Wage Determination Process Research Articles

The Dynamics of Pro-Government Labour Mobilisation in Cambodia

Following the 2013 electoral setback and post-election protests, the ruling Cambodian People’s Party has pursued policy concessions to mobilise support from workers in the garment industry. This article examines the role of government-aligned unions in vote mobilisation. It is argued that despite their under-performance in the 2013 election, government-aligned unions retain the trust of the Cambodian People’s Party leadership and continue to play a vital role in facilitating co-optation by communicating public policies and political messages to workers, influencing the minimum wage determination process, and delivering free healthcare services. This article contributes to the growing literature on the Cambodian People’s Party’s post-2013 adaptation and the broader literature which often focuses on labour unions in single-party regimes.

Demand and supply effects on native-immigrant wage differentials: the case of Malaysia

This paper uses a matched employee-employer dataset using the Productivity and Investment Climate Survey 2007 to assess the relative effect of demand and supply-side characteristics on the wages of native and immigrant workers in Malaysia. In doing so, the study demonstrates noteworthy differences in the wage determination process. Individual supply-side characteristics are found to be a key determinant of wages for native workers, and are relatively more important in explaining the wage variation than demand-side effects. In contrast, individual supply-side characteristics are found to explain noticeably less of the wage variation for immigrant workers. Therefore, this study reveals that native and immigrant wages do not solely reflect the workers’ productivity, although this effect is far more pronounced for the migrant workers.

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.

Wage Rate: Is this Return to Education or Return to Physical Capability? Evidence from Rural India

This paper estimates the wage function for daily labor market participants in Semi-Arid Tropics of rural India within a traditional agrarian framework. Village level data on 18 villages for 2009–2010 and 2012–2013 have been used for this study. Three-years balanced panel estimation has also been conducted to test the time invariance of the findings from the cross-sectional study. A modified Mincerian earning equation is estimated for different types of workers—regressing upon a set of human capital measures, socioeconomic factors and, demand influences after correcting for potential sample selection bias. The study finds differential impacts of education and physical ability to determine wages for male and female workers. It reveals the greater importance of education in explaining wages of male laborers while for females, nutritional status playing a significant role than education in wage determination process. Among the other factors, drought works as a major exogenous shock and hence impacts wages badly. Working in the non-farm sector has a significant impact on wages. Also, the wage–participation relationship has found more operative in the lower section of the society.

The wage-productivity nexus in the world factory economy

This paper highlights new findings on the wage-productivity nexus in the World Factory Economy. After presenting the long-run macro-elasticity characterizing the phase of Chinese economic development since the eighties, we look at the wage-productivity nexus from a micro level perspective using a detailed firm-level dataset covering the period of ownership restructuring (1998–2007). A few results are quite robust under different estimation strategies. First, throughout the impressive Chinese economic miracle, elasticities of real wages to productivities – that is the ratios of rates of variation of the former to the latter – are always positive both under pooled and longitudinal estimates, both at firm- and sectoral-levels. Second, such elasticities are dramatically low, and falling in many distinct phases since the late seventies. That is, even in the manufacturing sector, the distribution of gains from the impressive labour productivity growth appears to be markedly uneven. Finally, third, governance institutions seem to matter a lot, with the majority of ownership types exhibiting firm-specific wage determination processes. The low elasticities of wages to productivity are plausibly the consequence of the massive flow of migrant workers from the rural areas to the coasts, somewhat resembling the early phase of the English Industrial Revolution with the pattern of enclosure in the country-side and massive migrations to the industrial towns.

Reflections of Wage Discrimination on Poverty: Assessment of Indian Rural Labour Market

In this research paper, we have tried to probe the effect or reflections of wage discrimination on poverty. It is found that the differences in the wage determination process in the public and private sectors may result in earning differentials across socio-religious groups. Many of the research community have been given data about discrimination in the labour market. In this particular paper, we have given the results of data interpretation for wage discrimination and its direct or indirect relation with poverty. The analysis has been presented for mainly three types of work; regular, casual and self-employed work. For the query of wage discrimination and its effect on poverty, we had divided the households into two parts, the first type of households whose household’s MPCE is below the poverty line and second whose household’s MPCE is higher the poverty line. The findings of the study make clear that the average daily wage for all type work of lower caste is less than the upper caste. The results also show that the poor household has found higher in lower caste in comparison to upper caste. The differences in the average wage-earning among the social groups for the same types of work may be the case of discrimination and poverty. The result argued to policymakers that they should frame an appropriate plan to address this issue and work for indiscrimination in the labour market and job creation in the rural areas.

Setting National Minimum Wages for Nepal: A Need-Based Approach

Method of setting minimum wages has been a debatable issue across the world. Various countries have adopted various methods of minimum wage determination process primarily formulas, government rate setting, union bargained rates, and rate recommended by an expert body. International Labour Organization (ILO) puts forth that the process of setting-up minimum wages should be scientific and accommodative of the needs of the workers and their families. Although minimum wages remains an utmost prority as a redistributive tool, studies shows that its fixation are mostly driven by political interest of the incumbent government and the interest of the private sector. Nepal is not an exception to this. This paper attempts to propose a need based method of setting minimum wages for Nepal. In addition to the food and non-food information, unlike previous need based approaches, this study uses housing information from the nationally representative household survey to derive the minimum wages for Nepal. The minimum monthly salary/wages at 2019/20 prices per household is estimated at NRs. 21799 and daily wages is estimated at NRs. 838.43.This study is expected to guide policy makers in setting evidence-based minimum wages for Nepal.

Market Returns to Education in Pakistan, Corrected for Endogeneity Bias

This paper estimates the Mincer wage model for Pakistan’s labor market, using a relatively recent dataset and new independent variables. We employ instrumental variables and two-stage least squares to address the problem of the endogeneity of education. Our results show that the returns to education are biased downward due to endogeneity, with significant wage gaps emerging among different regions, between genders and between urban and rural job markets. The study’s choice of instruments has conceptual as well as empirical grounds. Our findings establish that the wage determination process is different for males and females across provincial labor markets.

The NFL Salary Cap and Veteran Players’ Salaries

The salary structure and process of wage determination in the American National Football League (NFL) is perhaps unique among professional sports: contracts are not guaranteed, careers tend to be very short, and the league operates under a salary cap that limits teams’ payrolls. Thus, while a fairly well-defined set of performance metrics exists for most professional football players, the usual relationship between measured performance and compensation—i.e. higher productivity translates into higher pay—may be blurred, empirically observable, or even nonexistent. This paper investigates this issue using a four-year panel of veteran professional football players. Our analysis suggests that although performance plays a role in determining salaries in the NFL, experience, durability, and mobility are the most important factors veteran player compensation.

The Effect of Heterogeneous Wage Contracts on Macroeconomic Volatility in a Financially Fragile Economy

I build a small open economy (SOE) dynamic stochastic general equilibrium (DSGE) model to investigate the effect of a heterogeneous wage contract between regular and temporary workers on a macroeconomic volatility in a financially fragile economy. The imperfect financial market condition is captured by a quadratic financial adjustment cost for borrowing foreign assets, and the labor market friction is captured by a Nash bargaining process which is only available to the regular workers when they negotiate their wages with the firms while the temporary workers are given their wage which simply equals the marginal cost. As a result of impulse responses to a domestic productivity shock, the higher elasticity of substitution between two types of workers and the lower weight on the regular workers in the firm’s production process induce the higher volatilities in most variables. This is reasoned that the higher substitutability creates more volatile wage determination process while the lower share of the regular workers weakens their Nash bargaining power in the contract process.

The Effect of Heterogeneous Wage Contracts on Macroeconomic Volatility in a Financially Fragile Economy

I build a small open economy (SOE) dynamic stochastic general equilibrium (DSGE) model to investigate the effect of a heterogeneous wage contract between regular and temporary workers on a macroeconomic volatility in a financially fragile economy. The imperfect financial market condition is captured by a quadratic financial adjustment cost for borrowing foreign assets, and the labor market friction is captured by a Nash bargaining process which is only available to the regular workers when they negotiate their wages with the firms while the temporary workers are given their wage which simply equals the marginal cost. As a result of impulse responses to a domestic productivity shock, the higher elasticity of substitution between two types of workers and the lower weight on the regular workers in the firm’s production process induce the higher volatilities in most variables. This is reasoned that the higher substitutability creates more volatile wage determination process while the lower share of the regular workers weakens their Nash bargaining power in the contract process.

Inter-Industry Wage Differentials in Greece: Evidence from Quantile Regression Analysis

ABSTRACTUsing a consistent estimator of the covariance matrix of the asymptotic distribution of the quantile regression estimator with intra-cluster correlation of the error terms, the paper investigates whether and to what extent inter-industry wage differentials derive from worker heterogeneity in the form of unobserved quality. To conduct this study, we pioneer in utilizing a unique data set, the European Union Structure of Earnings Survey for Greece, which follows a two-stage random sampling approach of employees clustered within firms. Data refer to 2010 when the first elements of the economic adjustment programme to deal with the chronic deficiencies of the Greek economy and restore sustainable public finances, competitiveness and set the foundation for long-term growth, gained visibility. Results point to high wage dispersion across industries at the mean of the conditional wage distribution, even after controlling for personal and workplace characteristics. However, evidence for the unobserved heterogeneity hypothesis is rather scant. Therefore, there is room for efficiency wage or rent-sharing theories in accounting for a large part of inter-industry wage differentials tentatively implying that firm heterogeneity in the ability to pay matters more than employee unobservable attributes in the wage determination process.

INFLATION AND REAL WAGE DISPERSION: A MODEL OF FRICTIONAL MARKETS

Current Population Survey (CPS) data over the period from 1994 to 2008 show that inflation has a positive effect on the residual wage dispersion. To explain this phenomenon, we introduce uncoordinated job searches into a general equilibrium monetary search framework. Our model shows that the uncoordinated job searches by unemployed workers give rise to an equilibrium, where a firm is matched with zero, one, or multiple job applicants. The ex post difference in matching probabilities generates a two-point wage dispersion among identical workers, when the Mortensen rule is implemented in the wage-determination process. In our model, inflation positively influences the wage dispersion directly through its impact on firm's real profit and indirectly through the effect of inflation that spills over from the goods market to the labor market. With reasonable parameter values, the calibrated model can account for most of the observed responses of residual wage dispersion to inflation.

Inter-Industry Wage Differentials in Greece: Rent-Sharing and Unobserved Heterogeneity Hypotheses

This paper examines the structure and determinants of inter-industry wage differentials in Greece, along with the role of the rent-sharing and unobserved heterogeneity hypotheses, employing restricted least squares and quantile regression techniques with cluster robust standard errors at the firm level. To this end, a unique dataset, the European Union Structure of Earnings Survey (SES), is utilized. Data refer to 2010 when the first elements of the economic adjustment programme to deal with the chronic deficiencies of the Greek economy and restore sustainable public finances, competitiveness and set the foundation for long-term growth were beginning to be implemented. Results point to high wage dispersion across industries at the mean of the conditional wage distribution, even after controlling for personal and workplace characteristics. However, evidence for the unobserved heterogeneity hypothesis is rather scant. Therefore, there is room for efficiency wage or rent-sharing theories in accounting for a large part of inter-industry wage differentials tentatively implying that firm heterogeneity in the ability-to-pay matters more than employee unobservable attributes in the wage determination process.

The Interrelationship of Collective Bargaining at Industry and Company-Levels in Wage Determination

The combined increase in firm or company-level and industry-level collective bargaining over recent decades in France has renewed the debate over the potential complementarity or the substitution effect between the two bargaining levels. In this article we study how the two bargaining levels are associated at the workplace level in France in the wage determination process. Our study is based on the REPONSE 2004-2005 survey –which provides information on the role given to industry-level bargaining and the current process of negotiations in the workplace– and on two case studies: one in the automotive sector, the other in call service centres. Three company profiles are defined. In the first two profiles, one of the two bargaining levels has greater emphasis than the other while the third profile is characterised by the weakness of negotiations, whatever the level. Whatever the profile, our analysis shows that the content of negotiations is different at each bargaining level –the company level being more focused on wage determination and the branch level on wage regulation. Besides these key levels of collective bargaining, we stress the growing influence in wage determination of individual performance interviews within the company, and of third parties such as the prime contractor or the parent company, outside the firm.

Country characteristics and the incidence of capital income taxation on wages: An empirical assessment

AbstractThis paper examines the incidence of corporate income taxes on wages using data from the US Bureau of Labor Statistics for 13 OECD countries. Within a wage‐bargaining framework, our econometric analysis shows that a substantial share of the corporate tax burden is shifted from capital to labour. However, the magnitude of this shift is influenced importantly by country characteristics affecting the process of wage determination, such as the degree of capital mobility, a country's relative influence over the world price of output and trade unions’ strength.

Why sustainable and ‘nutritionally correct’ food is not on the agenda: Western Sydney, the moral arts of everyday life and public policy

Within a context of delivering food security into the future, dietary guidelines are being reframed, corporations are replacing unsustainable products, and consumers are being encouraged to become ecological citizens. While there is a growing literature on the food practices of ‘alternative’ consumers, ‘mainstream’ consumers are less well understood. This paper describes qualitative research undertaken in a socio-economically disadvantaged area of Sydney, Australia, which aimed to uncover consumer views towards sustainable and healthy diets. Most participants indicated a discrepancy between their desired and actual behaviours: while they want to support Australian, or local, food producers they gravitate towards cheap and tasty food from ‘anywhere’; and while they associate nutritious food with fresh food, they will buy processed foods which can be less expensive, appeal to children and are prone to less waste. Reflecting mainstream Australian political culture, participants were compromising household food budgets in order to pursue a socially acceptable standard of living (including decent housing, car-reliance). They were also incorporating the pleasure and desires of family members as part of ‘the moral arts of everyday life’. Using social theories of consumption and practice sociology we argue that food choices and practices – easy or not – need to be interpreted as part of the role that consumption plays in political citizenship and moral subjectivity. In the Western Sydney context, food practices are essentially household budget and family nourishment practices rather than nutrition and sustainability practices; a position which is not addressed in the government’s new food policies or wage determination processes.

The dynamics of wage determination in Romania

AbstractThis article examines wage developments in Romania over the last 20 years, discusses the evolving role of government wage policy and structural labour market changes, and analyses the dynamics of the wage determination process. It finds that government wage policy has had a significant demonstration effect on private sector wages, driven mainly by policy decisions over the past few years. The article also finds strong causality from private sector wages to wages in state‐owned enterprises (SOEs) and government. No causality was found for changes in government wages to wages in SOEs or from SOE wages to private sector wages.

Evidence on the Incidence of Wage Posting, Wage Bargaining, and On-the-Job Search

Some workers bargain with prospective employers before accepting a job. Others face a posted wage as a take-it-or-leave-it opportunity. Both modes of wage determination have generated large bodies of research. We surveyed a representative sample of US workers to inquire about the wage determination process at the time they were hired into their current or most recent jobs. A third of the respondents reported bargaining over pay before accepting their current jobs. Almost a third of workers had precise information about pay when they first met with their employers, a sign of wage posting. About 40 percent of workers were on-the-job searchers—they could have remained at their earlier jobs at the time they accepted their current jobs, indicating a more favorable bargaining position than is held by unemployed job-seekers. About half of all workers reported that their employers had learned their pay in their earlier jobs before making the offer that led to the current job. (JEL C83, J31, J52, J64)

Learning and the Form of Compensation

Using data from the PSID and an empirical setup similar to the one used in Altonji and Pierret (Q J Econ 116(1):313–350, 2001)’s paper on wages and employer learning, we find that the coefficient of a hard-to-observe correlate of productivity—parents’ educational attainment—in a wage regression increases more rapidly with experience in performance pay jobs than in nonperformance pay jobs. This result is driven entirely by bonus pay jobs as opposed to commission/piece rate jobs. In the latter, there is no evidence that the importance of parental education in the wage determination process increases over time. This is consistent with the notion that explicit pay-for-performance compensation schemes are, by design, revealing workers’ productivities and that employers need not infer anything about worker productivity when the payment is ex post as is the case for commissions and piece rates as opposed to having to set pay ex ante.