Wage Outcomes Research Articles

Vocational Rehabilitation Program Evaluation: Comparison Group Challenges and the Role of Unmeasured Return-to-Work Expectations

Despite the importance and cost of workers' compensation (WC)-based vocational rehabilitation (VR) programs, outcome evaluations are rare, in part due to the scarcity of suitable comparison groups. The aims of this study were to assess (1) the adequacy of a commonly recommended internal comparison group, i.e., workers who were eligible for but did not receive services, and (2) return-to-work (RTW) expectations as a potential source of bias. In this prospective cohort study, we used WC claims data and worker-reported RTW expectations to compare workers who received vocational retraining services to eligible workers who did not receive such services. Workers were surveyed after retraining eligibility determination, prior to the initiation of retraining activities. VR progress and RTW wage outcomes were followed for 3 years. The magnitude of confounding contributed by RTW expectations and other covariates was quantified. Workers who were somewhat or very certain they would RTW had significantly better outcomes. RTW expectations played a strong confounding role, reducing the retraining plan effect estimate by about 23 %, while education and physical capacity each changed the effect estimate by <5 %. RTW expectations predicted long-term RTW outcomes and can play a strong confounding role if unmeasured. We found that the internal comparison group approach, commonly recommended for VR program evaluation, is inappropriate for WC-based VR evaluations. Ultimately, there is no simple solution to the challenge of identifying a comparison group; however, measurement of RTW expectations, an easily-measured multi-dimensional construct, may be a useful addition to the VR evaluation toolbox.

The returns to general experience, job and occupational tenure: a study using Australian panel data

This article uses Australian panel data for the years 2001–2009 to estimate returns to general experience, job and occupational tenure. We pay particular attention to issues of unobserved heterogeneity bias in our estimations. We find that both general experience and occupational tenure have statistically and numerically significant effects on wage outcomes, even after controlling for unobserved heterogeneity. Job tenure on the other hand only seems to matter in OLS regressions that do not control for heterogeneity biases. Once these biases are controlled for, only a modest effect from job tenure remains. The inclusion of occupational tenure in the estimating equation tends to negate even this modest job tenure effect. The only exception to this is for workers in large organizations. For these workers a small but statistically significant effect from job tenure remains, even once we have controlled for heterogeneity and included occupational tenure in the estimating equation. The results reported in this article have implications for the various theories of the labour market that predict upward-sloping wage-job-tenure profiles.

Book Reviews

Etienne Wasmer of Sciences Po and LIEPP reviews, “The Minimum Wage and Labor Market Outcomes” by Christopher J. Flinn. The Econlit abstract of this book begins: “Presents a model based on search and bargaining to use in investigating the impact of a minimum wage on labor market outcomes. Discusses descriptive evidence on minimum wage effects; a model of minimum wage effects on labor market careers; labor market and welfare impacts of minimum wages; minimum wage effects on labor market outcomes—a selective survey; assessing the welfare impacts of actual changes in the minimum wage; econometric issues; model estimates and tests; optimal minimum wages; the on-the-job search; and heterogeneity. Flinn is Professor of Economics at New York University and Senior Research Fellow at Collegio Carlo Alberto.”

An Agent-Based Model of Origin Destination Estimation (ABODE)

This paper proposes and tests an agent-based model of worker and job matching. The model takes residential locations of workers and the locations of employers as exogenous and deals specifically with the interactions between firms and workers in creating a job-worker match and the commute outcomes. It is meant to illustrate that by explicitly modeling the search and hiring process, origins and destinations (ODs) can be linked at a disaggregate level. The model is tested on a toy-city as well as using data from the Twin Cities area. The toy-city model illustrates that the model predicts reasonable commute outcomes, with agents selecting the closest work place when wage and skill differentiation is absent in the labor market. The introduction of wage dispersion and skill differentiation in the model increases the the average home to work distances considerably. Using data from Twin Cities area of Minneapolis-St. Paul, aggregate commute and wage outcomes from the model are shown to capture the trends in the observed data. Overall, the results suggest that the behavior rules as implemented lead to reasonable patterns. Future directions are also discussed.

Ethnicity and Gender in the Labour Market in Central and South East Europe

The Roma are both the largest 'minority' ethnic group in Central and South Eastern Europe and the one which suffered most from transition to the market. Still today, nearly forty years after the introduction of the EU's 1975 Discrimination Directive and with the end of the 'Roma Decade' (2005-15) in sight, people from the Roma minority have unemployment rates far above – and employment rates and wages far below – those of majority populations. One issue which has received relatively attention concerns the 'double' discrimination facing Roma women. Not only do Roma women face poorer employment and wage outcomes in the labour market than non-Roma women, in most CSEE countries the gender wage gap is significantly larger amongst Roma compared to non-Roma. This paper seeks to analyze and explain differences in the gender gap in the wages amongst Roma. The paper employs a non-parametric matching approach to identify the main factors underlying the gender wage gap. Educational attainment plays a relatively small role, explaining only around one-fifth of the gap. Industrial and occupational segregation appear to be playing a strong role as does the civil status of individuals, household socioeconomic status and whether individuals living in a predominantly Roma community.

How Did Public Services Fare? A Review of Australian State Public Service Labour Markets During the Global Financial Crisis

Public employment was traditionally seen as a ‘good job’, and governments were seen as ‘model’ employers. That reputation has faded in recent years due to factors including public management reforms that changed traditional public service employment. This research considers how the Australian public service labour market fared compared to the private sector during the global financial crisis. The research compares public and private sector outcomes in Australian states, focusing on two indicators of the size of the public service and wage outcomes. It finds that the global financial crisis did not enhance job prospects or conditions in Australian state public services, and potentially further detracted from public perceptions of governments as ‘model’ employers and the desirability of public service jobs. The crisis also highlighted the institutional tensions and complexities of the contemporary public employment environment.

Mobility for care workers: Job changes and wages for nurse aides

The long-term care industry in the United States faces serious recruitment and retention problems among nurse aides. At the same time, these low-wage workers may feel trapped in poorly-paid jobs from which they would do well to leave. Despite this tension, not enough is known about how workers fare when they leave (or stay in) such care work. Using longitudinal data from the Survey of Income and Program Participation for the years 1996–2003, we examine the relationship between different job and occupational mobility patterns and wage outcomes for nurse aides, focusing on which job transitions offer better opportunities to earn higher wages and on whether job transition patterns differ by race. Our results confirm high turnover among nurse aides, with 73 percent of the sample working in occupations other than nurse aide at some point during the survey time frame. About half of respondents that transition out of nurse aide work move into higher-paying occupations, although the percentage of transitions to higher paying occupations drops to 35 percent when nurse aides that become RNs are excluded. Among black workers especially, wage penalties for moving into other jobs in the low-wage labor market appear to be rather small, likely a factor in high turnover among nurse aides. The findings illustrate the importance of occupation-specific mobility trajectories and their outcomes for different groups of workers, and for understanding the constrained decisions these workers make.

Globalization and workplace performance in Canada: Cross-sectional and dynamic analyses of productivity and wage outcomes

We start from the premise that firm productivity differences need to be taken into account in the examination of the determination of wages and, more broadly, earnings inequality. Unlike most sociological studies of globalization, in this study using Canadian data we incorporate direct measurement (of some aspects) of globalization, and examine closely the association between workplace productivity and wages on the one hand, and exporting, foreign ownership and outsourcing on the other. We conduct cross-sectional and dynamic analyses. We find the following: (i) there is a relationship between exporting and productivity across different model specifications; (ii) the effects on productivity kick in when a workplace is substantially rather than marginally engaged in export markets; (iii) productivity increases are markedly greater in workplaces where export intensity has increased in prior periods; (iv) productivity is higher in workplaces that are wholly foreign owned; (v) wages are also associated with productivity and with both exporting and foreign ownership.

Book Review Feature: Two Book Reviews of the Minimum Wage and Labor Market Outcomes

Book Review Feature: Two Book Reviews of the Minimum Wage and Labor Market Outcomes

Book Review Feature: Two Book Reviews of the Minimum Wage and Labor Market Outcomes

Book Review Feature: Two Book Reviews of the Minimum Wage and Labor Market Outcomes

Does Industrial Composition Matter for Wages? A Test of Search and Bargaining Theory

Does switching the composition of jobs between low-paying and high-paying industries have important effects on wages in other sectors? In this paper, we build on search and bargaining theory to clarify a key general equilibrium channel through which changes in industrial composition could have substantial effects on wages in all sectors. In this class of models, wage determination takes the form of a social interaction problem and we illustrate how the implied sectoral linkages can be empirically explored using U.S. Census data. We find that sector-level wages interact as implied by the model and that the predicted general equilibrium effects are present and substantial. We interpret our results as highlighting the relevance of search and bargaining theory for understanding the determination of wages, and we argue that the results provide support for the view that industrial composition is important for understanding wage outcomes.

The effects of trade and services liberalization on wage inequality in India

We examine the effects of trade and services liberalization on wage inequality in India. We find that labor reallocations and wage shifts attributable to liberalization account for at most 29% of the increase in inequality between 1993 and 2004, and that the effects of services reforms are many times larger than those of trade liberalization. In contrast, 30–66% of the increase in wage inequality is due to changes in industry wages and skill premiums that cannot be empirically linked to liberalization. These results suggest that if liberalization did, in fact, contribute significantly to increased inequality, the bulk of its effects do not linger in inter-industry wage and skill premiums but are subsumed by general equilibrium effects. Studies of the liberalization-inequality relationship that focus on differences in employment and wage outcomes across industries, or on tradable goods alone, may therefore only be exploring the tip of the iceberg.

Effects of Trade and Services Liberalization on Wage Inequality in India

We examine the effects of trade and services liberalization on wage inequality in India. We find that labor reallocations and wage shifts attributable to liberalization account for at most 29% of the increase in inequality between 1993 and 2004, and that effects of services reforms are many times larger than those of trade liberalization. In contrast, 30%-66% of the increase in wage inequality is due to changes in industry wages and skill premiums that cannot be empirically linked to liberalization. These results suggest that if liberalization did, in fact, contribute significantly to increased inequality, the bulk of its effects do not linger in interindustry wage and skill premiums but are subsumed by general equilibrium effects. Studies of the liberalization – inequality relationship that focus on differences in employment and wage outcomes across industries, or on tradable goods alone, may therefore only be exploring the tip of the iceberg.

Do Recruitment Ties Affect Wages? An Analysis using Matched Employer–Employee Data from Vietnam

AbstractThis paper examines the extent to which recruitment ties affect individual wage outcomes in small and medium scale manufacturing firms. Based on a unique matched employer–employee dataset from Vietnam the authors find that there is a significant positive wage premium associated with obtaining a job through an informal contact, when controlling for standard determinants of wage compensation. Moreover, they show that the mechanism through which informal contacts affect wages depends on the type of recruitment tie used. The findings are robust across location, firm size categories, and different worker types.

Measuring Transitions into the Workforce as a Form of Accountability

This paper explores the relationship between student major and industry of employment and its application to higher education accountability. Data provided by statewide longitudinal data systems (SLDS) has enabled state educational agencies and colleges to follow students into the workforce. While most studies have focused on wage outcomes, this shows how to use SLDS data to understand the correlation between major and industry. The transition into the workforce is an important outcome since it is an assessment of a college’s ability to develop specific, targeted sectors of the economy. We use SLDS data from Iowa to follow community college alumni from 2002 through 2008.

Unequal wages for equal utilities

When educational policy is supplemented by a redistributive income tax, and when individuals differ in their ability to benefit from education, the optimal policy is typically rather regressive. Resources are concentrated on the most able individuals in order to get a “cake” as big as possible to share among individuals through income taxation. In this paper, we put forward another reason to push for regressive education. It is not linked to heterogeneity in innate ability but to the property that welfare may be a convex function of an individual’s wage. For simplicity, we assume a linear education technology and a given education budget. To give the equal wage outcome the best chance to emerge, we also assume that individuals have identical learning abilities. Nevertheless, it turns out that in the first-best wage inequality is always preferable to wage equality. Even more surprisingly, this conclusion remains valid in the second-best when the feasible degree of wage differentiation is sufficiently large. This is in spite of the fact that wage equalization would eliminate any need for distortionary income taxation.

Women's Sexual Orientation and Labor Market Outcomes in Greece

This study is the first to use a field experiment to provide information on the relationship between women being lesbian and their hiring prospects in Greece. Data for 2007–8 support previous findings (in Canada and Austria) indicating that lesbians face hiring discrimination. The study finds that the estimated probability of lesbian applicants receiving an invitation for an interview is 27.7 percent lower than that for heterosexual women applicants. More importantly, the study shows that entry wage differentials assigned are inconsistent with the ascendant empirical claims (from the United States, the Netherlands, and the United Kingdom) that lesbians have higher market earnings. The study concludes that the negative effect of lesbian sexual orientation on wage outcomes in Greece is 6.1 percent. Given that legal actions in Greece have the potential to affect sexual-orientation minorities, it is important to understand the relationships between sexual orientation and the labor market.

Intergenerational Social Mobility in OECD Countries

This paper assesses recent patterns of intergenerational social mobility across OECD countries and examines the role that public policies can play. It shows that the relationship between parental or socio-economic background and offspring educational and wage outcomes is positive and significant in practically all countries for which evidence is available. Intergenerational social mobility is measured by several different indicators, since no single indicator provides a complete picture. However, one pattern that emerges is of a group of countries, southern European countries and Luxembourg, which appears to rank as relatively immobile on most indicators, while another group, the Nordic countries, is found to be more mobile. Furthermore, public policies such as education and early childcare play a role in explaining observed differences in intergenerational social mobility across countries.

Moral Sentiments and the Minimum Wage

AbstractAdam Smith is widely regarded as the father of political economics, and as one who provided the philosophical underpinnings of much of neoclassical economics. Since the mid-1970s there has been renewed interest in, and reinterpretation of, Smith’s work. This paper looks at two aspects of this reinterpretation, the first of which is Smith’s writing on wages. Smith was an advocate of high wages, a view that strongly contrasted with the received wisdom of the day. He considered that a wage which provided for a reasonable standard of living was essential for the development of an economy. The second aspect encompasses Smith’s notion of the subsistence wage which traces its historic lineage to the Greek philosophers. The paper concludes that Smith, the champion of ‘liberty’ and non-government interference in markets, would probably have supported the notion of minimum wages, such as are now mandated in the United Kingdom, the United States and Australia. Nevertheless, the mandating of minimum wages is a necessary but not a sufficient condition for the achievement of living wage outcomes.

Do Foreign-Owned Firms Provide Better Working Conditions Than Their Domestic Counterparts? A Comparative Analysis

This paper analyses to what extent working conditions in foreign-owned firms differ from those in their domestic counterparts. It makes three main contributions. First, we replicate the consensus in the empirical literature by applying a standardised methodology to firm-level data for three developed (Germany, Portugal, UK) and two emerging economies (Brazil, Indonesia). We show that, consistent with previous evidence, foreign-owned firms offer substantially higher average wages than domestic firms and that this difference is particularly important in emerging economies. Second, we show that these positive wage effects of foreign takeovers reduce in size when controlling for changes in the composition of the workforce, although they tend to remain positive and statistically significant. However, the wage effects associated with worker movements from domestic to foreign firms are potentially important, particularly in emerging economies. Third, we look not only at wage outcomes but also consider other working conditions such as working hours, job stability and union coverage. We find that foreign takeovers of domestic firms tend to have a small positive effect on wages, but little effect on other aspects of working conditions.