of collective bargaining, this paper tries to infer union power from the observed results in wage setting. It derives a time-varying indicator of union strength and confronts it with annual data for Germany. The results show that union power was relatively stable in the 1990s but fell substantially (by almost one-third) from 1999 to 2007. Two-thirds of this fall in union power follow from the reduction in the labour share relative to the capital share whereas changes in the gap between the net wage and the income when unemployed account for the remaining third.

Specialities of income taxing according to the Czech legal frame in HR systems

Abstract This paper concentrates on a specific part of the income taxing question, which is the personal income from a dependent activity and office-holders’ emoluments and how it is captured in the HR system. According to the Czech law, employee income taxing, which is quite complicated and tightly legally bounded, is one of the most important employer’s responsibilities. The incorrect income tax amount could be punished with a fine. Careful recognition of different income categories is the key question for a modern HR system for wages accounting. The procedure of tax calculation begins with the income type resolution, continues with consideration of all the specific conditions connected with the employee as a tax payer and terminates in the prescription of the net wage. The main topic consists in whether and to what degree the calculation of the tax liability could be executed by the system automatically.

THE SHADOW ECONOMY FACTORS AND CAUSES ANALYSIS BY EXPERT EVALUATION METHOD: CASE OF LITHUANIA

In the scientific literature the shadow economy is defined as a complex multifaceted set of phenomena, whose existence is determined by various factors and causes. The article examines the shadow economy through tax administration perspective. The author’s chosen object of the research encompasses economic activities, results of which such as tax evasion or concealment are not included in the official records. The shadow economy factors and reasons are economic, legal-administrative and social- psychological. Most of the time scientific research analyses the following shadow economy factors and causes: ▪ burden and rise of direct and indirect taxes and compulsory social insurance contribution; ▪ too stringent (or insufficient) legal and administrative regulation; ▪ weak government and a high level of corruption in the governmental sector; ▪ the income inequality (a high poverty level); ▪ the legislative gaps; ▪ the tax administration system deficiencies; ▪ irrational country’s economic policy; ▪ tax morale; ▪ insufficient government attention to social policy or irrational its development. The article presents the empirical study results about Lithuanian shadow economy factors and causes. The survey was carried out by experts – Lithuanian State Tax Inspection staff which has experience in inspecting taxpayers and conducting tax investigations. 702 experts took part in the research. According to experts’ estimations, companies and individuals enter into shadow economic activity mainly because they do not have any other way out (otherwise they won’t be able to stand up to competition, individuals won’t be able to make a living, etc.) as well as because other economy players pull them in. Experts also estimate that the most important Lithuanian shadow economy causes are the following: too big tax burden (in the case of illegal work – significant gross and net wage gap), gaps in legislation, frequent law changes, distrust of country’s government, dissatisfaction with the quality of work of governmental institutions. The main causes of the sprawl of the shadow economy – the inability to compete without being involved in the shadow economy, the lack of unified declaration of income and insufficient control of state institutions.

Capital Assistance for Small Firms: Some Implications for Regional Economic Welfare

This paper analyzes the role of finance capital in regional economic development. A cost-benefit approach is invoked in order to estimate the welfare impacts of a re ional loan and guarantee program for small fm in Israel. that separates net from gross employment, is presented. An estimate of net wage benefits is then derived. This involves adjusting wages across diferent earnings classes in order to account for the variation in opportunity costs of labor at d$ ferent levels. The estimation of costs includes the opportunity costs of capital, administration, default, and tax-raising costs. Results point to substantial regional welfare efects. We stress the need to account for changing regional economic structure in this kind of evaluation framework. Program-create cf employment is treated as a beneft and an employment account The provision of finance capital to small firms (in the form of loans, grants, guarantees, etc.) is a standard prescription for jump-starting regional economic growth. Assessments of this approach to regional growth are usually couched in terms of the employment gains, increased investment, and income that ensue in the region. Cost-effectiveness analysis is often invoked in order to evaluate the impact of this kind of assistance and cost-per-job or subsidy-per-job indices are invariably estimated (Miller, Gaskins, and Liner 1969; Hart et al. 1993; Bangsund and Leistritz 1997). Welfare impacts and distributional issues, however, are often overlooked because the standard assessment frameworks are exclusively efficiency driven. This paper presents a new cost-benefit method and then applies it in an empirical evaluation of a capital assistance program for small firms, highlighting the implications for regional economic welfare. We distinguish between regional economic “growth” and regional economic “development.” The former is measured in terms of an increase in regional product, employment, and income. The latter refers to who benefits from that growth, the extent to which local welfare is really improved, and how this This research project was funded by the Department for Rural and Urban Development of the Jewish Agency, Jerusalem. Thanks to the anonymous referees for helpful comments on earlier drafts and to Adi Sidi for assistance with data management.

WAGE CHANGE IN THE LITHUANIAN LABOUR MARKET

In a market, the labour force of the population can be sold and bought. The wage is the price or the monetary value of the labour force. The wage rate depends on the key internal and external factors. In a market economy, remuneration for work becomes the object of negotiation between the employer and the employee. In order to legally implement this negotiation, we need to describe the term of the wage, wage systems, wage structure, functions and other issues. The article deals with the theoretical issues relating to wages: the concept of the wage, the main function of wages, the factors influencing the wage rate are analysed and systematised. The article analyses net wages and gross wages and other factors influencing the Lithuanian labour market.

Estimating Incentive and Welfare Effects of Non-Stationary Unemployment Benefits

The distribution of unemployment duration in our equilibrium matching model with spell-dependent unemployment benefits displays a time-varying exit rate. Building on Semi-Markov processes, we translate these exit rates into an expression for the aggregate unemployment rate. Structural estimation using a German micro-data set (SOEP) allows us to discuss the effects of a recent unemployment benefit reform (Hartz IV). The reform reduced unemployment by only 0.3%. Contrary to general beliefs, we find that both employed and unemployed workers gain (the latter from an intertemporal perspective). The reason is the rise in the net wage caused by more vacancies per unemployed worker.

Measuring the time costs of exercise: a proposed measuring method and a pilot study

BackgroundThe cost of time spent on exercise is an important factor in societal-perspective health economic analyses of interventions aimed at promoting physical activity. However, there are no existing measuring methods for estimating time costs. The aim of this article is to describe a way to measure the costs of time spent on physical activity. We propose a model for measuring these time costs, and present the results of a pilot study applying this model to different groups of exercisers.MethodsWe began this investigation by developing a model for measuring the time spent on exercise, based on the most important theoretical frameworks for valuing time. In the model, the value of utility in anticipation (expected health benefits) of performing exercise is expressed in terms of health-related quality of life. With this approach, the cost of the time spent on exercise is defined as the value of utility in use of leisure activity forgone minus the value of utility in use of exercise. Utility in use for exercise is valued in comparison with utility in use for leisure activity forgone and utility in use for work.To put the model into practice, we developed a questionnaire with the aim of investigating the valuations made by exercisers, and applied this questionnaire among more experienced and less experienced exercisers.ResultsLess experienced exercisers valued the time spent on exercise as being equal to 26% of net wages, while more experienced exercisers valued this time at 7% of net wages (p < 0.001). The higher time costs seen among the less experienced exercisers correlated to a less positive experience of exercise and a more positive experience of the lost leisure activity. There was a significant inverse correlation between the costs of time spent on exercise, and the frequency and duration of regular exercise.ConclusionThe time spent on exercise is an important factor in interventions aimed at promoting physical activity, and should be taken into consideration in cost-effectiveness analyses. The proposed model for measuring the costs of the time spent on exercise seems to be a better method than the previously-used assumptions of time costs.

Time Limits in a Two-tier Unemployment Benefit Scheme under Involuntary Unemployment

The consequences of introducing or tightening time limits on the receipt of high unemployment benefits are studied in a shirking model. Stricter time limits have an ambiguous impact on the net wage, and changes of utility levels of employed workers and recipients of high unemployment benefits have the same sign as the variation in the net wage. The utility differential between the two groups of unemployed shrinks. The relative income position of skilled workers moves in the same direction as the net wage of unskilled workers. When access to high benefits is denied for shirkers who are caught, stricter time limits may decrease employment. (JEL codes: H53, J41, J60)

Vietnam Compulsory Social Security Participation Revealed Preferences

Since 1947, the Vietnam Social Security has provided social insurance to public servants and armed forces personnel in Vietnam. In 1995, the system became mandatory to the employees of the newly developing private sector. The mandatory coverage of the private sector was first restricted to the enterprises with 10 or more employees. Since 2005, all the types of enterprises, whatever their size, have the obligation to register to VSS the employees with a labor contract of 3 months or longer.In recent years, participation to VSS has been increasing fast along the development of the private sector. Still, the number of contributors if compared to the number of people reporting being employed in Vietnam is relatively small. It covers 38.8% of the 17 464 thousand persons that report receiving wages equal or above the legal minimum wage. The reasons for this low coverage are unknown. It could be that these persons are not employed under a labor contract or that their employers are not well aware of their social obligations. It could be also that employers avoid register (with or without employees implicit agreement) to obtain higher enterprises revenues or to pay higher employee’s net wages. Using the information of the Census of enterprises of 2006, this paper shows that most of the enterprises in Vietnam pay contributions on lower wages than the wages they effectively pay to their employees. Several econometric analyses indicate strong evidence that employees that work in such enterprises receive higher net wages but there are no strong evidence that the avoiding enterprises obtain higher revenues per worker. The paper argue that the wide spread practice of under reporting wages to social security increasingly erodes public appreciation of the insurance role of social security and reassures employers and employees about the appropriateness of their behavior. It creates also unfair payments of the minimum pension to workers that are not low income earners.

Workfare, monitoring, and efficiency wages

The impact of a stronger work requirement for welfare recipients in a workfare program is studied in an efficiency wage model where a representative firm chooses its level of monitoring activities. A stricter workfare policy raises employment as well as the monitoring intensity. It typically increases profits and reduces the tax rate. The impact on the net wage is ambiguous. Utility levels of employed workers and welfare recipients may increase even if the net wage declines. The utility differential between these two groups of workers shrinks.

Labour Market Participation: The Impact of Social Benefits in the Czech Republic and Selected European Countries

This paper aims to quantify the impact of social benefits on labour market participation in the Czech Republic and provides a comparison with selected European countries. It applies the logistic regression to estimate the probability of labour market participation depending on social benefits related to net wage of the individuals, controlling for individual and household characteristics. Our results indicate that the work disincentives via social benefits do exist in most of the included countries and they proved to be relatively strong in the Czech Republic. When trying to understand the reasons for recently decreasing participation rate in the Czech Republic, the often called ""generous"" Czech social benefit system appears to be relevant.

Social Security and Retirement During Transition: Microeconometric Evidence from Slovenia

This paper analyses old-age retirement decisions of Slovenian men and women eligible to retire in the period 1997-2003. In addition to established market economies, relatively high hazard rates of retirement are found, which decline with age. This peculiar pattern can be partly attributed to weak incentives to work inherent in the design of social security and is reflected in predominantly negative values of accruals and to transition-specific increases in wage inequality in the late 1980 and early 1990s. The authors also find that the probability of retirement increases with social security wealth and decreases with net wages, although the response to option value to work, with controlling for wage differences, is rather weak. The results also imply that less educated persons, persons with great private wealth and persons entitled to severance payment are more likely to retire.

Why is the public sector more labor-intensive? A distortionary tax argument

Government-run entities are often more labor-intensive than private companies, even with identical production technologies. This need not imply slack in the public sector, but may reflect a wage tax advantage, stemming from the fact that government entities (partly) pay their taxes to themselves. A tax-induced cost advantage of public production precludes production efficiency and reduces welfare when labor supply is inelastic. With an elastic labor supply, a wage tax advantage of the public sector may improve welfare if it allows for a higher net wage.

Was muten sich Arbeitslose zu? Lohnkonzessionen von ALG II-Empfängern

Zusammenfassung Der Beitrag beschaftigt sich mit den Lohnanspruchen von Empfangern des ALG II und knupft dabei an fruhere Arbeiten von Christensen an, der die Lohnanspruche von Arbeitslosen untersucht hat. Jedoch stutzt er sich nicht auf Daten des Soziooekonomischen Panels (SOEP), sondern auf Angaben der Querschnittserhebung des IAB „Lebenssituation und Soziale Sicherung“, die ALG II-Empfanger in der fruhen Phase nach der Reform von Arbeitslosen- und Sozialhilfe in den Fokus nimmt. Die Frage ist dabei, ob sich die von Christensen auf Daten bis zum Jahr 2000 ermittelte Konzessionsbereitschaft von Arbeitslosen hinsichtlich ihrer Lohnerwartungen nach Einfuhrung des SGB II merklich erhoht hat. Besonderes Augenmerk gilt dabei der Relation zwischen dem letzten Lohn vor Arbeitslosigkeit und dem Reservationslohn, der Abhangigkeit dieser Relation von der Dauer der Arbeitslosigkeit und den Bestimmungsfaktoren des Reservationslohns. Die auf der jungsten IAB-Befragung von ALG II-Empfangern basierenden Auswertungen un...

Social Security and Retirement During Transition: Microeconometric Evidence from Slovenia

In this paper we analyse old-age retirement decisions of Slovenian men and women eligible to retire in the period 1997-2003. In comparison to established market economies, we find relatively high hazard rates of retirement that decline with age. This peculiar pattern can be partly attributed to weak incentives to work inherent in the design of Social Security, and is reflected in predominantly negative values of accruals, and to transition-specific increase in wage inequality in the late 1980s and early 1990s. This is reflected in low wages and relativily high pensions of less productive (skilled) workers and vice versa. We also find that the probability of retirement increases with social security wealth and decreases with net wages, although the response to option value to work, when controlling for wage differences, is rather weak. Our results also imply that less educated persons, persons with greater private wealth, and persons entitled to severance payment are more likely to retire.