Wage Bill Research Articles

The Impact of the Paycheck Protection Program on Small Businesses: Evidence from Administrative Payroll Data

This paper uses administrative data from a private payroll processor whose clients are primarily very small businesses (median 5 employees) to measure both which firms apply for financial relief through the Paycheck Protection Program (PPP) and the effects of this financial relief. Conditional on industry, larger firms with higher average wages were more likely to apply, indicating that the PPP funds disproportionately flowed towards larger firms with higher paid employees. Firms that applied for PPP funds increased their average employment by 6.25% one month following the program's launch relative to those that did not apply, but the effect declines to zero within three months of applying. There is no measurable impact of the PPP on the firms' wage bills in aggregate. Moreover, the positive effects on employment occur entirely in industries in which firms are not affected by government shut-downs or higher levels of COVID-19, namely industries with more employees that are able to work remotely and fewer hourly workers, or essential businesses. My estimates imply a cost of approximately $300,000 per job preserved as of September 2020, suggesting that less than 10% of the PPP funds went directly to preserved employee wages.

Misallocation and Capital Market Integration: Evidence from India

We show that foreign capital liberalization reduces capital misallocation and increases aggregate productivity in India. The staggered liberalization of access to foreign capital across disaggregated industries allows us to identify changes in firms' input wedges, overcoming major challenges in the measurement of the effects of changing misallocation. For domestic firms with initially high marginal revenue products of capital (MRPK), liberalization increases revenues by 25%, physical capital by 57%, wage bills by 27%, and reduces MRPK by 35% relative to low MRPK firms. There are no effects on low MRPK firms. The effects of liberalization are largest in areas with less developed local banking sectors, indicating that foreign capital partially substitutes for an efficient banking sector. Finally, we develop a novel method to use natural experiments to bound the effect of changes in misallocation on treated industries' aggregate productivity. Treated industries' Solow residual increases by 4-17%.

Korean Industrialization, Skill Demand, and Wage Premium

This paper aims to observe the evolution of skilled labor demand and relative wages during the rapid industrialization period. Although this historic episode has attracted the researchers’ attention, the evolution of skill demand and its impact on inequality remained as a black box. To provide first-hand evidence, I construct a 3-digit industry-level dataset that covers 1955-1980 from the Mining and Manufacturing survey. Then I measure skill demand and relative wages following the skill-biased technological change literature. Analysis results show that Korea experiences drastic skill upgrading during its rapid industrialization. The nonproduction workers’ share in wage bill increased throughout the 25 years of 1955-1980. Relative demand rose much faster in industries that were initially less skill-intensive but accumulated capital through investment faster. This implies that there was a strong skill-capital complementarity. Increasing skill demand and skill-capital complementarity are a force of increasing skill premium in wages and wage inequality. It was so until 1973. However, since then relative wages fell while skill demand kept rising. This is unique to the Korean experience, It also implies that the supply of skilled labor expanded even faster than the skill demand. Although it is possible to connect this to the heavy-chemical industrialization, falling skill premium and inequality was most driven by the “within” or common effect. Furthermore, emerging heavy-chemical industries had greater skill demand, therefore a positive effect on relative wage.

THE FINANCIAL RESOURCES OF STATE SOCIAL INSURANCE: TWO-FACTORS MODELS OF FORMATION

The purpose of the article is to consider the impact of a number of factors (the wage fund in the economy, its share in GDP, and state social insurance fees rates) on the result indicator – the amount of the financial resources of the state social insurance. Two-factor models of the formation of financial resources of the state social insurance in the article have investigated. The largest change in the result indicator has caused by the size of the wage fund in the economy and the size of the insurance fees rate is calculated. The current practice of reducing the number of insurance fees in 2016 negatively affected the number of financial resources of state social insurance have investigated. It is determined that the reserve for increasing the result indicator is an increase in the absolute size of the wage fund in the economy, which taxpayers due to certain circumstances do not seek to declare and tax. To a lesser extent, such a reserve is the share of the wage bill in the country's GDP.

The Wage Bills of COVID-19

The Wage Bills of COVID-19

Sharing the Burden? Empirical Evidence on Corporate Tax Incidence

AbstractThis study investigates the direct incidence of the corporate income tax (CIT) through wage bargaining, using an industry-region level panel dataset on all corporations in Germany over the period 1998-2006. For the first time we account for employment effects which result from tax-induced wage changes. Workers share in reductions of the CIT burden; yet, the net effect of wage bargaining on the corporate wage bill, after an exogenous €1 decrease in the CIT burden, is as little as 19-28 cents. This is about half of the effect obtained in prior literature focussing on wages alone.

Directing O'Neill: Mourning Becomes Electra, Long Day's Journey Into Night, Desire Under the Elms, Days Without End

Directing O'Neill: <i>Mourning Becomes Electra, Long Day's Journey Into Night, Desire Under the Elms, Days Without End</i>

Capital Allocation Across Regions, Sectors and Firms: Evidence from a Commodity Boom in Brazil

We study the allocation of capital across regions, sectors and firms. In particular, we assess to what extent growth in agricultural productivity can lead to an increase in the supply of credit in industry and services. For this purpose, we identify an exogenous increase in agricultural profits due to the adoption of genetically engineered soy in Brazil. We find that regions with larger increases in agricultural productivity experienced larger increases in local bank deposits. However, there was no increase in local bank lending. Instead, capital was reallocated towards other regions through bank branch networks. This increase in credit supply affected firms' credit access through the extensive and intensive margin. First, regions with more bank branches receiving funds from soy areas experienced an increase in credit market participation of small and medium sized firms. In addition, banks experiencing faster deposit growth in soy areas increased their lending to firms with whom they had preexisting relationships. In turn, these firms grew faster in terms of employment and wage bill. Our estimates imply that the elasticity of firm growth to credit is largest in the manufacturing sector. These findings suggest that agricultural productivity growth can lead to structural transformation through a financial channel.

Executive Compensation and Labor Expenses

Abstract Using data on US public firms, I uncover a strong and positive correlation between executive compensation and labor expenses. On average, a 1 % increase in the wage bill translates into a 0.3 % raise in total executive pay. This association is driven by wages rather than by employment growth, is stronger for the incentive than for the salary component of executive compensation, and is particularly pronounced in the financial sector.

Is There a Gender Wage Gap in Online Labor Markets? Evidence from Over 250,000 Projects and 2.5 Million Wage Bill Proposals

We explore whether there is a gender wage gap in one of the largest EU online labor markets, PeoplePerHour. Our unique dataset consists of 257,111 digitally tradeable tasks of 55,824 hiring employers from 188 countries and 65,010 workers from 173 countries that made more than 2.5 million wage bill proposals in the competition for contracts. Our data allows us to track the complete hiring process from the employers' design of proposed contracts to the competition among workers and the final agreement between employers and successful candidates. Using Heckman and OLS estimation methods we provide empirical evidence for a statistically significant 4% gender wage gap among workers, at the project level. We also find that female workers propose lower wage bills and are more likely to win the competition for contracts. Once we include workers' wage bill proposals in the regressions, the gender wage gap virtually disappears, i.e., it is statistically insignificant and very small in magnitude (0.3%). Our results also suggest that female workers' higher winning probabilities associated with lower wage bill proposals lead to higher expected revenues overall. We provide empirical evidence for heterogeneity of the gender wage gap in some of the job categories, all job difficulty levels and some of the worker countries. Finally, for some subsamples we find a statistically significant but very small reverse gender wage gap.

Burkina Faso

In light of widespread concern about the security crisis and protracted public sector pay disputes, the government resigned in January 2019. The new government, installed with a mission to combat the security crisis with more vigor, remains under tremendous pressure. Growth in 2018 remained resilient as a bumper harvest more than compensated for a decline in non-agricultural GDP growth. Inflation remained subdued, and the overall fiscal deficit declined below 5 percent of GDP, though essentially at the cost of lower public investment. Given difficulties in moving ahead with a constitutional reform, the authorities are now focusing on a two-stage strategy to contain the wage bill. First, in the near term, transitional measures will be implemented and the outlook for the wage bill would remain in line with the understandings reached at the first review. Second, in the meanwhile, the authorities will continue exploring politically feasible ways to adopt their reform package. The main risks to the program stem from heightened security risks and further labor disputes.

Parliament of Uganda Passes the Minimum Wage Bill 2019

Parliament of Uganda Passes the Minimum Wage Bill 2019

Burkina Faso

Burkina Faso faces large social and physical infrastructure gaps, a deteriorating security situation, and unease among the rapidly-expanding population about economic prospects. Growth has been robust, averaging more than 6 percent over the past two years. Activity has been supported by expansionary fiscal policy, including from a boost to capital spending in 2017. Revenue has not increased as expected and the wage bill has been rising.

Fiscal Implications of Government Wage Bill Spending

This paper discusses the short- and medium-term fiscal implications of government wage bill spending. Working with a sample of 137 advanced, emerging and low-income countries, we use a panel VAR approach to identify differences in the dynamic behavior of revenues, nonwage expenditures, and the overall fiscal balance in response to changes in the wage bill. We show that the interaction between wage bill changes and these three fiscal items is alike and varies overtime. Higher wage bill spending does not revert in the medium term, but the initial worsening of the fiscal balance associated with it, though it persists, eventually halves as revenues increase while non-wage spending remains broadly unchanged. We also show that countries differ in how these three fiscal variables behave following wage bill changes and seek to explain this variation by a set of country characteristics, including the level of development, access to natural resources and public indebtedness levels.

Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union

In this study, we assess the size of the government wage bill and employment in the member countries of the Eastern Caribbean Currency Union and their implications for fiscal sustainability and the adequacy of public service delivery. Over the period 2005 to 2015 their wage bill (as a percentage of GDP, government revenues and expenditures) is higher than in other small states notwithstanding recent efforts by governments to make it more manageable. The composition and distribution of employment is sub-optimal and is reflected in skills mismatches contributing to inefficiencies in public service delivery. Using a dynamic fixed-effects panel, we find that wage bill growth reflects the expansion of government activities to speed up economic and social development and that wage bill spending is procyclical in good times but is rigid during downturns. Finally, we identify the main institutional and legal reforms needed to improve wage bill management and public service efficiency.

Unemployment Surges in the EU: The Role of Risk Premium Shocks

In the last decade, over half of the EU countries in the euro area or with currencies pegged to the euro were hit by large risk premium shocks. Previous papers have focused on the impact of these shocks on demand. This paper, by contrast, focuses on the impact on supply. We show that risk premium shocks reduce the output level that maximizes profit. They also lead to unemployment surges, as firms are forced to cut costs when financing becomes expensive or is no longer available. As a result, all countries with risk premium shocks saw unemployment surge, even as euro area core countries managed to contain unemployment as firms hoarded labor during the downturn. Most striking, wage bills in euro area crisis countries and the Baltics declined even faster than GDP, whereas in core euro area countries wage shares actually increased.

Unemployment Surges in the EU: The Role of Risk Premium Shocks

In the last decade, over half of the EU countries in the euro area or with currenciespegged to the euro were hit by large risk premium shocks. Previous papers havefocused on the impact of these shocks on demand. This paper, by contrast, focuses onthe impact on supply. We show that risk premium shocks reduce the output level thatmaximizes profit. They also lead to unemployment surges, as firms are forced to cutcosts when financing becomes expensive or is no longer available. As a result, allcountries with risk premium shocks saw unemployment surge, even as euro area corecountries managed to contain unemployment as firms hoarded labor during thedownturn. Most striking, wage bills in euro area crisis countries and the Balticsdeclined even faster than GDP, whereas in core euro area countries wage sharesactually increased.

Fiscal Implications of Government Wage Bill Spending

Fiscal Implications of Government Wage Bill Spending

Union Membership and Employment Dynamics: The Role of the Union Objective Function

This paper studies the behaviour of a labour union in a model with employment and membership dynamics. It is known from the literature that the relative level of employment between intertemporal and static union models is affected by the structure of the union density function. We show that this result does not hold in general but rather that it depends on the union objective function. If the union maximises the wage bill of their members, employment in the intertemporal model will differ from employment in the static model depending on the union density function. However, if the union maximises the rent from unionisation, the intertemporal model will yield the same level of employment as the static model regardless of the union density.

Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union

Government Wage Bill Management and Civil Service Reform in the Eastern Caribbean Currency Union