Workplace Heterogeneity Research Articles

AKM Effects for German Labour Market Data from 1985 to 2021

Abstract This article describes the processing and accessibility of the person and establishment fixed wage effects in German administrative data. These effects have been estimated following the approach of Abowd, J., Kramarz, F., and Margolis, D. (1999. High wage workers and high wage firms. Econometrica 67: 251–333) and Card, D., Heining, J., and Kline, P. (2013. Workplace heterogeneity and the rise of West German wage inequality. Q. J. Econ. 128: 967–1015). They can be linked to most of the available administrative datasets provided by the Research Data Center (FDZ) of the German Federal Employment Agency at the Institute for Employment Research (IAB). They are available for different time intervals from 1985 until 2021. These effects have been used in numerous articles that deal with the contributions of workers and establishments to earnings inequality.

Workplace heterogeneity and wage inequality in Denmark

SummaryWage inequality is on the rise in most developed economies, and this phenomenon has fostered a growing body of research on its potential drivers. Using German data over the period 1985–2009, Card et al. (The Quarterly Journal of Economics 2013, 128(3), 967‐1015) argue that rising workplace heterogeneity has contributed substantially to the rise in wage inequality. I revisit their findings in two ways. First, because the generalization of their findings remains an open question, I apply their methodological approach to Danish register data and test whether rising workplace heterogeneity explains a significant share of the rise in wage inequality in Denmark. I find that, contrary to Germany, workplace heterogeneity remained practically stable over time, and this pattern contributed slightly negatively to the rise in wage inequality. Second, I complement Card et al.'s (2013) methods with the variance decomposition exercise proposed by Song et al. (2019) to identify more precisely the sources of the rise in wage inequality in Denmark. Although the rise in wage inequality is partly a between‐establishment phenomenon, I show that the strengthening of assortative matching patterns and the rising heterogeneity of workers within establishments are the main drivers of growing inequality.

Workplace Heterogeneity and the Returns to Versatility

Abstract In the canonical random on-the-job search model with continuous firm heterogeneity, I show that a mean-preserving spread of the firm-productivity distribution raises the returns to mobility, i.e., the inter-firm mobility of workers as measured by the number of outside contacts per employment spell. Both sorting and rent-share mechanisms play a role. In a further contribution, I distinguish frictional and structural impediments to mobility in order to establish a link between mobility and skills via the concept of versatility. Versatility enhances a person’s mobility since a mismatch between job requirements and the person’s skill set is less likely to occur. I provide some statistics in support of the discussed mechanisms. The findings are particularly intriguing in light of the concurrent rise in the productivity dispersion across firms and in the skill premium in many countries.

Do unions and works councils really dampen the gender pay gap? Discordant evidence from Germany

Using a large employer–employee dataset, we provide new evidence on the relationship between the gender pay gap and industrial relations from within German workplaces. Controlling for unobserved workplace heterogeneity, we find no evidence that introducing or abandoning collective agreements or works councils affects the gender pay gap. This result holds at the mean and along the distribution, challenging the stylized fact that unions and works councils dampen the gender pay gap.

Do Unions and Works Councils Really Dampen the Gender Pay Gap? Discordant Evidence from Germany

Using a large employer-employee dataset, we provide new evidence on the relationship between the gender pay gap and industrial relations from within German workplaces. Controlling for unobserved workplace heterogeneity, we find no evidence that introducing or abandoning collective agreements or works councils affects the gender pay gap. This result holds at the mean and along the distribution, challenging the stylized fact that unions and works councils dampen the gender pay gap.

Changes in Workplace Heterogeneity and How They Widen the Gender Wage Gap

Using linked employer-employee data for West Germany, I investigate the role of growing wage differentials between firms in the slowdown of gender wage convergence since the 1990s. The results show that two factors are at play: first, high-wage firms experience higher wage growth and employ disproportionately more men, and second, male firm premiums grow faster than female premiums in the same firms. These developments were catalyzed by a decline of union coverage, coupled with more firm-specific wage setting in collective bargaining agreements. Taken together, these conditions prevented the gender gap from narrowing by approximately 15 percent between the 1990s and 2000s. (JEL J16, J51, J31, J71)

Editors’ Comments: Why Do We Need a Special Issue on New Theoretical Perspectives on Market-Based Economic Systems?

Academy of Management ReviewVol. 44, No. 1 From the EditorEditors’ Comments: Why Do We Need a Special Issue on New Theoretical Perspectives on Market-Based Economic Systems?Jay Barney and Subi RanganJay BarneyEditor and Subi RanganAssociate EditorPublished Online:3 Jan 2019https://doi.org/10.5465/amr.2018.0425AboutSectionsView articleView Full TextPDF/EPUB ToolsDownload CitationsAdd to favoritesTrack Citations ShareShare onFacebookTwitterLinkedInRedditEmail View articleREFERENCESAgarwal, R., & Holmes, M. In press. Let’s not focus on inequality. Academy of Management Review. Google ScholarArrow, K. 1950. A difficulty in the concept of social welfare. Journal of Political Economy, 58: 328–346. Google ScholarBarney, J. 1991. Firm resources and sustained competitive advantage. Journal of Management, 17: 99–120. Google ScholarCard, D., Heining, J., & Kline, P. 2013. Workplace heterogeneity and the rise of West German wage inequality. Quarterly Journal of Economics, 128: 967–1015. 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The wealth of nations. London, W.: Strahan. Google ScholarStiglitz, J. 2012. The price of inequality. New York: Norton. Google ScholarTsui, A. S., Enderle, G., & Jiang, K. 2018. Income inequality in the United States: Reflections on the role of corporations. Academy of Management Review, 43: 156–169.Link , Google ScholarWilkinson, R., & Pickett, K. 2009. The spirit level: Why equality is better for everyone. London: Penguin Press. Google ScholarWilliamson, O. 1985. The economic institutions of capitalism. New York: Macmillan. Google ScholarZingales, L. 2000. In search of new foundations. Journal of Finance, 55: 1623–1653. Google ScholarFiguresReferencesRelatedDetailsCited byRethinking Corporate Power to Tackle Grand Societal Challenges: Lessons from Political PhilosophyRuth V. Aguilera, J. Alberto Aragón-Correa and Valentina Marano12 October 2022 | Academy of Management Review, Vol. 47, No. 4Open Team Production, the New Cooperative Firm, and Hybrid AdvantageMarco Berti and Christos Pitelis20 April 2022 | Academy of Management Review, Vol. 47, No. 2The Corporate Social Responsibility Price Premium as an Enabler of Substantive CSRLeandro Nardi20 April 2022 | Academy of Management Review, Vol. 47, No. 2A World Changed: What Post-9/11 Stories Tell Us about the Position of America, Purpose of Business, and Meaning of WorkChristopher Michaelson and Jennifer Tosti-Kharas18 November 2020 | Academy of Management Review, Vol. 45, No. 4 Vol. 44, No. 1 Permissions Metrics in the past 12 months History Published online 3 January 2019 Published in print 1 January 2019 Information© Academy of Management ReviewAcknowledgmentsComments from Bill Hesterly and Jason Snyder were helpful in developing this essay.Download PDF

Gender Gap in Upward Mobility: What Is the Role of Non-Cognitive Traits?

Do non-cognitive traits contribute to the gender gap in supervisory status and promotion? We use a large linked employer-employee dataset collected from six former socialist countries to assess the link between non-cognitive traits and upward mobility. Controlling for workplace heterogeneity, we find that gender differences in locus of control, the preference for challenge versus affiliation, and adherence to work ethic together can explain about 7–18% of the gender gap in supervisory status and promotions Overall, non-cognitive traits provide an important, though incomplete, explanation for the gender gap in upward mobility.

The Performance Pay Premium and Wage Dispersion in Britain

Estimates of the performance pay (PP) premium using household survey data are upwardly biased due to the use of PP contracts in higher paying workplaces. Using nationally representative linked employer‐employee data we estimate the PP premium at the mean and across the wage distribution, after accounting for workplace heterogeneity. We then present the effects of PP on the wage distribution. Failure to account for the use of PP in high paying workplaces overstates the PP premium by one‐third. The premium rises as one moves up the wage distribution, but the effect is more modest after having accounted for workplace heterogeneity.

Computerization and wage inequality between and within German work establishments

Recent evidence has revealed that a significant share of the rise in wage inequality has occurred at the establishment level, underscoring the importance of workplace-level analyses for understanding growing inequality. Using longitudinal matched employment data from Germany, we provide new insights into how investments in information and communication technologies (ICT) affect earnings inequality between and within establishments over time. Focusing on the mechanisms of inequality, cross-sectional estimates provide evidence of both skill- and class-biased technological change; however, establishment fixed effects models reveal that this relationship is driven by unobserved establishment heterogeneity. Despite a strong relationship between computerization and the rise in workplace heterogeneity, we find little evidence of a causal effect of computers on changes in establishment-level inequality. Rather, establishments that invest more greatly in ICT pay on average better wages and exhibit higher within-establishment inequality. These results challenge dominant explanations about the role of computerization in rising inequality, while also reinforcing the necessity of using organizational data to study inequality processes.

Gender gap in upward mobility: what is the role of non-cognitive traits?

PurposeThe purpose of this paper is to find whether non-cognitive traits contribute to the gender gap in supervisory status and promotion.Design/methodology/approachThe authors use a large employer-employee matched data set collected from six former socialist countries to assess the link between non-cognitive traits and upward mobility.FindingsControlling for workplace heterogeneity, the authors find that gender differences in locus of control, the preference for challenge vs affiliation, and adherence to work ethic together can explain about 7-18 percent of the gender gap in supervisory status and promotion.Originality/valueOverall, non-cognitive traits provide an important, though modest, explanation for the gender gap in upward mobility.

Workplace Heterogeneity and the Returns to Versatility

In the present paper, I develop an on-the-job search model in which workers face both frictional and structural impediments to sorting. There are two key model predictions. First, versatility enhances the worker’s ability to sort into the most productive firms since a mismatch between the job requirements and the worker’s skill set is less likely to occur. Second, the larger the productivity differentials between the firms, the larger the returns to sorting and, hence, versatility. I test the latter hypothesis by exploiting industry variation in sales-per-worker dispersion across employers in the United States in 2007. An increase in the sales-per-worker standard deviation by ten log-points is, indeed, estimated to raise the above-median versatile worker’s relative wage by 11 to 21 log-points. I also provide supportive evidence from Germany.

Workplace Heterogeneity and the Rise of West German Wage Inequality*

AbstractWe study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit into four subintervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

Workplace Heterogeneity and the Rise of West German Wage Inequality

We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models with additive fixed effects for workers and establishments are fit in four sub-intervals spanning the period from 1985 to 2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic rise in West German wage inequality.Our estimates suggest that the increasing dispersion of West German wages has arisen from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments, and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations, and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers to establishments explain a large share of the rise in inequality along all three dimensions.

Are Immigrants’ Pay and Benefits Satisfaction Different than Canadian-born?

This study contributes to the emerging literature on immigrants’ life, job, and pay satisfaction by focusing on a relatively understudied aspect of the immigrant experience – satisfaction with pay and benefits. The purpose of the study is to first examine whether there are differences in satisfaction with pay and benefits between Canadian-born and immigrant workers, and if so, to then examine factors associated with immigrants’ pay and benefits satisfaction using discrepancy and equity theoretical frameworks. Immigrants are examined in four cohorts based on the year of arrival. We use Statistics Canada’s 2005 Workplace and Employee Survey (WES), which is a large Canadian dataset containing responses from both employers and employees enabling us to control for individual and workplace heterogeneity. Both descriptive and multivariate regression results found that, with the exception of the pre-1965 cohort, all immigrant cohorts report significantly lower pay and benefit satisfaction compared to Canadian-born workers. Further, we find that for Canadian-born workers, external and internal referents, non-wage benefits, and pay-for-performance are positively related to pay and benefit satisfaction, whereas pay-for-output is important for the 1986 to 1995 and 1996 to 2005 immigrant cohorts. We conclude that the lack of consistency in the factors contributing to pay and benefits satisfaction across Canadian-born and immigrant groups suggests that the theories and traditional models for pay and benefit satisfaction may not be as relevant when studying immigrants. We recommend that further studies of a qualitative nature tease out factors associated with immigrants’ pay and benefits satisfaction and contribute to the refinement of existing theories. The results can also assist human resource managers and government policy-makers to facilitate more successful integration and retention of immigrants.

Unhappy working with men? Workplace gender diversity and job-related well-being in Britain

This paper attempts to establish empirically the link between workplace gender diversity and employee job-related well-being in Britain. Using nationally representative linked employer–employee data and accounting for unobserved workplace heterogeneity the paper finds gender diversity to be associated with lower employee well-being for women. Workplace gender equality policies and practices are not found to ameliorate this finding.

The Gender Composition of Workplaces and Men's and Women's Turnover

Using a data set of 721,123 employees in 1,890 Swedish workplaces, the author tests whether employees’ propensity to leave a workplace is dependent on the share of the employees of the opposite sex in a workplace. Net of time-invariant workplace heterogeneity, the probability to leave a workplace is found to decrease with the share of employees of the opposite sex. This is true for men as well as women. The results contradict theories suggesting that men and women prefer to work in work settings with a high proportion of employees of their own sex. On the contrary, a plausible explanation of the results is that both men and women prefer work settings with a high proportion of employees of the opposite sex.

Workplace Disability Diversity and Job-Related Well-Being in Britain: A WERS2004 Based Analysis

This paper attempts to establish empirically whether there is a link between workplace disability and employee job-related well-being. Using nationally representative linked employer-employee data for Britain, I employ alternative econometric techniques to account for unobserved workplace heterogeneity. I find that workplace disability diversity is associated with lower employee well-being among people with no reported disability. Tests conducted also indicate that workplace equality policies do not ameliorate this effect.

Workplace Job Satisfaction in Britain: Evidence from Linked Employer-Employee Data

This paper examines the determinants of job satisfaction in Britain using nationally representative linked employer-employee data (WERS2004) and alternative econometric techniques. It uses eight facets of job satisfaction for the purpose. As well as underscoring the importance of accounting for unobserved workplace heterogeneity, the paper is able to highlight some new findings that relate to differential effects of dependent children and other dependents, type of employment contract and gaps between employees' skill and skills requirements of their job. Working long hours is found to be positively associated with intrinsic aspect of jobs. Public sector employment is positively associated with all facets of job satisfaction except satisfaction with pay.

Unhappy Working with Men? Workplace Gender Diversity and Employee Job-Related Well-Being in Britain: A WERS2004 Based Analysis

This paper attempts to establish empirically the link between workplace gender diversity and employee job-related well-being. Using nationally representative linked employer-employee data for Britain, I employ econometric techniques that account for unobserved workplace heterogeneity. I find that gender diversity is associated with lower employee well-being among women in several of the equations estimated. The magnitudes of the estimated effects also tend to increase with (women's) group size. Workplace equality policies do not appear to ameliorate these effects.