Wage Bill Research Articles

What is Your Gain? Tempests in Implementing the Capital Gains Tax on Property Transactions in Kenya

1st January 2015. Kenya re-introduced Capital Gains Tax which had been suspended in 1985 so as to encourage growth in the real estate and capital markets sectors. However, after budgetary constraints due to among others ambitious development projects and a growing wage bill, there was need for the Kenyan Government to broaden the tax net. The Capital Gains Tax was viewed as a low hanging fruit considering it would have been inequitable to further tax the incomes of already overtaxed populace while still shielding capital gains from tax. This paper interrogates the background of Capital Gains Tax in Kenya, the legal framework and further analysis the challenges of its implementation in property transactions. The argument is, reintroduction of Capital Gains Tax is welcome for it helps in ensuring taxation equity. It is noted that as part of law reform process, there is need to streamline Capital Gains Tax legal framework to harmonize it with the realities such as inflation and currency depreciation. This would in turn make the collection more effective and reduce negative ripple effects on key sectors of the economy such as the securities market.

Working capital requirement and the unemployment volatility puzzle

Shimer (2005) argues that a search and matching model of the labor market in which wage is determined by Nash bargaining cannot generate the observed volatility in unemployment and vacancy in response to reasonable labor productivity shocks. This paper examines how incorporating monopolistically competitive firms with a working capital requirement (in which firms borrow funds to pay their wage bills) improves the ability of the search models to match the empirical fluctuations in unemployment and vacancy without resorting to an alternative wage setting mechanism. The monetary authority follows an interest rate rule in the model. A positive labor productivity shock lowers the real marginal cost of production and lowers inflation. In response to the fall in price level, the monetary authority reduces the nominal interest rate. A lower interest rate reduces the cost of financing and partially offsets the increase in labor cost from a higher productivity. A reduced labor cost implies the firms retain a greater portion of the gain from a productivity shock, which gives them a greater incentive to create vacancies. Simulations show that a working capital requirement does indeed improve the ability of the search models to generate fluctuations in key labor market variables to better match the U.S. data.

Estimating Nursing Wage Bill in Canada and Breaking Down the Growth Rate: 2000 to 2010

Even though the nursing professional category (registered nurses [RNs] and licensed practical nurses) made up about one-third of the Canadian health professionals, no study exists about their wage bill, the composition and growth rate of this wage bill. This paper attempts to fill this gap by estimating the nursing wage bill in the Canadian provinces and breaking down the growth rate for the 2000-2010 period, using the 2001 Census and the 2011 National Household Survey. Total wage bill for the nursing professional category in Canada was estimated at $20.1 billion ($17.3 billion for RNs), which suggests that it is as substantial as net physician remuneration. The average annual growth rate of this wage bill was 6.6% for RNs. This increase was mainly driven by real (inflation-adjusted) wage per hour, which was 3.0%, suggesting the existence of a “health premium” of 1.7 percentage points during the study period.

O perfil socioeconômico das donas de casa na Nicarágua

O propósito deste artigo é caracterizar o perfil socioeconômico das donas de casa nicaraguenses e refletir sobre sua contribuição monetária para o Produto Interno Bruto. Os resultados da análise estatística mostraram que o trabalho doméstico, que em geral é invisível e não valorizado, é responsabilidade da mulher. Estimou-se que, em termos monetários, a massa salarial do trabalho doméstico em Nicarágua oscilaria entre 8,0% e 22,1% do PIB. Concluiu-se que, apesar de sua relevância na produção nacional, o lugar que a mulher ocupa na sociedade é determinado por seu papel na família, em função dos estereótipos de gênero

The German Right to anExistenzminimum, Human Dignity, and the Possibility of Minimum Core Socioeconomic Rights Protection

Due to the financial crisis, European states are struggling to make both ends meet and comply with budgetary requirements, This results in cutting pensions and the public wage bill, as well as in phasing out subsidies and other forms of assistance, Although welfare state arrangements have become more limited in the past several decades, especially now, in these times of austerity, it is worth asking how far states can go in limiting social welfare programs, On the one hand, it can be said that there need to be fundamental rights-based limits to the legitimate phasing out or cutting down of existing arrangements to ensure that a minimum level of social arrangements is at all times guaranteed. On the other hand, it is hard to curtail the legislature's freedom by setting such limits, as the political sensitivity, technical aspects, and budgetary implications of social measures seemingly do not allow for too much fundamental rights rhetoric.

The effect of state taxes on the geographical location of top earners: evidence from star scientists

Using data on the universe of U.S. patents filed between 1976 and 2010, we quantify how sensitive is migration by star scientist to changes in personal and business tax differentials across states. We uncover large, stable, and precisely estimated effects of personal and corporate taxes on star scientists’ migration patterns. The long run elasticity of mobility relative to taxes is 1.6 for personal income taxes, 2.3 for state corporate income tax and -2.6 for the investment tax credit. The effect on mobility is small in the short run, and tends to grow over time. We find no evidence of pre-trends: Changes in mobility follow changes in taxes and do not to precede them. Consistent with their high income, star scientists migratory flows are sensitive to changes in the 99th percentile marginal tax rate, but are insensitive to changes in taxes for the median income. As expected, the effect of corporate income taxes is concentrated among private sector inventors: no effect is found on academic and government researchers. Moreover, corporate taxes only matter in states where the wage bill enters the state’s formula for apportioning multi-state income. No effect is found in states that apportion income based only on sales (in which case labor’s location has little or no effect on the tax bill). We also find no evidence that changes in state taxes are correlated with changes in the fortunes of local firms in the innovation sector in the years leading up to the tax change. Overall, we conclude that state taxes have significant effect of the geographical location of star scientists and possibly other highly skilled workers. While there are many other factors that drive when innovative individual and innovative companies decide to locate, there are enough firms and workers on the margin that relative taxes matter.

Public Policy Induced Changes in Employment: Valuation Issues for Benefit-Cost Analysis

We explore the economic welfare effects of direct and indirect government-induced changes in employment under varying market conditions. We begin with a discussion of those policy-induced employment changes that seamlessly reshuffle workers among jobs in an efficient (i.e., full-employment, full-information) economy; generally such changes create few, if any, net changes in economic welfare not captured in changes in wage bills. We then turn to the effects of policy-induced employment changes in economies with two market distortions: (1) inflexible wages set by law or custom that result in involuntary unemployment during periods of deficient aggregate demand, and (2) illiquidity resulting from imperfect capital markets that prevent people from borrowing against future earnings. Induced employment changes in these circumstances impose real net social costs or generate real net social benefits beyond changes in the wage bill. We also assess the likely magnitude of the social opportunity cost of labor in the case of involuntary unemployment and imperfect liquidity, and address how the welfare effects of such employment changes should be valued. Based on currently available empirical research, we develop estimates of the opportunity costs of hiring or releasing an employee during periods of high unemployment with and without other market distortions. In contrast to conventional benefit-cost analysis practice, which treats releasing workers as having a negative opportunity cost, we estimate an opportunity cost for firing that is positive and equal to about 73% of pre-firing compensation, primarily because of the “scarring effect” of unemployment. Also in contrast to conventional practice, we estimate an opportunity cost for hiring an unemployed worker that is less than the worker’s opportunity cost of time.

Multiunion Bargaining: Tariff Plurality and Tariff Competition

We study (efficient) sequential bargaining between two unions and a single firm. If unions are perfectly substitutable (tariff competition ), then there is a first-mover advantage and the second union is foreclosed. If unions are perfectly complementary (tariff plurality ), then there is a second-mover advantage, so that the first union's wage bill is smaller than the second union's. If unions represent worker groups each producing a differentiated good, then overemployment (underemployment) occurs when goods are substitutable (complementary). Unions merge when workers are substitutable but stay separate when they are complementary, so that the inefficiencies associated with craft unionism persist.

Who Exports High-Quality Products? Some Empirical Regularities from Greek Exporting Firms

This study assesses the quality of Greek exports and links the estimates with exporters’ characteristics. Export quality in manufacturing is estimated to have fallen by 1% per year on average for the period 1998-2010, but recovered in 2011 and 2012 when export quality displayed a cumulative rise of 25.7%, yielding a cumulative rise of 9.2% for the entire period 1998-2012. Export quality in agriculture displays a slightly upward trend with the average annual rise over the period 1998-2012 amounting to 1.6%. Linking the quality estimates at the product level with exporting firms in the manufacturing sector shows that higher product quality is associated with firms that have a higher share of their wage bill paid to skilled workers. This positive relationship stems from firms with higher skilled to unskilled employment ratios, rather than higher wage skill premia, and is more pronounced in large and rich destinations.

The collection of pension contributions: a comparative review of three Central European countries

This article presents a comparative review of systems of collection of pension contributions in three Central European countries. We discuss some basic requirements for successful contribution collection and show how these three countries fare in that regard. The changing role of the social security institutions is described. The broad trend toward integrated collection systems, with an enhanced role of the tax authority is clearly discerned, although with some country-specific features. Contribution compliance is analysed for the largest group of insured persons – employees, using the indicator: covered wage bill (as percentage of GDP). The value of this indicator has mostly been decreasing in the 2000s. This is not a satisfactory development and could contribute to the deteriorating financial sustainability of public pension systems.

Causality between public wage bill, exports and economic growth in Slovenia

This article aims to investigate the causal relationship between economic growth, exports and public wage bill spending, using the Johansen cointegration, Granger causality test, variance decomposition (VDC) and impulse response function (IRF). The empirical investigation focuses on the case of a small open and export-oriented Slovenian economy, where public wage bill spending accounts for a sizable share of public expenditure. The results show a significant impact of public wage bill spending on exports. Reduction of public wage bill spending should be adapted to the circumstances in the economy to assure financial consolidation.

Report: US policy in Honduras causes migration

The delegation’s report is unusually critical of US foreign and immigration policies a return in some ways to labour condemnation of US intervention during the civil wars in Central America INTERNATIONAL union rights Page 25 Volume 22 Issue 1 2015 Although the report doesn’t mention it, the head of the dockers’ union, Victor Crespo, was forced to flee Honduras after his father was killed and mother injured, and he himself received threats to his life. A support campaign by the US International Longshore and Warehouse Union helped save his life, and eventually won guarantees that allowed his safe return to Honduras. The AFL-CIO report condemns a plan to ‘reduce the wage bill’ in the public sector by cutting jobs and privatising public services, especially in electricity. It points out that this reflects the policies of the International Monetary Fund, which called for cutting the public sector from 7.5 percent of GDP to 2 percent in four years. The resulting job loss has a clear impact on increasing poverty, forcing many Hondurans to migrate in search of survival. The report makes the case that poverty in Honduras has been deepened by the impact of the Central American Free Trade Agreement: ‘today, Honduras is the most unequal country in Latin America’. Poverty rose from 60 to 64.5 percent from 2006 to 2013. By emphasising a policy that deregulated business and used low wages as an incentive to attract foreign investment, ‘CAFTA only exacerbated the desperation and instability in Honduras’, it charges. ‘Honduran workers identified the 2009 Honduran coup d’état and the subsequent militarisation of Honduran society, and the implementation of CAFTA and its impact on decent work and labour rights, as two essential elements to understanding the current crisis’. Backing up the increasing militarisation of Honduran society is US military aid, which reached $27 million in 2012. The report notes that both Assistant Secretary of State William Brownfield and Commander John Kelly of the United States Southern Command praised Honduran ‘advances in security’. In the US media, General Kelly has demonised migration from Central America, calling the movement of families and children a national security threat and a ‘crime-terror convergence’. That migration, described in the AFL-CIO report, has grown sharply. More than 18,000 unaccompanied Honduran children arrived in the United States in 2014 alone. ‘In 1990, there were approximately 109,000 Honduran migrants in the world. In 2010, that number grew close to 523,000, with the vast majority living in the United States’, it says. ‘Today, migration is seen by many families as a means to escape violence or seek employment opportunity or reunite with family, while the government has embraced the remittances from migrants as a major economic resource’. Three quarters of those migrants, arriving in the I n the wake of the political crisis in the United States last year, caused by the migration of large numbers of children from Central America to the US/Mexico border, the AFL-CIO in November sent a delegation to Honduras, the country that sent the greatest number of unaccompanied minors. ‘What we witnessed’, reported Tefere Gebre AFL-CIO Executive Vice President, ‘was the intersection of our corporate-dominated trade policies with our broken immigration system, contributing to a state that fails workers and their families and forces them to live in fear’. The report, in fact, contains a frank assessment of the history of US foreign policy in Honduras, and draws out the disastrous consequences it has created in that country today. ‘The fate of Honduras long has been tied to that of the United States’, it charges. ‘Throughout the 20th century, Honduras was key to maintaining US military and economic interests on the isthmus. The US military intervened in Honduran politics throughout the early 20th century to protect the foreign investments of large US corporations like the United Fruit Co. Later, Honduras served as a base of operations during the US-supported 1954 coup in Guatemala, as well as the 1961 Bay of Pigs invasion, and during the years of civil war and Cold War proxy wars in Central America in the 1970s and ‘80s, the government provided support for the ‘Contra...

Convergence in the pre-1914 Atlantic economy: what really happened to wages in Ireland between 1881 and 1911?

After the Famine, Irish wages caught up to those of Great Britain. Catch-up is ascribed to globalised labour markets and the effects of emigration. However current estimates of the level of Irish wages and their rate of growth are based on a small sample of the male workforce. This article presents estimates of the average wage for all wage earners and the Irish wage bill. This enables an estimate of an (implied) British average wage and wage bill. The new estimates show that although there was significant wage catch-up in a few occupations, in general catch-up was less rapid than recent studies have suggested. The origins of this catch-up are also examined. Consistent with earlier studies which emphasise modernisation of the post-Famine economy, the evidence of this article is consistent with the effects of traditional convergence forces such as TFP growth, capital accumulation and structural change operating alongside the effects of emigration.

Fiscal Deficits in Egypt: Is It A Macroeconomic or Politico-Institutional Problem?

This paper aims at finding and analyzing the key determinants of Egypt’s fiscal deficits for the period of 1985–2013. It hypothesizes that the political and institutional factors are more important than macroeconomic variables to explain the fiscal deficits of the country in question. In carrying out the research, the paper employs ARDL technique. Findings of the study include that the growth in interest payments, public wage, and subsidy bills are the key sources of fiscal deficits in Egypt. They separately outweigh most of the gains with tax revenues. The reason for this kind of results is found to be largely due to adverse political and institutional factors prevailing in the country. In order to estimate the individual influences of the factors, we use Variance Decomposition Method. Policy implications of the research suggest that to control the future risks of fiscal deficits in Egypt, it is necessary to restrict the growth of subsidy bill and interest payments. However, more efforts are needed to reform the entire tax revenue system and its collection procedures. In addition, policy makers should adopt massive and appropriate political and institutional reform measures.

How the VC Industry Transformed an Economy: Evidence from Two Decades of Israeli High-Tech Sector

We question the impact of the Venture Capital industry on its hosting economy. This area is rarely explored because 90% of the VC investments are in the US and other large economies, wherein the impact of the VC is too small to be measured. Israel presents a unique case in which the activity of the VC industry over two decades (1993-2012) made the Israeli an exporter not only of High-tech hardware and software but also of intangible assets such as patents knowhow and expertise.In the knowledge-based world, ideas are an important driver for growth and development. It takes a long time to turn ideas into actual cash flows. The VC industry provides an excellent example for an industry that is based on the ability to bring together ideas and high risk capital in a process that generates value. Of particular interest is the case where the entrepreneurs reside in one country and the investors reside in another country. In this paper we show that in this case there are two types of benefits; the benefits to the entrepreneurs and the investors, and the benefits to the country where the investment takes place. The first type of benefits depends on the success of the young innovative technology firms. The second type of benefits depends on the total flow of high-risk capital from the country of the investors to the country where the investment takes place. The two main components of the second macro benefit are the wages of the local high skilled and other workers; and the tax that they pay. Israel is a good example for a country that benefits substantially from the import of high-risk capital, primarily from the US, via venture capital fund. We use hand-picked database to estimate the total benefit to the Israeli economy from the investment of venture capital funds, which are funded by foreign high-risk capital.Our main result is a direct empirical measure showing that the benefits to the Israeli economy from the wage bill which is generated by the VC investment is at least ten-times larger than the direct benefits from the successful start-ups only. This result can be translated into an optimal governmental policy of incentives that are set to keep cost-benefit efficient success rate.

Tax Credits and Small Firm R&D Spending

In 2004, Canada changed the eligibility rules for its Scientific Research and Experimental Development (SRED) tax credit, which provides tax incentives for R&D conducted by small private firms. Difference in difference estimates show a seventeen percent increase in total R&D among eligible firms. The impact was larger for firms that took the tax credits as refunds because they had no current tax liability. Contract R&D expenditures were more elastic than the R&D wage bill. The response was also greater for firms that invested in R&D capital before the policy change.

I'll be gone, you'll be gone: why American employers underinvest in health.

It has become increasingly common to hear a business case for wellness that emphasizes the benefits of having a healthy workforce. This is essentially the same as the case for employers to train their workers; training a worker and investing in the health of the worker both represent a productivity-enhancing investment in the worker by the firm. The problem is that the employer frequently fails to capture the returns on the investment. A healthier or better-skilled worker can command a higher wage and threaten to leave the firm making the investment. This risk of failing to capture the gains from investment produces underinvestment in skills and, by the same mechanism, should produce underinvestment in workforce wellness. We further divide wellness into positive and negative policies: Positive wellness is an investment, expenditure on the workforce in expectation of future increased returns, or perhaps better recruitment and retention. Negative wellness is an effort to reduce the wage bills associated with ill health with, for example, co-pays. Most stable and meaningful employer wellness programs are likely to be negative wellness programs that reduce the effective wages of the sick.

Executive compensation: A general equilibrium perspective

We study the dynamic general equilibrium of an economy where risk averse shareholders delegate the management of the firm to risk averse managers. The optimal contract has two main components: an incentive component corresponding to a non-tradable equity position and a variable “salary” component indexed to the aggregate wage bill and to aggregate dividends. Tying a manager's compensation to the performance of her own firm ensures that her interests are aligned with the goals of firm owners and that maximizing the discounted sum of future dividends will be her objective. Linking managers' compensation to overall economic performance is also required to make sure that managers use the appropriate stochastic discount factor to value those future dividends. General equilibrium considerations thus provide a potential resolution of the “pay for luck” puzzle. We also demonstrate that one sided “relative performance evaluation” follows equally naturally when managers and shareholders are differentially risk averse.

On the relationship between effective demand and income distribution in a Kaleckian framework

The work takes up some issues raised by Kalecki in his posthumously published article “Class struggle and distribution of national income”. By using Marx’s schemes of reproduction, Kalecki was able to prove that, in a given short period, a part of the wage bill is positively related to the level of profits in the consumption goods sector and through the latter, to the level of aggregate profits. Following Kalecki’s methodology of a two sector Marxian model, the author introduces inventories into the framework. In order to do so critical analysis of the supply functions postulated in most of his earlier works on oligopolistic pricing is provided. It is then demonstrated how even under the most favourable short-run technological conditions, bottlenecks may arise depending on the price/cost relation and on the level of inventories in the way described by Hicks. Finally, capital accumulation is introduced into the framework and it is argued that longer run inventories play a much reduced role.

Public Employment and Compensation Reform During Times of Fiscal Consolidation

This paper compiles and compares recent and past measures introduced to contain the public wage bill in a number of emerging and advanced economies to assess their effectiveness in bringing down expenditure in a sustained way. In the aftermath of the Great Recession a number of countries have approved measures on the wage bill as part of fiscal consolidation efforts. These recent episodes are compared to past cases implemented in advanced economies over the period 1979–2009. Findings suggest that public wage bill consolidation episodes pre and post 2009 are similar in many respects. Moreover, typically countries that were able to achieve more sustained reductions in the wage bill have implemented to larger extent structural measures, and/or these measures were accompanied with substantial social dialogue and consensus.