Wage Formation Research Articles

Female employment in India: determinants of choice of sector of activity

Purpose The purpose of this paper is to examine whether the choice of employment sector for women is driven by the structure of the labour market or determined by the household socioeconomic condition. Design/methodology/approach Data for the study were drawn from the National Sample Survey 68th round (2011–2012). The sector of employment was assessed through females’ participation as an unpaid labour, employer/own account worker, informal wage worker, formal wage worker and unemployed. A multinomial logit model was used to examine the factors that determine the sector of employment. Findings Although education increases formal employment among women, most of them are unemployed or entering into informal employment. It indicates that the labour market has not been able to integrate educated women into formal employment. Research limitations/implications Increase in female education accompanied by a slow growth of employment creates the challenge to accommodate the educated and skilled women in formal employment. Originality/value This study examines the factors determining the sectoral participation of employment to assess the responses of the current labour market for the females, especially educated females who have not been adequately addressed. The findings of the study have significant implications for formulating appropriate labour market policies for the educated female labour force.

The decline of the labor income share in Mexico, 1990–2015

• Mexicós labor share fell from 1990 to 2015 because of reductions in formal sectors. • Stagnant productivity in the self-employment sectors held real formal wages back. • With formal wages anchored, formal productivity gains accrued to profits. • Slow economic growth had a crucial role in the decline of the labor share. • A remaining puzzle is why a rising profit share failed to stimulate growth. The paper studies the decline of the labor income share ( LIS ) in Mexico during the period 1990–2015. The decline is mostly explained by reductions within the economy’s major sectors (including manufacturing, tradables, and non-tradables) rather than by a recomposition of value added towards sectors with low labor shares. In contrast to agriculture—where LIS fell due to a shift of labor force from self-employment to wage-employment—in other major areas of the economy the fall in LIS is explained by reductions within the wage-employment sector. Econometric estimations indicate that parallel declines in the wage share and relative productivity of non-tradables and in the US manufacturing labor share all played a large role in the reduction of the manufacturing wage share in Mexico. More generally, the analysis suggests that the lagging productivity of the economy’s informal non-tradable sector—itself a reflection of the country’s low aggregate rate of economic growth—is a crucial factor in the fall of LIS in the formal sectors. The paper concludes by discussing possible explanations for the paradox of the slow rate of economic growth in Mexico despite the rise in the profit share.

Regional Wage Responsiveness to Unemployment — Rural–Urban Heterogeneity and Policy Implications

AbstractPrevious studies of regional wage formation in Norway have indicated low regional wage responses to regional unemployment. However, previous analyses have not investigated whether wages are more rigid in rural areas than in urban areas, which in the case of Norway is important for the efficiency of regional differentiated payroll taxes. In the paper, the authors focus on the rural–urban nature of the wage curve in Norway. We re‐estimate the wage curve on the basis of a large Norwegian microlevel dataset covering the entire Norwegian labour market during the years 2008–13. Our findings are rural–urban heterogeneity in the wage curve, with higher unemployment elasticity of pay in the urban region than in the rural regions. The elasticity of the average rural wage curve is about 70 per cent that of the of the urban wage curve. The authors conclude that to achieve the goals of regional policy in Norway, more rigid wages in rural areas seem to be an argument for continuing to have an active labour market policy for rural regions.

Дослідження сучасного стану заробітної плати в Україні у контексті забезпечення соціальної справедливості

The level of wages of citizens is one of the most important factors in the development of the state, the basis for the formation of society on the principles of social justice. Being under the constant influence of all participants of social and labor relations, the level of wages requires constant analysis and monitoring. In this case, special attention should be paid to the assessment of how wages perform their basic functions and ensure social justice, namely, contributes to the reduction of poverty and improve the overall standard of living of the working population. The article investigates the features of the formation of wages in the Ukrainian economy during 2010-2018. The dynamics of the minimum wage in the context of the impact on the poverty level of the working population of Ukraine is considered. The changes in the level of wages on average in the economy, the indices of nominal and real wages, as well as the differentiation of wages by individual types of economic activity that has developed in Ukraine in recent years are analyzed. The study revealed that the formation of wages in the Ukrainian economy does not correspond to the principle of social justice in society. Raising social standards, namely the statutory minimum wage, is aimed primarily at reducing only extreme forms of poverty. In recent years, Ukraine has seen a slowdown in the growth rate of both minimum and average wages, there is a drop in the overall standard of living of the working population. Traditionally, wages remain low (less than the national average) both in socially important activities (health and education) and in priority ones in terms of sustainable economic development (construction and agriculture). Low wages generally reduce the attractiveness of work, the motivation of workers, contribute to the outflow of labor to other activities (or even abroad), lead to imbalances in the labor market and the emergence of a shortage of qualified personnel. Thus, the issue of ensuring social justice in the formation of wages requires an immediate solution and should be a priority of state policy in the coming years.

«ЯДРО» И «ЗАЩИТНЫЕ СЛОИ» ОПЛАТЫ ТРУДА НАЕМНЫХ РАБОТНИКОВ С ПОЗИЦИИ ОБЩЕЙ ЭКОНОМИКИ

The article is devoted to the study of the subordination of wage's forms and the wages nature from the perspective of science modern methodology developed by I. Lakatos. In particular, on the basis of “protective layers’ and “core” allocation of the phenomenon characterized as employee remuneration, the article considers the following aspects. The basis of the various wage systems is wages as the monetary price of labour, i. e. a certain amount of money paid to employees by employers for the work they have done under the contract. Depending on the degree of importance for employees wages divide into main and additional. The “core” of the basic part of wages is the cost of goods labor (annual, monthly, daily). This according to Marx determines the time and piece-rate forms of wages and their various combinations in the wage systems. The cost of labor and the cost of its production as a special kind of goods are determined by the costs associated with both production and consumption. From the perspective of the consumption process, the “core” of wages includes the cost of consumed material and spiritual means of consumption, as well as services related to the activities of households in their consumption. From the perspective of production it includes costs associated with the development of human capital, expressed in the growth of workers’ qualifications. The cost of goods labor, the core of wages in economic and social practice are manifested as a normative requirement of compliance with the level of wages historically emerging standard of living of the majority of the population, which are employees. This, in particular, is a characteristic of the normative dependence of the minimum wage on the subsistence minimum.

Ризики солідарного рівня пенсійної системи України

The article investigates into the main types of risks and their impact on the system of solidarity level of pension provision in Ukraine. The demographic risk is proved to be one of the key factors affecting the formation of modern pension systems. The demographic burden on the working generation is growing due to an increase in the retirement age. Ttherefore, the solidarity system is unable to fulfil its obligations to form an adequate level of pensions that leads to a nominal and real pension reduction. The economic risk affects significantly the solidarity level of pension provision as well. The country’s economic development is the basis for the formation of wages, which in turn also affects the level of pensions. There is no increase in the employees’ real incomes due to the low level of economic growth. Pensions accordingly remain low in the solidarity pension system. The political risk posed by factors of a political nature is considered to be another risk affecting the formation of pension systems. It is proved that these risks collectively predetermine the problems of a modern pension system in Ukraine. The low level of pensions, which led to the impoverishment of a significant number of people who have lost their ability to work, is believed to be one of the biggest problems. Besides, the low level of filling with its own revenues is characteristic to the Pension Fund of Ukraine. Consequently, it is unable to fulfil its obligations without the support of state budget funds. Solving these problems is possible under condition of forming a multi-level system of pensions, especially its accumulative component. It will partly offset the impact of the above-mentioned risks on the solidarity level of pensions

Problems of formation of the wages level in Kazakhstani labor market

Increase in wages is recognized as one of the tasks within the long-term development strategy of the country in the Address of the Head of State K. Tokayev to the people of Kazakhstan “Constructive public dialogue – the basis of stability and prosperity of Kazakhstan” (Tokayev, 2019). The successful implementation of this task largely depends on solving the extremely complex problem of forming the level of wages in the labor market. A vast amount of theoretical and statistical studies on this problem, unfortunately, are not always characterized by a deeper penetration into the mechanism of formation of the level of wages in the current Kazakhstan model of the labor market. The goal of the study is to actualize the problem of the formation of the wages level in Kazakhstani labor market. Due to the totality of complex issues, the study is limited by studying only a few of them: a quantitative analysis of the influence of the main economic and institutional factors on the formation of the level of wages in the Kazakhstan labor market. Emphasizing the attention of researchers and practitioners to raising the level of wages will allow critically rethinking the existing practice of forming the level of wages. The scientific significance of the work bases on identifying the features of the manifestation of the general patterns of wage formation in the domestic labor market. The practical significance bases on obtained results those help to modernize the labor market, to bring it closer to the best practices of developed countries. They will also be taken into account in the design and implementation of effective social and economic policies.

Informality and Working Conditions in China's Sanitation Sector

AbstractDrawing on ethnographic data from the sanitation industry in Wenzhou and Guangzhou, we investigate different patterns of work organization in each city. We find that supplementary informal work can serve to subsidize low family income and therefore stabilize formal but exploitative work. In Wenzhou, the family team model creates time and space for one spouse to engage in informal work while still receiving a wage from the employer. This additional informal work significantly increases net family income, which neutralizes worker demands for better wages and working conditions in the formal sector. In contrast, Guangzhou workers are subject to relatively rigid spatio-temporal controls, impeding them from participating in informal work to supplement their formal wages. Despite receiving higher wages and more benefits, these workers are highly wage dependent and express much greater discontent than their equivalents in Wenzhou. Theoretically, we contribute to the literature on informality through a discussion of “ancillary informal work,” highlighting how access to certain kinds of informal work both subsidizes and is facilitated by formal sector employment.

Regional Aspects of a Climate and Energy Tax Reform in Norway—Exploring Double and Multiple Dividends

We investigate the potential for double or even multiple dividends arising from a climate and energy tax reform (CETR), using a regional computable general equilibrium model. Such dividends indicate if government revenues raised from energy-related environmental taxes and recycled back to households or industries through (regional) social security contributions will yield welfare gains larger than gross cost. Building on existing double dividend theory, we broaden the scope by considering both social and regional aspects of a CETR. We explore the use of household transfers and regional payroll taxes as recycling instruments and investigate to what extent wage formation on the labor market has an effect. For Norway, our results indicate that a CETR may conflict with sub-national policy goals under all assessed scenarios. In particular, this holds for income inequality. Although our analysis concerns the social, economic and environmental aims of a Norwegian policy, the approach can be generalized to, e.g., a European context.

Fostering Agribusiness Entrepreneurship for Kenyan Youth through Practice-Based Education

Approximately 1 million Kenyan youth enter the labour market each year, a number which the formal sector has been incapable of absorbing. As a result, youth unemployment and underemployment rates are high, with two-thirds of youth aged 15–24 not engaged in the labour force. The lack of formal wage opportunities pushes these young people into entrepreneurial activities; however, due to the theoretical focus of the current education system, many secondary school-leavers do not possess the practice-based skills to start their own businesses. This article argues for building partnerships between secondary schools, largely in rural areas, and agribusinesses to foster skills-building that will enable young people to start entrepreneurial activities in the agricultural sector. It draws on interviews with agribusiness owners and stakeholders in the education sector, and survey data from secondary school students and on youth employment to identify how to improve youth employability through business-led experiential programmes.

How do Regulated and Unregulated Labor Markets Respond to Shocks? Evidence from Immigrants During the Great Recession

We study wage adjustment during the recent crisis in Italy using a unique dataset on immigrant workers that includes those employed in formal and informal sector. We find that before the crisis immigrants’ wages in the formal and informal sectors moved in parallel (with a 15% premium in the formal labor market). During the crisis, however, formal wages did not adjust down while wages in the unregulated informal labor market fell so that by 2013 the gap had grown to 32%. The difference was particularly salient for workers in occupations where the minimum wage is likely to be binding, and in “simple” occupations where there is high substitutability between immigrant and native workers. Calibrating a simple partial equilibrium model of spillovers between formal and informal markets, we find that less than 10% of workers who lost a formal job during the crisis move to the informal sector. We also find that if the formal sector wages were fully flexible, the decline in formal employment would be in the range of 1.5–4.5%—much lower than 16% decline that we observe in the data.

Jobs for Africa\u2019s expanding youth cohort: a stocktaking of employment prospects and policy interventions

Youth unemployment and underemployment are serious concerns in sub-Saharan Africa, especially given the region’s young population. The barriers young people face stem both from skills deficiencies and from weak fundamentals that constrain job creation more generally in the region. Employment interventions can mitigate some of these barriers. However, our stocktaking of these interventions suggests that existing programs are disproportionately focused on the formal wage sector and do not adequately reflect the reality that most young people work in agriculture, household enterprises, and self-employment and will continue to do so for the foreseeable future. Finally, better data and evaluation are needed for more effective interventions.

Exploitation in New Zealand’s hospitality sector

Disturbing accounts of exploitation in the hospitality industry recently reported in the media include: “Restaurant workers treated like modern-day slaves – judge” [1]; “Restaurant chain exploited, underpaid workers for years” [2]; “Christchurch restaurant to pay $70K for underpaying staff” [3]. Such headlines are not new.
 In December 2016, I released the findings from a research project entitled “Worker exploitation in New Zealand: A troubling landscape” [4] which I undertook for the Human Trafficking Research Coalition [5]. I interviewed 105 people, the majority of whom were migrant workers. What became quickly apparent was the vulnerability of workers in the hospitality industry, and, in particular, the food and beverage sector.
 Common amongst those I interviewed was the non-compliance by their employers with New Zealand employment law, including the Minimum Wage Act 1983 and the Holidays Act 2003. A number of interviewees were paid less than the minimum wage and/or for less hours than they had worked. For example, one temporary migrant typically worked 90 hours a week but was only paid for 45 hours. Another worked 80 hours a week earning just $350 to $450 a week ($4.37 to $5.62 an hour). Staff in one Auckland restaurant, located in an upscale suburb, were not paid for two weeks as they were told there was no money to pay them. For some, their legal entitlements to holiday or sick pay were denied.
 In some cases, workers were paid their legal entitlements through the formal wage system but had to return part of their wages back in cash. Others paid potential employers $20,000 to $40,000 in order to secure a job with the prospect of obtaining permanent residency (PR). One interviewee had a good job albeit one without the prospect of permanent residency. He was offered employment in a restaurant with the promise of support for his PR application. There he worked 80 hours a week, often for little or no pay. Eight months later his employer told him he would not support his visa application.
 A number of interviewees felt their employers took advantage of their vulnerability, stating that “they know your weaknesses” including their inability to obtain other employment as their working visa was linked to their employer. In some cases, employers threatened the workers that they would be deported if they complained.
 In April 2017, a new policy came into effect whereby employers who are found to have exploited migrant workers face a compulsory stand-down period in terms of hiring. In May 2018, 106 employers were listed on the Ministry of Business, Innovation and Employment’s stand down list, including some from the hospitality sector. The hospitality sector is a significant employer of temporary migrant workers, particularly those on working holiday or student visas. The contributions that migrant workers make to this sector must be valued and their entitlement to New Zealand employment conditions respected.
 The original report that this article is based on can be accessed here https://www.workerexploitation.com/report 
 Corresponding author
 Christina Stringer can be contacted at c.stringer@auckland.ac.nz
 References
 (1) Tupou, L. Restaurant Workers Treated Like Modern Day Slaves – Judge. Radio NZ, 8 February 2018, https://www.radionz.co.nz/news/national/349948/restaurant-workers-treated-like-modern-day-slaves-judge (accessed Jun 11, 2018)
 (2) Restaurant Chain Exploited, Underpaid Workers for Years. Radio NZ, 16 March 2018. https://www.radionz.co.nz/news/national/352684/restaurant-chain-exploited-underpaid-workers-for-years (accessed Jun 11, 2018)
 (3) Christchurch Restaurant to Pay $70K Fine for Underpaying Staff. NZ Herald, 20 April 2018, https://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=12036338 (accessed Jun 11, 2018)
 (4) Stringer, S. Worker Exploitation in New Zealand: A Troubling Landscape, 2016. Report prepared for the Human Trafficking Research Coalition. www.workerexploitation.co.nz (accessed Jun 11, 2018)
 (5) Human Trafficking Research Coalition (members: The Préscha Initiative, Stand against Slavery, Hagar, and ECPAT –End Child Prostitution and Trafficking). https://e2nz.org/tag/human-trafficking-research-coalition/ (accessed Jun 11, 2018)

Pre-Crisis Wage Leadership in Croatia in the Context of Export Competitiveness: Any Lessons for the Future?

This study explores the determinants of sectoral wage dynamics in Croatia, including inter-sectoral wage linkages, using both panel data methods and Granger causality analysis. Given the large deficits in Croatian merchandise trade and accumulated external liabilities, wage formation in the exporting sectors receives a particular focus. It has been found that exporters are wage leaders and that labour productivity is a more important wage determinant for the exporting sectors than for other sectors. Public sector wages do not affect wages in private sectors. There are, however, wage spillovers within the group of exporting sectors and possibly a bi-directional causal relationship between wages in exporting and private sheltered sectors. Thus, some exporting industries may face pressure from wage increases in more successful exporting sectors as well as in private sheltered sectors. A more coordinated wage-setting system could contribute to improving overall export performance and reducing external trade imbalances.

Complexities in the spatial scope of agglomeration economies

AbstractThis paper argues that the spatial scope of agglomeration economies is more complex than is often assumed in the literature. We provide insight into this issue by showing that agglomeration on short distances (<5 km) does not significantly affect wages, whereas it has a significant and positive effect on medium distances (5–10 km). This effect attenuates rapidly across geographic space, becoming insignificant after 40–80 km. We offer several explanations for this observed distance decay pattern. The results do not imply, however, that nearby agglomeration is irrelevant to the wage formation: only highly urbanized areas benefit from agglomeration on longer distances. Furthermore, this article finds no evidence that foreign economic mass affects wages in the Netherlands, which suggests that national borders are still a substantial barrier for economic interaction.

Recent Developments in Macro-Econometric Modeling: Theory and Applications

Developments in macro-econometrics have been evolving since the aftermath of the Second World War.[...]

Trade unions’ inflation expectations and the second-round effect in South Africa

Inflation expectations play a critical role in the formation of prices and wages. Hence, the South African Reserve Bank (SARB) reacts to inflation’s direct effects by tightening the monetary policy in order to avoid any second-round effects. The study we conducted attempts to investigate whether the inflation rate are led by inflation expectations or vice versa. We analyse quarterly data using the Toda-Yamamoto causality technique and three different measures of inflation expectations of the trade union representatives. We also investigate the role of the exchange rate in leading or lagging the inflation rate. Overall, the results obtained demonstrate that the inflation and the exchange rates have bidirectional causality, while unidirectional causality exists from the inflation rate to inflation expectations. We therefore conclude that a second-round effect of inflation cannot be induced by changes in the inflation expectations of the trade unions, and provide some policy recommendations.

Enforcement of labor market regulations: heterogeneous compliance and adjustment across gender

This paper explores microdata from Argentine household surveys to analyze how changes in the enforcement of labor regulations affect the compliance level and other labor outcomes among men and women. Using information of the highly decentralized labor inspection system in Argentina, I construct an enforcement measure with variation at the province, sector, and time level (share of inspected firms) which I instrument using a measure of the arrival cost of labor inspectors to the firms. The main findings reveal that when enforcement increases, the compliance with mandated benefits and formal wages increase among men, while informal wages decline. Among women, the compliance level declines jointly with informal wages. These heterogenous impacts are explained by labor regulations that make formal and informal men more substitutable in the production process than formal and informal women.

Air traffic control regulation with union bargaining in Europe

This paper studies the behavior of the national air traffic control (ATC) centers in the EU as it relates to bargaining between a union and government. We analyze wage formation, the reactions of ATC's to a price-cap, the slow adoption of new technologies, the reluctance to vertically disintegrate, the slow standardization, and the failures of mergers of neighboring ATC's. The theory is illustrated by using estimated union preference parameters and bargaining power parameters for the government. We find that bargaining power and union preferences vary greatly by country.

An analysis of the indicators affecting urban household food insecurity in the informal settlement area of the Cape Town Metropole

Households in the informal settlement areas of the Cape Town Metropole face different challenges in terms of poverty and food security. Challenges are determined by the social and economic circumstances these households subside in. Many initiatives by the Western Cape Department of Agriculture was initiated to aid households in these areas. Some of the initiatives include the implementation of urban household and community food gardens assisted by the Department’s extension division. A thorough analysis of these indicators is imperative to initiate development planning. The results showed that 26.1% of household heads completed school, while 33.8% did not reach secondary school (grade 7). The average household size is 4.29 persons in the study area. The average age of household head was 48 and 50.64 years for non-farmer groups and urban farming households respectively. The average monthly income per household was R3543.22. The main source of income generated throughout the year derived from formal salaries or wages (46.4%), while child support grants and pension funds also contributed towards income. Expenditure factors accounts for 20.4% of the variance of factors affecting food security. The expenditure component is comprised by the share of food expenditure on income, the total value of food consumed and the household diet diversity score. The socio-economic indicators component forms the second largest component group (15.15%), while the components with a lesser effect include a food security component, an urban farming component and a geographical and market component. Keywords: Urban Agriculture, household gardens, community gardens, food security, household size, age, gender, education level, migrant workers, household income