Real Hourly Wages Research Articles

Employment and wage dynamics in the electricity sector: Evidence from Portugal 2002–2020

Exploring a rich administrative matched employer-employee longitudinal dataset over the 2002–2020 period and a task-based approach, this study investigates to what extent the recent paradigm shift in the electricity sector has affected the structure of employment and wages in the Portuguese case. Our results show that the liberalization in the sector led to the entry of new players and firms' downsizing of the workforce, most notably in occupations involving routine cognitive tasks and non-routine manual tasks. In two decades, the employment share of occupations involving non-routine cognitive tasks (abstract or interactive) doubled, from 29.7% in 2002 to 58.1% in 2020. Regarding wage premiums, the results reveal a clear positive trend in real hourly wages for all types of occupations in the sector. However, we observe a lower wage growth acceleration for workers employed in routine (cognitive or manual) occupations, when compared with similar workers employed in non-routine occupations (cognitive or manual). Our findings are partly consistent with the skill-biased and routine-biased technological change hypotheses in the sense that we observe, respectively, a skill up-grading translated into an increase in employment share in non-routine cognitive occupations and a substantial decline in employment share in routine cognitive occupations.

Selection and the distribution of female real hourly wages in the United States

We analyze the role of selection bias in generating changes in the observed distribution of female hourly wages in the United States using CPS data for the years 1975 to 2020. We account for selection bias from the employment decision by modeling the distribution of the number of working hours and estimating a nonseparable model of wages. We decompose changes in the wage distribution into composition, structural, and selection effects. Composition effects increased wages at all quantiles while the impact of the structural effects varied by time period and quantile. Changes in the role of selection only appeared at the lower quantiles of the wage distribution. The evidence suggests that there was positive selection in the 1970s, which diminished until the later 1990s. This reduced wages at lower quantiles and increased wage inequality. Post 2000 there appears to be an increase in positive sorting, which reduced the selection effects on wage inequality.

Wage inequality in the developing world: Evidence from Latin America

AbstractWe study the dynamics of wage inequality in Latin America in the past two decades. We find a consistent trend reversal in wage inequality in the region since the early 2000s: wage inequality fell across all countries in a way not predicted by the trends each country had experienced in the 1990s. The decline in wage inequality is explained by a disproportional expansion in the real hourly wage among low‐paid workers, reducing both lower and upper tail inequality. About 40% of the observed reduction in wage variance was a response to the more equal wage structure, while the rest derived from a reduction in wage dispersion among workers with similar observable traits. The equalization of the wage structure in the 2000s is correlated with a reduction in the wage premium across education, experience, and place of residence. The reduction in the gender gap contributed, to a lesser extent, to the trend reversal.

Business Cycles and Distribution of Wages in Colombia: A Semi-Parametric Wage Density Decomposition Approach

This paper examines the changes in real hourly wages in Colombia along the recovery phase taking place from March 2009 to March 2014. The starting finding is that the distribution of wages at trough looks like translations to the left of recovery distribution. To shed light on those procyclical translations this paper performs a sequential decomposition on change of wages in 1) cyclical demand and supply factors, 2) changes in the attributes of workers, 3) changes and spillovers effects of minimum wage and 4) a residual. As literature suggests, this paper shows that procyclicality of real wages is associated mainly to shifts in labor demand-supply factors and to updates of skills --usually linked to the secular trend of wage distribution. As a novelty, evidence suggests that there is a positive spillover from monthly Minimum Wage on hourly wages explaining 25% of the divergence between distributions.

The informalization of the Egyptian economy (1998–2012): a driver of growing wage inequality

ABSTRACT We run recentered influence function (RIF) regressions, using Firpo et al. (2007) distributional approach to identify each control variable’s contribution on the decomposition of wage changes. Using the Egyptian Labour Market Surveys 1998–2012 for waged men we find that wage changes between 1998 and 2012 mainly resulted in increased inequality. The richer percentiles have persistently enjoyed disproportionately larger positive changes in real hourly wages. Whilst increasing in all three wage gaps, inequality increased the most between the top and bottom deciles (90–10 gap), i.e. between the lowest and highest wage earners. This increase in inequality is primarily driven by the unexplained wage structure effect. The distinct labour market segments are foremost responsible for the increased inequality trend. Private sector informality is the largest contributor to increased inequality. The sector does not adhere to a minimum wage, and being unregulated it has responded dramatically to the severe competitive pressures caused by the departing middle classes of the public sector. It suppressed mid and low-end wages resulting in sharp wage gaps at the tails. Public sector wage setting dynamics and the direction of labour movements since liberalization cause the sector to contribute more to wage inequality than does its formal private counterpart.

Cyclical labor costs within jobs

Using UK employer-employee panel data, we present novel facts on how wages and working hours respond to the business cycle within jobs. Firms reacted to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.6% for new hires as well as for job stayers. Hiring hours worked were substantially procyclical, while job-stayer hours were acyclical. These results show that real wages are not rigid and that the labor costs of new hires are especially flexible.

Is Employment Polarization Informative About Wage Inequality and is Employment Really Polarizing?

Equating a job with an individual rather than an occupation, we re-examine whether U.S. workers are increasingly concentrated in low and high-wage jobs relative to middle-wage jobs, a phenomenon known as employment polarization. By assigning workers in the CPS to real hourly wage bins with time-invariant thresholds and tracking over time the shares of workers in each, we do find a decline since 1973 in the share of workers earning middle wages. However, we find that a strong increase in the share of workers in the top bin is accompanied by a slight decline in the share in the bottom bin, inconsistent with employment polarization. Turning to occupation-based analysis, we show that the share of employment in low-wage occupations is trending up only from 2002-2012, and that the apparent earlier growth and therefore polarization found in the literature is an artefact of occupation code redefinitions. This new timing rules out the hypothesis that computerization and automation lie behind both rising wage inequality and occupation-based employment polarization in the United States.

Cyclical Labor Costs within Jobs

Using UK employer-employee panel data, we present novel facts on how wages and working hours respond to the business cycle within jobs. Firms reacted to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.8 percent for new hires and 2.6 percent for job stayers. Hiring hours worked were substantially procyclical, while job-stayer hours were acyclical. These results show that real wages are not rigid and that the labor costs of new hires are especially flexible.

The Heterogeneous Cyclicality of Income and Wages Among the Distribution in the UK

Abstract We investigate the cyclicality of real hourly wages and income using individual data for the UK over the 1991–2013 period. By paying special attention to the heterogeneity among different earnings and income groups, we document that individuals at the top of the distribution are more cyclical than lower ones. We also show that real wages and income are roughly acyclical for low-wage and low-income workers. In particular, we present evidence that the adjustment for low-paid workers takes place through transitions to and from unemployment.

The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces

The Incidence of the Corporate Income Tax on Wages: Evidence from Canadian Provinces

Casual employment and long-term wage outcomes

Temporary and other forms of non-standard employment are an important feature of modern labour markets. Yet, relatively little is known about how much and under what circumstances such employment arrangements impact on long-term wage outcomes. Using longitudinal data from the Household, Income and Labour Dynamics in Australia (HILDA) Survey spanning the period 2001 to 2014, we examine how employment status earlier in a working career is associated with subsequent wage dynamics. Particular attention is paid to how wage trajectories vary with gender and age. Estimates from a series of panel data models of real hourly wages reveal that among men there is an average long-run penalty from casual employment of about 10%, suggestive of scarring effects. Nevertheless, for men in most age groups this wage penalty does eventually begin to shrink. Among prime-age men, however, there is no evidence of catch-up; indeed, for this group the wage gap widens over time. Among women the estimated average long-run wage penalty associated with casual employment is both much smaller and less robust. We argue that expectations and norms about ‘ideal careers’ may be an important explanatory factor underlying the larger casual employment wage penalty for men.

Real Wages and Hours in the Great Recession: Evidence from Firms and Their Entry-Level Jobs

Using employer-employee panel data, we provide a novel set of facts on how real wages and working hours within jobs respond to the business cycle. In contrast to previous studies, our data enable us to address the cyclical composition of jobs. We show that UK firms were able to respond to the Great Recession with substantial real wage cuts and by recruiting more part-time workers. A one percentage point increase in the unemployment rate led to an average decline in real hourly wages of 2.8 per cent for new hires and 2.6 per cent for job stayers. Hours in entry-level jobs of new hires were also substantially procyclical, while hours of job stayers were nearly constant. We conclude that there is little evidence of real wage rigidity in the UK, and that the labour costs of new hires are especially flexible for jobs and firms.

Educational Mismatch and Returns on Human Capital in the Spanish Hospitality and Travel Agency Sectors

The authors analyse the returns on human capital and the importance of educational mismatch in determining wages in the Spanish hospitality and the travel agency sectors. In addition, they assess the impact of several job characteristics (business size, full-time contracts and permanent contracts) and personal characteristics (gender and worker nationality) on wages. Using an expanded Mincerian wage equation and data from the 2006 Spanish Wage Structure Survey, they estimate separate regressions for each educational group analysed: overeducated, undereducated and adequately educated workers. The results show that the return on human capital and the real hourly wage may be quantitatively influenced by educational mismatch. Moreover, evidence is presented regarding the impact of firm size on wage returns and the data also reveal wage differentials by the gender and nationality of workers in the Spanish hospitality industry.

Fixed Exchange-Rate Policy and Real Wage Growth: Quasi-Experimental Evidence

Using Difference-in-Differences estimation and data from the European Community Household Panel, this paper suggests that the fixed exchange-rate policy adopted by Italy in the 1997-2000 period has reduced the real hourly wage growth of Italian full-time workers with permanent contracts, on average, by 3%. Yet, the cost of the policy has been ultimately paid by the private sector where real wage growth has decreased by 5.4%.

How different are the wage curves for formal and informal workers? Evidence from Turkey

AbstractThis paper estimates wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005–2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a significant role in the economy. Using the Turkish Household Labour Force Survey observed over 26 NUTS 2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups.

The impact of sectoral minimum wage laws on employment, wages, and hours of work in South Africa

This paper attempts to investigate the impact of sectoral wage laws in South Africa. Specifically, we examine the impact of minimum wage laws promulgated in the Retail, Domestic work, Forestry, Security, and Taxi sectors using 15 waves of biannual Labour Force Survey data for the 2000–2007 period. Using a quasi-experimental approach, we apply two alternative specifications of a difference-in-differences model to estimate the impact of multiple minimum wage laws in South Africa on employment, wages, and hours of work. In order to assess whether the changes experienced by workers in the sectors analysed were unique to those sectors, a unique control group is identified for each sector. We find some evidence of a significant increase in real hourly wages in the post-law period in four of the five sectors examined. Our results also suggest that whilst there was no significant impact of the laws at the extensive margin, there was some evidence of an adjustment at the intensive margin in certain sectors. We also find that in three of the five sectors, increases in real hourly wages were sufficient to outweigh intensive margin adjustments so that workers in these sectors experienced an improvement in real monthly income as a result of the law. C21, J23, J30, J31, J38.

Educational Mismatch And Returns On Human Capital In The Spanish Hospitality And Travel Agency Sectors

This paper investigates the importance of returns on human capital and educational mismatch in determining wages in the Spanish hospitality sector and the travel agency sector using an expanded version of the Mincer wage equation (1974). In addition, we analyze the impact of several job characteristics and personal characteristics on wages. Using data from the 2006 Spanish Wage Structure Survey, we estimate separate regressions for each education group under analysis: overeducated, undereducated and adequately educated workers, following the method used by Kiker et al. (1997) and using a procedure similar to that used by Strauss and Maisonneuve (2007). The regressions show specific estimated parameters of the variables included in all wage equations implemented for each analyzed group. Thus, educational mismatch is determinant for the returns on human capital in both sectors and it also has a significant and differential impact on wage formation in each educational group. Moreover, this fact has also been shown in the other variables of the model that represent both the personal characteristics of workers and job-specific characteristics. Therefore, according to the methodology used in our study, the real hourly wage may be quantitatively influenced by the variables in a model depending on whether the educational level of the workers matches the educational requirements of the job performed. Finally, it is important to note that evidence has been found regarding the impact of firm size on wage returns and the data also has provided evidence of wage differentials by gender in the Spanish hospitality industry.

Real wage cyclicality and the Great Depression: evidence from British engineering and metal working firms

Based on occupation-level payrolls from around 2000 member firms of the British Engineering Employers' Federation we examine the behaviour of real hourly earnings over the 1927--1937 Great Depression cycle. Pay and working time data cover adult male blue-collar workers within engineering and metal working firms. We attempt to tackle the problem of countercyclical aggregation bias linked to workforce composition by distinguishing between pieceworkers and timeworkers who are broken down into 14 occupations and 51 travel-to-work engineering districts. We test for the likely effects on our estimates of within-occupation heterogeneity. For pieceworkers we find significant, though modest, real hourly wage procyclicality. Timeworkers' real hourly wages are found to be acyclical. Due to procyclical fluctuations in weekly hours, the real weekly pay of both pieceworkers and timeworkers are strongly procyclical. We compare hourly and weekly pay outcomes with findings based on more recent micro data. Copyright 2013 Oxford University Press 2012 All rights reserved, Oxford University Press.

How Different are the Wage Curves for Formal and Informal Workers? Evidence from Turkey

This paper presents wage curves for formal and informal workers using a rich individual level data for Turkey over the period 2005-2009. The wage curve is an empirical regularity describing a negative relationship between regional unemployment rates and individuals' real wages. While this relationship has been well documented for a number of countries including Turkey, less attention has focused on how this relationship differs for informal versus formal employment. This is of utmost importance for less developed countries where informal employment plays a significant role in the economy. Using the Turkish Household Labor Force Survey observed over 26 NUTS-2 regions, we find that real hourly wages of informal workers in Turkey are more sensitive to variations in regional unemployment rates than wages of formal workers. This is true for all workers as well as for different gender and age groups.

Unemployment and Labour Market Flexibility in the Great Depression

In historical studies of the labour market, one of the most extensively debated subjects has been unemployment during the Great Depression of the 1930s. According to a new panel data, the unemployment rate among construction workers in Helsinki was 45% in spite of extensive relief work. At the same time, real hourly wages dropped 25–35% and piecework rates 40–60%, which was an even more exceptional phenomenon. The main reasons for these phenomena were difficulties in financing construction work, the weakness of the trade union and the lack of unemployment benefits.