Wage Premium Research Articles

Establishment size and the task content of jobs: evidence from 46 countries

AbstractUsing a mix of household‐ and employer‐based survey data from 46 countries, we provide novel evidence that workers in larger establishments perform more non‐routine analytical tasks, even within narrowly defined occupations. Moreover, workers in larger establishments rely more on the use of information and communication technologies to perform these tasks. We also document a 15% raw wage premium that workers in larger establishments enjoy relative to their counterparts in smaller establishments. A mediation analysis shows that our novel empirical facts on the task content of jobs are able to explain 5–20% of the establishment size wage premium, a similar fraction to what can be explained by selection of workers on education, gender and age.

Occupational licensing and income inequality in the states

AbstractThe decades‐long rise of economic inequality in the U.S. has led to a growing body of literature examining the role of policy in shaping income differences. We examine one such policy: occupational licensing regulations. Licensing can restrict employment and reduce market competition, which can then inflate wages for those in licensed professions. Existing research demonstrates that occupational licensure does increase wages in specific industries, leading some scholars to argue that licensing makes income inequality worse. We add nuance by arguing that the effect of licensing on inequality is dependent on which occupation classes experience the largest wage premiums. Using a comprehensive over‐time database of state licensing regulations, we first demonstrate that medium‐ and low‐wage jobs garner larger wage premiums than high‐wage occupations. Second, consistent with this result we then show that the occupational licensing regulations have the overall effect of reducing state income inequality. This research contributes to our understanding of the causes of growing inequality and how public policy can shape economic disparities through sometimes unintended and indirect ways.

Sorting and Wage Premiums in Immoral Work

Abstract We use surveys, laboratory experiments and administrative data to study how heterogeneity in the perceived immorality of work and in workers' aversion to acting immorally impact labor market outcomes. Immoral work is associated with higher wages, both in administrative data and in causal experimental evidence. Individuals more willing to engage in immoral conduct find employment in firms and industries perceived as immoral less aversive and have higher employment rates in immoral work in the laboratory. These phenomena appear to be driven by impure social motives, reflecting a desire not to be involved with immoral work, rather than by consequentialist concerns.

Green Transition and Industrial Relations at the Workplace: Evidence From Italian Firms

ABSTRACTThis article analyses the role of green investments (GIs) in the adoption of decentralised bargaining and the single aspects negotiated therein. Using data on a large representative sample of Italian firms, we find that investing in green technologies increases the overall probability of decentralised agreements. Further, GIs lead to an increase in negotiations on performance‐related pay and welfare benefits. These results are robust to an econometric strategy that controls for unobserved heterogeneity and endogeneity issues. Our explanation for this evidence is that the current ecological transition in production processes is likely causing significant organisational changes. Managing these changes requires increased flexibility in negotiating critical issues at the company level, such as wage premiums and non‐monetary benefits to employees.

Gender Differences in Job Requirements: Change Within Careers and Across Cohorts

ABSTRACTWe examine differences in jobs held by men and women based on a measure not used before, the standard human resources measures of “knowledge, skills, and abilities” generated by job analyses. While there is an abundance of evidence on gender disparities in pay, we know much less in detail about differences in the work men and women perform and especially how these differences have changed over time. We use nationally representative data for two cohorts of college graduates, one entering the post‐college workforce in 1994 and another in 2009, and we follow them for the first 10 years of their careers. We find that women generally held jobs with lower requirements relative to men. The gender gap in job requirements grew over the course of individuals' careers for the first cohort (1994–2003) but declined sharply for the second (2009–2018). We also find that among the second cohort, women received a wage premium for social skills that was greater than what men received.

Can fertility decline help explain gender pay convergence?

Abstract Prior scholarship demonstrates that motherhood wage penalties and fatherhood wage premiums contribute to the gender pay gap. These analyses typically take a cross-sectional perspective, asking to what extent gender inequalities in the association between parenthood and wages can explain gender pay inequality for a given cohort or at a given moment in time. By contrast, explorations of gender pay convergence over time have tended to start at the firm’s door, testing the explanatory power of changes in men’s and women’s human capital and job characteristics and neglecting the contributions of fertility change. We bring these two strands of research together, asking to what extent declines 1980–2018 in US employees’ number of children can explain gender pay convergence over the same period. Using a descriptive decomposition and data from the Panel Study of Income Dynamics, we show that, in gross terms, fertility decline can explain almost one-quarter of gender pay convergence from 1980 to 2018. Even net of a host of controls for human capital and job characteristics, fertility decline explains 8 percent of the attenuation of the US gender pay gap 1980–2018—about half as much as changes in education and about a quarter as much as changes in full-time work experience and job tenure combined. Finally, we show that employees’ fertility decline was fastest in the 1980s and subsequently slowed; this, in conjunction with persistent gender differences in parenthood–wage associations, helps explain stalled progress toward gender pay parity.

Nursing unions: A scoping review of outcomes for employees, patients, and administrators

BackgroundNursing labor organization is consequential to many stakeholders, but collective evidence for outcomes associated with nurse unionization is lacking. PurposeTo synthesize evidence of associations between nursing unions and nurse, patient, and system outcomes. MethodA scoping review. FindingsTwenty-four articles spanning nearly 50 years were abstracted. Most studies (n=16; 67%) included nurse outcomes, usually remuneration (n=10; 42%). Patient and systems outcomes were less common (for each: n=7; 29%). Union wage premiums were modest. Evidence for other nurse outcomes (e.g., job satisfaction, retention) was limited and mixed. Unionization was associated with improvements in many but not all patient outcomes studied, and with operational differences, including decreased staffing and labor substitution. DiscussionCollective bargaining outcomes may help administrators understand nurses’ needs and concerns and thereby improve nurse recruitment and retention. For example, modest wage effects may signal non-wage priorities among nurses, which are understudied and worthy subjects of future research.

China’s commuting-based metropolitan areas

Using commuting flows derived from cellphone location data at fine geographical levels, this paper presents the first delineation of China’s commuting-based metropolitan areas (MAs). The size distribution of those MAs follows a power law, with larger MAs hosting more skilled workers, more productive firms, and offering higher wage premiums. China’s commuting-based MAs exhibit a few notable features compared to several other large countries. First, commutes are short in both time and distance and rarely cross administrative boundaries. Second, China’s MAs are small relative to the size of the country, with MA sizes highly correlated with the administrative hierarchy. We discuss existing policies that may have contributed to these characteristics. We demonstrate that commuting-based MAs differ substantively from other definitions of Chinese cities. The commuting-based MAs provide a valuable tool for researchers who need to define Chinese cities as local labor markets but are limited by the availability of official delineations.

The foreign firm wage premium in the Israeli tech sector

Foreign tech multinationals, which have entered Israel en masse in the past two decades, are known to use high wages to draw in the best talent. While paying higher wages no doubt contributes to the domestic economy, local tech firms have argued that the competition for talent inhibits their growth, and that foreign multinationals contribute less in terms of overall economic value compared to local firms. It is thus of great importance to estimate the foreign firm wage premium – by how much do foreign multinationals pay more for comparable talent? Using an extensive micro-level education data and exploiting worker movement and firm shutdowns/downsizing as an unbiased alternative to AKM methodology, this paper finds the foreign firm wage premium to be in the 3%–4% range, much less than previously estimated.

Occupational specialization, skills, and urban wage premium in Brazil

Occupational specialization, skills, and urban wage premium in Brazil

Tasks, wages and new technologies

AbstractThis paper addresses the role of technology in shaping worker‐level task prices, exploiting within‐occupation variation using a unique survey linked to administrative data for over 180,000 Dutch workers between 2014 and 2020. Nonroutine abstract and interactive tasks are related to wage premia, and routine tasks to wage penalties. However, these task returns vary according to exposure to the types of (new) technology, such as computers, robots and artificial intelligence. Overall, wages are higher in technology‐intensive industries, but newer technologies target non‐routine tasks differently. This may have profound implications for the nonroutine wage premium given the rise of artificial intelligence.

Resource rents, ethnic fractionalization and redistributive public sector employment

The resource curse literature often posits that public employment in resource-rich economies tends to be large, driven by motivations beyond public goods provision. One set of theories attributes this phenomenon to (ethnic) clientelism, but lacks robust empirical support. Another set of theories challenges the notion of (ethnic) clientelism, suggesting that the expansion of public sector employment serves as a form of social insurance in the absence administrative tools to redistribute income. This study diverges from the conventional story of an invariably positive association between resource abundance and public sector employment. Instead, I show that the positive correlation between resource abundance and public sector employment only holds when ethnic fractionalization is low. In countries with high levels of ethnic fractionalization, the relationship weakens and can even reverse. This is because an increase in public sector employment tends to dilute public sector wages, diminishing the attractiveness of public sector jobs as clientelist rewards. The empirical analysis supports this claim: when ethnic fractionalization is low, more resource rents correspond to higher public sector employment and lower (or even negative) public sector wage premiums; when ethnic fractionalization is high, the opposite holds: more resource rents correspond to fewer public sector jobs but larger public sector wage premiums.

Labor Substitutability among Schooling Groups

Given worldwide trends in education, wage premium for schooling, and real GDP, we derive a lower bound for the long-run elasticity of labor substitution across schooling groups of around 4, which is far higher than values commonly used in the literature. We exploit our bound to reexamine the importance of human capital in cross-country income differences, including the roles of school quality versus the skill bias of technology in the greater efficiency gains from schooling in richer countries. (JEL E23, E24, I26, J24, J31, O15)

The contribution of employer changes to aggregate wage mobility

Abstract Wage mobility reduces the persistence of wage inequality. We develop a framework to quantify the contribution of employer-to-employer movers to aggregate wage mobility. Using three decades of German social security data, we find that inequality increased while aggregate wage mobility decreased. Employer-to-employer movers exhibit higher wage mobility, mainly due to changes in employer wage premia at job change. The massive structural changes following German unification temporarily led to a high number of movers, which in turn boosted aggregate wage mobility. Wage mobility is much lower at the bottom of the wage distribution, and the decline in aggregate wage mobility since the 1980s is concentrated there. The overall decline can be mostly attributed to a reduction in wage mobility per mover, which is due to a compositional shift toward lower-wage movers.

The effects of foreign direct investment on human capital accumulation—Evidence from China

AbstractThis paper examines the effect of foreign direct investment (FDI) on human capital accumulation in China. The identification strategy exploits variations in FDI inflows across manufacturing sub‐sectors caused by China's FDI liberalisation and initial sectoral composition patterns across cities. Using a panel of city‐level data from 1990 to 2005, the paper shows that FDI liberalisation accelerated human capital accumulation. Cities with higher exposure to FDI liberalisation experienced higher growth in high school and college enrollment. FDI incentivizes individuals' investment in their human capital by paying a higher wage premium for skilled workers, pushing up the skill premium in the local labor market, and raising household income. Compared to export‐oriented FDI and FDI in less‐skilled industries, market‐seeking FDI and skill‐intensive FDI have a much larger effect on college enrollment.

Are Manufacturing Jobs Still Good Jobs? An Exploration of the Manufacturing Wage Premium

This paper explores the factors behind the disappearance of the manufacturing wage premium—the additional pay a manufacturing worker earns relative to a comparable nonmanufacturing worker. With substantially larger declines across union members, we quantify the role of unionization by exploiting the heterogeneity in membership status across manufacturing industries. We find that the decline in union membership explains more than 70 percent of the decline in the wage premium since the 1990s for union members but does not affect nonunion premia. Our findings suggest that the erosion of “good” manufacturing jobs has contributed to the increase in overall wage inequality.

Income and wage inequality in democratic Portugal, 1974–2020

AbstractThis paper investigates the evolution of income and wage inequality in Portugal from the 1974 democratic revolution up to 2020, drawing on a series of administrative records, survey data and aggregate statistics. Over this period, Portugal consistently ranked among the most unequal nations in the developed world. The transition from a deeply unequal dictatorial regime, in the wake of the 1974 revolution, brought about substantial redistribution. However, since the 1980s, income and wage inequality followed an arc‐shaped trajectory. There was a sharp rise in inequality from the early 1980s to the mid‐1990s, which, in just eight years, outpaced the infamous US growth in wage inequality of the last five decades. Then, there was stability at high levels until the mid‐2000s. Finally, there was a sharp decline in inequality until 2020, which halved both the gender wage gap and the college wage premium. Changes related to the supply and demand for education/skills emerged as key drivers of inequality dynamics. Institutional and political forces were especially relevant in reducing inequality during the transition to democracy and, more recently, with the rising importance of the minimum wage and collective bargaining.

Does vocational education pay off in China? Evidence from city-level education supply shocks

China hosts the world’s largest secondary education sector: more than 14 million adolescents enrol in secondary academic and vocational schools every year. Despite the large literature on returns to education, little evidence exists as to how these two streams compare in the country. Using 2013 China Household Income Project data, we estimate the returns to secondary vocational education both at the mean and along the conditional wage distribution. We use instrumental variables based on the considerable variation in education provision across cities and years (and a 1995 policy reform). We find that vocational education generates a large wage premium (up to 54%), especially for those of lower earnings potential. Our findings indicate that vocational education can be a good option for those who do not wish to enter tertiary education, especially the less well-off.

Is there a nationality wage premium in European football?

We investigate the presence of nationality salary premia in two top European football leagues (the Premier League and Serie A). We uncover a substantial pay premium for South American players (primarily driven by Argentina and Brazil) of between 11 and 15 per cent in magnitude. We investigate possible mechanisms, such as whether these salary effects are driven by new entrants to the league, and whether they are reflected in team attendances and team performance. Fans appear to respond to higher proportions of South American players in England, but not in Italy. We discuss the implications of these results and suggest why potential differences might exist across the leagues.

Testing the algebraic modeling of competitive impacts from wage premium shocks: a case study from a booming airline market

Labor relations issues such as collective bargaining and strike threat power have recently gained increased attention in the Brazilian air transportation market due to a short-term shortage of qualified workforce, leading stronger pilot unions to demand higher wages and better working conditions. Exacerbated by the notable expansion of the Brazilian economy between 2020 and 2023, where air travel demand surged by 60%, this pressure has driven labor costs to grow more rapidly than other cost categories. This paper examines exogenous flight crew cost shocks, treating these as increases in wage premiums resulting from stronger unionization and higher labor market rents. Using a differentiated duopoly model, we analyze the impact of these wage increases on competition between a major network carrier and a small low-fare carrier, introducing the hypothesis of non-exhausted economies of density. Our findings indicate that smaller airlines are more adversely affected by labor cost shocks, though differentiated wage increase schemes can mitigate these impacts, reducing market concentration and preserving consumer welfare. This study contributes to the literature by incorporating wage premium shocks into existing models and suggesting that labor regulations in Brazil should be liberalized to address the rapid growth in air transportation demand and the resultant workforce shortage.