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Trade Unions and the Dispersion of Earnings in British Establishments, 1980–90
Abstract
In most developing countries, income inequality tends to worsen during initial stages of growth, especially in urban areas. The People’s Republic of China (PRC) provides a sharp contrast where income inequality among urban households is lower than that among rural households. In terms of inclusive growth, the existence of income mobility over a longer period of time may mitigate the impacts of widening income inequality measured using crosssectional data. We explore several ways of measuring income mobility and found considerable income mobility in the PRC, with income mobility lower among rural households than among urban households. When incomes are averaged over 3 years and when adjustments are made for the size and composition of households, income inequality decreases. Social welfare functions are posited that allow for a trade-off between increases in income and increases in income inequality. These suggest strong increases in well-being for urban households in the PRC. In comparison, the corresponding changes in rural households are much smaller.
... Freeman found also lower wage differentials between low-paid blue-collar workers and white-collar workers in the unionised sector. Gosling and Machin (1995) found similar results for the UK, earnings dispersion being lower within the union sector compared to sector/firms where wage setting was not the outcome of wage bargaining between the two sides of industry. The compression effect in the wage structure was explained by the union's wage policy, which aimed at increasing low-paid members' wages, and by the aim of standardising pay for a given job/occupation. ...
... Fortin and Lemieux (1996) showed that one third of the increase in wage inequality among workers between 1973 and 1992 in the US was due to weakening of labour market institutions, i.e. a decline in union density. Gosling and Machin (1995) reached a similar conclusion for the UK estimating that the fall in unionisation during the 1980s accounted for some 15% of the increase in wage inequality among semi-skilled male workers. This same study shows that the decline in the real value of the lowest wages during the 1980s accounted for a significant part of the growth in wage inequality at the bottom end of the wage distribution during this period, particularly for women. ...
The Directive on Adequate Minimum Wages in the European Union, adopted by the European Parliament and the Council in October 2022 and to be transposed in national law by November 2024, is an important EU instrument aimed at revitalising Europe’s social dimension. With its dual and interlinked objectives of ensuring adequate minimum wage levels and strengthening collective bargaining, the Directive acknowledges the positive role that social dialogue, collective bargaining, and minimum wage regulation play in promoting inclusive economic growth and social cohesion by limiting social exclusion and earnings inequalities.
It should be emphasised that the Directive does not impose obligations on Member States to introduce a statutory minimum wage or to declare collective agreements universally applicable when wage formation is carried out exclusively via collective agreements, as is the case in the Nordic countries, Austria, and Italy. Nor does the Directive aim to set a uniform minimum wage level across Europe, rather it specifies certain criteria, such as a statutory minimum wage corresponding to 60% of the median wage, to ensure that adequate minimum wages are set at national level.
For the 22 EU Member States which have statutory minimum wages, the explicit aims of the Directive regarding the setting of adequate statutory minimum wages are as follows: to achieve a decent standard of living; to reduce wage inequality; to help to close the gender wage gap; to reduce income disparities by lowering levels of in-work poverty, and to contribute to the promotion of social cohesion and upward social convergence within the EU. Another part of the directive deals with the issue of coverage and affects every Member State: the aim is to have 80% of workers covered by collective agreements.
Drawing on a review of the theoretical and empirical literature on minimum wages, the aim of this report is to analyse the potential socio-economic consequences of the Directive on Adequate Minimum Wages in the European Union. Taking an institutional and gender perspective, it assesses the extent to which the Directive may constitute an effective instrument to improve the pay and working conditions of men and women in Europe, reverse the trend in increasing inequalities, help close the gender wage-gap, and reduce gender income disparities by reducing in-work poverty.
The most recent comprehensive review on the employment impact of a moderate increase of statutory minimum wages found no significant employment effects, either for men or for women. Overall, empirical studies on the impact of minimum wages on wage distribution suggest that an increase in minimum wages significantly increases the wages of low-paid workers. This provides strong evidence that minimum wages, by compressing the wage structure at the bottom end of the wage distribution, reduce wage inequality, particularly for women, who are overrepresented among low-paid workers. Furthermore, a moderate increase in minimum wages not only appears to have an equalising effect on wages but also on the earnings distribution at the lower end of the wage distribution. The distributional impact of an increase in minimum wages on household income distribution is the subject of greater controversy. Nevertheless, recent evidence from the United States reveals positive distributional effects of a rise in minimum wages and a reduction of working poor households.
When it comes to the impact of minimum wages on the gender wage gap, a review of available empirical literature shows that increasing minimum wages does contribute to reducing pay disparities between men and women. This finding supports the objectives of the Directive and consistent with the European Commission’s pre-assessment, which found that an uprating of minimum wages in the EU would decrease the gender wage gap on average by around 5%.
In order to assess the impact of the Directive’s aim of increasing levels of collective bargaining, the report analyses the pattern of industrial relations systems across the EU. This analysis shows that systems with certain characteristics – high union density and collective bargaining coverage rates, balanced bargaining power between the two sides of industry, and centralised, coordinated, multi-employer collective bargaining systems – appear not only to favour better working conditions, greater wage and gender equality, but also to deliver better labour market outcomes, economic growth and social cohesion. Labour market governance by the social partners and a developed (tripartite and/or bipartite) social dialogue process, as in the Nordic countries or in Belgium not only seems to better reconcile economic efficiency and social justice, but it also appears better adapted to provide an effective and fair response to the challenges linked to globalisation, demographic, technological change and the green transition. The report also shows that minimum wages tend to have stronger wage equality effects when combined with strong union and high collective bargaining coverage.
As far as gender equality and industrial relations systems are concerned, a review of available evidence shows that the higher wage floors found in countries with high union density, high coverage rate of collective bargaining and highly centralised wage setting raise women’s relative pay and reduce the gender wage gap, since women are to a larger extent located at the bottom end of the wage distribution. Consistent with this evidence, the aim of the Directive (i.e. to increase the collective bargaining rate in all Member States to 80% and, for Member States with minimum wages, to actively involve the social partners in the setting of minimum levels) should lead to a reduction in the gender wage gap.
Furthermore, the analysis shows that the Nordic countries and Belgium, characterised by strong and independent social partners playing a crucial role in the production of labour market norms, wage formation, social protection and welfare state arrangements, score highest among EU countries on the Gender Equality Index. Not only is women’s representation in national parliaments and political bodies among the highest in the world, their high level of trade union membership and involvement in collective bargaining/social dialogue helps put gender equality issues at the top of the political agenda. The strong feminisation of the labour force coupled with the significant modifications in the employment structure, from manufacturing to the services sector, means that, today, union density in the Nordic countries is significantly higher for women than for men. On the other hand, countries with fragmented systems, low union density, low coverage rates of collective bargaining, and less involvement of social partners in the production of labour market and social norms, score lowest on the Gender Equality Index among EU Member States.
In light of these findings, a priority should indeed be to strengthen the representativeness and autonomy of social partners and their institutional capacity to shape labour market and social norms. Such a policy strategy is in line with the aim of the Directive to promote social dialogue and collective bargaining at national level in order to ensure the setting of adequate minimum wage levels that enable a decent standard of living, reduce wage inequality, help close the gender wage gap, reduce the incidence of low-paid workers, and contribute to upward social convergence within the European Union.
If the policy objective of the EU, as illustrated by the adoption of the Directive, is to change direction and to move towards industrial relations systems characterised by high collective bargaining coverage rates and powerful and autonomous social partners playing a crucial role in the production of fair labour market norms, there is, however, a long way to go. This is especially true in Member States that have highly decentralised and non-coordinated, fragmented bargaining systems, such as the single-employer bargaining regimes prevalent in the majority of Central and Eastern European countries. These countries are characterised by both low union density and low coverage rates of collective bargaining, and they are currently far from achieving the target for collective bargaining coverage of 80%. Political and institutional support for upwards convergence in the EU towards a regime of industrial relations favouring a system of labour market governance based on autonomous and strong social partners and constructive social dialogue will be important. This will require effective monitoring, implementation, and financial and political support at both national and EU level.
The Directive on Adequate Minimum Wages in the European Union, in particular the uprating of statutory minimum wages, can thus contribute to improved pay and working conditions of men and women in the labour market and reduce gender wage and earnings inequalities at the lower end of the wage distribution. It must, however, be stressed that gender differences in, for example, labour supply, should continue to be addressed with other policy instruments. Such instruments include the safeguarding and development of public services, the development of public childcare and elderly care facilities, the development of work-life balance arrangements, such as generous and flexible parental leave systems, the development of life-long learning facilities as well as the development of gender neutral fiscal and social protection systems.
... Gregg and Machin (1994) find within manufacturing industries the share of non-manual employees rose as did their share in the total wage bill. Gosling and Machin (1995) report aggregate union density fell from 54% to 38% during the 1980's^. The log standard deviation of semi-skilled earnings rose from 0.028 in 1980 to 0.066 in 1990 with most of the rise occurring within the non-union sector. ...
... In the UK and the US, the decline in unionisation meant a large share of workers lost their percentage union mark-up on wages contributing to the rapid rise in wage inequality. In the UK the drop in the union share of the work force alone explains 16-20% of the rise in overall dispersion (Gosling and Machin(1995)). In the US unions explain one fifth of the rise (Freeman (1993)). ...
The hypothesis that wages are a key determinant of labour mobility has been prominent in the literature for some time. In Britain during the 1980s, wage inequality at the national level increased dramatically. Such a change in the distribution of wages is likely to alter the relative wage between a variety of types of employment. The purpose of this thesis is to document this change across regions, occupations and other observable characteristics, and to analyse the response of labour mobility to changes in relative wages. Using data from the Labour Force Survey, the General Household Survey and New Earnings Survey three types of labour mobility are considered. A change of region, a change out of employment into self-employment and, a move up the occupational ladder. The analyses of national wage inequality indicates that a small proportion was associated with rising inequality between regions; most of the rise was within regions. Moreover, within regions the inequality trend was quite varied; some regions had a large rise and others a small rise. Upward and outward mobility was found to be more responsive to regional unemployment and vacancy rates (quantity signals) suggesting the importance of local demand conditions. Wage relativities (price signals) were important for all outward moves but for upward movements they were important only for young workers. This is consistent with the idea that transaction costs are smaller for young workers. Mobility between regions was strongly responsive to price signals. The responsiveness to quantity signals however was weak and often statistically insignificant. Tracing regional mobility over the eighties revealed that mobility was less responsive to price signals by the end of the decade. This is relevant to the British policy debate on, whether the market has become more flexible because, in terms of regional mobility this study finds no evidence of increased labour market flexibility.
... Grogger and Eide 1995;Walker and Zhu 2008) as well as unionization (e.g. Gosling and Machin 1995;Hibbs and Locking 1996;Card et al. 2004). The notion of institutional or structural change is crucial in all these strands of the literature in explaining the changes in the wage distribution. ...
... In addition to the structural change literature, there is also an extensive literature which analyzes the effects of trade unions and minimum wages on the distribution of wages (e.g.Blau and Kahn 1996a;Gosling and Machin 1995;Lee 1999;Card et al. 2004;Töngür and Elveren 2014). These, however, are institutional rather than structural changes and we abstract from this strand of the literature in the reminder of our paper. ...
Income inequality in the context of large structural change has received a lot of attention in the literature, but most studies relied on household post-transfer inequality measures. This study utilizes a novel and fairly comprehensive collection of micro data sets from between 1980’s and 2010 for both advanced market economies and economies undergoing transition from central planning to market based system. We show that wage inequality was initially lower in transition economies and immediately upon the change of the economic system surpassed the levels observed in advanced economies. We find a very weak link between structural change and wages in both advanced and post-transition economies, despite the predictions from skill-biased technological change literature. The decomposition of changes in wage inequality into a part attributable to changes in characteristics (mainly education) and a part attributable to changes in rewards does not yield any leading factors.
... les syndicats sont généralement reconnus pour favoriser de faibles écarts de salaires dans l'entreprise (e.g. Card, 1996;Gosling & Machin, 1995;Lemieux, 1998;Card et al., 2004) Stewart, 1990Stewart, : 1123Stewart, 1991: 156 ;Schmidt & Berri, 2004: 344). Le pouvoir d'un syndicat augmenterait ainsi avec sa capacité à convertir sa menace en action, dépendante elle-même en partie des caractéristiques de la main d'oeuvre (Paci & Holl, 1993: 66-67). ...
... En outre, la littérature existante tend généralement à associer l'action syndicale à une compression de la distribution des salaires dans les entreprises (e.g. Card, 1996;Lemieux, 1998;Gosling & Machin, 1995). Cette relation peut aussi causer un problème de simultanéité entre les grèves et la dispersion des salaires, en considérant l'occurrence de grèves comme un indicateur de l'efficacité de la menace syndicale (Checchi & Lucifora, 2002: 372). ...
This thesis consists of three essays on the analysis of labor strikes in France, using recent data on workplaces and firms and applying various econometric methods. Very few quantitative studies, in economics, have been conducted on this issue in France, in contrast with a particularly large Anglo-saxon literature on the economic analysis of strikes. The decline of unionization and collective action of employees led however to a progressive shift in the interest of Anglo-saxon researchers, in labor economics and industrial relations, towards the study of individual labor relations between employees and employers. The individualization of jobs and labor relations is often considered as orthogonal to employee collective action. The decline of strikes and other collective disputes may have been linked, in the Anglo-saxon literature, to an increase in individual expressions of conflict and in the overall wage dispersion or inequality within firms. We propose, in this thesis, an original analysis of strikes in France, in connection with these two facets, linked to the individualization of jobs and labor relations in firms. The first chapter documents the relationship between the collective expression of conflict, including strikes, and growing individual forms of conflict in French workplaces, i.e. Employment Tribunal (or prud'hommes) claims and disciplinary action. It is shown that the collective expression of conflict and Employment Tribunal claims are substitutes in French workplaces, while strikes and other collective disputes increase the employer use of disciplinary action. The second chapter deals explicitly with this relationship, more specifically between strikes and employee absenteeism, in estimating and analyzing the effect of strikes on labor productivity in French firms. Strike occurrence during the recent past period tends to be associated with a surplus in labor productivity in firms affected by a low strike frequency, conditionally to a weaker employee expression of discontent (i.e. absenteeism). The third chapter discusses the role of within-firm wage dispersion in variations of strike activity between French workplaces. If a great wage dispersion among the workforce proves to be an obstacle to employee collective organization in strikes, it seems however to result in a more intense strike activity, in terms of frequency and of duration, in some workplaces.
... 7 It is important to distinguish these estimates by gender, owing to a traditionally lower representation of women in unions. Table 1 therefore reports separate estimates for men in Panel A and women in Panel B, showing the different elements of the variance decomposition that assesses how unions impact the variance of wages both 6 UK work using such decompositions includes Gosling and Machin [27], Machin [28] and Bell and Pitt [29]. 7 See also a longer time window exercise for Canada and the US in Card, Lemieux and Riddell [30]. ...
... union voice in general enhances workers' welfare. A number of influential studies have established the link between union voice and workers' welfare in the followings viz: levels of pay either in terms of a direct premium attributable to unions or through reducing pay inequality (Freeman 1980;Booth 1995;Gosling & Machin 1995;Clark & Oswald, 1996;Card, 1996;Card, Lemieux & Riddell, 2003;Budd & Na 2000;Metcalf, Hansen & Charlwood, 2001;Hirsch 2004, Blanchflower & Bryson, 2004. ...
Employees have been the most important element of any organization whereby success or otherwise of a given organization depends largely on the performance of its employees. If employees are not allowed to participate in decision making, it becomes very difficult for them to showcase the skills, knowledge and abilities they possess. This study therefore examines the relationship between employee voice and workers' well-being in food and beverages manufacturing companies in Rivers State, Nigeria. The study used a cross-sectional design. The population of this study is the seven (7) food and beverages manufacturing companies out of the Thirty-four (34) manufacturing companies registered with the Manufacturers Association of Nigeria (MAN), as obtained from the 2019 updated Directory of the Rivers State zone of the Association. These seven (7) companies were purposively selected because of their peculiarity of being in the same grouping of production, that is, food and beverages. The population element for the study was 208 employees, of which a sample size of 137 was extracted using Taro Yamane's sample size determination formula. Data were analyzed using mean and standard deviation for univariate analysis while Spearman Rank Oder correlation Coefficient was used to test all stated hypothesis The findings of the study showed that there was a significant relationship between Employee Voice and the measures of workers Well-being in food and beverages manufacturing companies in Rivers State, Nigeria. The study recommends that organizations need to encourage employees' participation in all aspects of decision making as a crucial determinant of employee functioning and job performance.
... union voice in general enhances workers' welfare. A number of influential studies have established the link between union voice and workers' welfare in the followings viz: levels of pay either in terms of a direct premium attributable to unions or through reducing pay inequality (Freeman 1980;Booth 1995;Gosling & Machin 1995;Clark & Oswald, 1996;Card, 1996;Card, Lemieux & Riddell, 2003;Budd & Na 2000;Metcalf, Hansen & Charlwood, 2001;Hirsch 2004, Blanchflower & Bryson, 2004. ...
Employees have been the most important element of any organization whereby success or otherwise of a given organization depends largely on the performance of its employees. If employees are not allowed to participate in decision making, it becomes very difficult for them to showcase the skills, knowledge and abilities they possess. This study therefore examines the relationship between employee voice and workers' well-being in food and beverages manufacturing companies in Rivers State, Nigeria. The study used a cross-sectional design. The population of this study is the seven (7) food and beverages manufacturing companies out of the Thirty-four (34) manufacturing companies registered with the Manufacturers Association of Nigeria (MAN), as obtained from the 2019 updated Directory of the Rivers State zone of the Association. These seven (7) companies were purposively selected because of their peculiarity of being in the same grouping of production, that is, food and beverages. The population element for the study was 208 employees, of which a sample size of 137 was extracted using Taro Yamane's sample size determination formula. Data were analyzed using mean and standard deviation for univariate analysis while Spearman Rank Oder correlation Coefficient was used to test all stated hypothesis The findings of the study showed that there was a significant relationship between Employee Voice and the measures of workers Well-being in food and beverages manufacturing companies in Rivers State, Nigeria. The study recommends that organizations need to encourage employees' participation in all aspects of decision making as a crucial determinant of employee functioning and job performance.
... Dentro de esta literatura, es bastante estudiado el rol de los sindicatos en el nivel y dispersión de remuneraciones, con hallazgos mixtos. 1 Por un lado, algunos trabajos señalan que los sindicatos reducen la dispersión dentro de los trabajadores sindicalizados, porque buscan elevar el piso salarial de los más desfavorecidos (Stewart, 1995;Gosling y Machin, 1995;Fortin y Lemieux, 1997). Por otro lado, Arbache y Carneiro (1999) muestran para Brasil que los sindicatos afectan positivamente al salario, aunque la dispersión salarial entre sectores es mayor entre los trabajadores de sectores sindicalizados. ...
La heterogeneidad salarial en el mercado de trabajo argentino es un tema ampliamente debatido. La inserción productiva de los trabajadores es una importante fuente de diferenciales salariales, que a su vez explica buena parte de la desigualdad en la distribución del ingreso de los hogares. Dicho fenómeno reconoce al menos dos determinantes principales: la considerable heterogeneidad productiva de nuestro país y las diferencias de atributos productivos en la fuerza laboral. En este trabajo se utilizan técnicas de descomposición tradicionales para cuantificar la contribución de cada uno de estos factores, a distintos niveles de desagregación sectorial. Así, mostramos que las primas salariales de cada sector dependen en gran medida de las características observables de su fuerza laboral, aunque después de controlar por dichos atributos queda una proporción considerable de la variación sin explicar. Finalmente, ofrecemos algunas hipótesis acerca de los posibles determinantes de las diferencias salariales entre los sectores productivos del país.
... Countries like Germany used to have the minimum wage based on negotiations between the employer federation and labour union. The rise in statutory minimum wage across the world is a result of increasing de-unionisation (Gosling and Machin 1995) and the rise in employment by big fi rms (Mueller et al 2017). Thus, the fear of exploitation of lowwage earners is still as large as it was when the fi rst minimum wage laws were passed in the early 20th century. ...
The minimum wage law is becoming one of the most popular tools to address concerns regarding poverty and inequality. There has been a measurable positive impact of minimum wages on societal welfare, which is the reason behind increasing implementation of minimum wage laws. Using existing theoretical and empirical evidence from both sides of the debate, I make an argument that we sti need the minimum wage.
... Dentro de esta literatura, es bastante estudiado el rol de los sindicatos en el nivel y dispersión de remuneraciones, con hallazgos mixtos. 1 Por un lado, algunos trabajos señalan que los sindicatos reducen la dispersión dentro de los trabajadores sindicalizados, porque buscan elevar el piso salarial de los más desfavorecidos (Stewart, 1995;Gosling y Machin, 1995;Fortin y Lemieux, 1997). Por otro lado, Arbache y Carneiro (1999) muestran para Brasil que los sindicatos afectan positivamente al salario, aunque la dispersión salarial entre sectores es mayor entre los trabajadores de sectores sindicalizados. ...
... Moreover, unions may also foster implicit contracts that shield employees against wage reductions (Gürtzgen, 2009;Gürtzgen, 2014). Works councils and unions additionally prefer and promote equal pay for comparable jobs and compress wage differentiation (Gosling and Machin, 1994;Card et al., 2004;Dell´Aringa, C. and Pagani, L., 2007;Dustmann et al., 2009;Addison et al. 2010;Hirsch and Müller, 2020). Many collective bargaining agreements do not allow for wage differentiations between occupation groups. ...
... Moreover, unions may also foster implicit contracts that shield employees against wage reductions (Gürtzgen, 2009;Gürtzgen, 2014). Works councils and unions additionally prefer and promote equal pay for comparable jobs and compress wage differentiation (Gosling and Machin, 1994;Card et al., 2004;Dell´Aringa, C. and Pagani, L., 2007;Dustmann et al., 2009;Addison et al. 2010;Hirsch and Müller, 2020). Many collective bargaining agreements do not allow for wage differentiations between occupation groups. ...
The literature on wage bargaining so far mainly argues that unemployment benefits are relevant outside options for employees. This paper demonstrates that also a change in outside wage options drives wages in continuing jobs. We use the natural experiment of a crafts reform that reduces outside wage options for a clearly defined treatment group of employees in deregulated crafts occupations in comparison to employees in crafts occupations that have not been reformed. Five years after the reform, the wages of employees in deregulated crafts increased by five per cent less than wages of employees in the other group. Reform effects are concentrated in employers with high increases in their median wage level after the reform. Wage differences therefore seem to be the result of wage renegotiations initiated by employees, rather than renegotiations initiated by employers. Works councils or collective bargaining, firm size, firm profits or regional unemployment have no impact on wage differentiation after taking wage increases into account. We show for the first time that changes in outside options induce wage differentiation at the employer level even in the tightly regulated German labour market. We use entropy matching on the basis of a large representative administrative linked employer-employee panel data set to guarantee homogeneous treatment and control groups before the reform. We isolate the outside wage option effect from other wage determinants by restricting our sample to employers not affected by the crafts reform. JEL Codes: J24, J31, J44, L11
... First-generation studies on the impact of unionization on wage inequality concluded that declining unionization explained around 15 to 20% of the increase in wage inequality in the 1980s (Card, 1992;Gosling and Machin, 1995). Second-generation studies however using more advanced econometric methodologies provided a more complete picture of the effect of unions in wage inequality. ...
Purpose
The authors explore the impact of financialization on income inequality for a panel of 19 OECD countries over the period 2000–2017. The authors control for the effect of banking crises, credit market regulation and globalization, among other factors.
Design/methodology/approach
The authors use three proxies for income inequality and four proxies for financialization. The authors employ a panel fixed effects approach using Driscoll and Kraay’s (1998) nonparametric covariance matrix estimator, which produces standard errors that are robust to general forms of cross-sectional dependence.
Findings
The authors provide evidence which to a great extent supports the view that the process of financialization has increased income inequality. In the disposable Gini specifications, two out of the four financialization measures are found to significantly contribute to rising inequality whilst in the specification with the market income Gini coefficient, three out of the four financialization proxies appear to adversely affect inequality. In the specification with the Gini coefficient based on manufacturing pay, the evidence is weak. Furthermore, trade unions appear to play a significant role in reducing inequality in two out of the three Gini specifications while the effect of credit market regulation is rather ambiguous.
Originality/value
The authors’ findings suggest a positive relationship between financialization and income inequality; however, the results depend on the proxies used to measure financialization and income inequality. The authors conclude that the process of financialization in triggering income inequality is complex and merits additional research.
... The changing role of labour market institutions has also been considered as a potential cause of the rise in wage inequality. Gosling and Machin (1995) study the role of falling unionisation on the distribution of wages in the UK. They estimate that around 20% of the rise in inequality can be attributed to the declining importance of unions. ...
After a long period of relative stability, wage differentials in the UK have risen sharply since the late 1970s. Wage inequality is now greater than it was 100 years ago. This increase in cross sectional inequality has been widely documented. The aim of the first part of thesis is to establish the degree to which earnings differences are permanent or transitory and to study the level of mobility of individuals within the earnings distribution. Using data from the New Earnings Survey (1975-1994) and the British Household Panel Survey (1991-1994), I provide an analysis of the dynamics of the earnings process and investigate whether this has changed over time. An examination of the covariance structure of male earnings points to the existence of a permanent component, that increases with age, and a highly persistent transitory component. Both of these components rise over time, each explaining about half of the rise in wage inequality from 1975 to 1994. The investigation into wage mobility suggests considerable persistence in the wage distribution. There is some evidence that mobility has fallen over this time period. The second part of this thesis studies the economic effects of minimum wages in Britain. Using a panel of Wages Council industries I report evidence showing that increases in the minimum wage compress the wage distribution, but there is no evidence of any adverse employment effects. Meyer and Wise (1983a, 1983b) propose a technique for estimating the employment effects of the minimum wage from data on a single cross section of earnings. I show that, at least for Britain, their approach is highly sensitive to key assumptions about the functional form for wages and the impact of the minimum on the wage distribution. Their technique although appealing on an intuitive level does not provide robust results in practice.
... Sweden, The Netherlands, Germany, Italy, and France, for example, all have centralised bargaining systems, and have lower income inequality than the USA and UK. Declining rates of union membership directly contributed to an increase in wage inequality in the United States and the United Kingdom in the 1980s (Gosling & Machin, 1995;Card, Lemieux & Riddell, 2004). ...
This paper argues that trade unions represent natural allies for career services, as they have shared interests in addressing issues of social justice at work. This potentially valuable partnership has been under-developed. Two case studies of innovative practice will be presented, one relating to guidance practice in the Netherlands, the other related to career education proposals in Scotland. The challenges to be overcome in union involvement in careers work are explored. Working with unions represents a pragmatic approach to career guidance practice that is responsive to the social justice implications of new employment relationships.
... 38 Studies for the United States include Card (1996Card ( , 2001 and Machin (2016). Studies for the United Kingdom include Gosling and Machin (1995) and Machin (1997). Table 5. ...
Income inequality became more and more prominent in the academic and policy debate in recent years and particularly since the economic downturn. Inequality, indeed, may have long-term effects on (potential) growth and macroeconomic stability, reinforcing existing inequalities and reducing opportunities, skills development and social and occupational mobility. Structural reforms, i.e. labour and product market reforms and tax-benefit systems reforms, are one of the main tools available for public interventions aimed at boosting growth while not being detrimental to equality. In this context, DG ECFIN of the European Commission organised two workshops held on the 16th of May and the 19th of June 2017 aimed at enriching the existing knowledge of the relationship between structural reforms and inequality and taking place at a time where Europe discusses the social dimension, notably the European Pillar of Social Rights as proposed by the Commission and proclaimed at the Social Summit in Gothenburg. The first workshop focused on the methodological issues whilst the second one focused on policy evidence of the impact of structural reforms on inequality. These proceedings take stock of the discussions held in the workshops, in order to contribute to the growing debate on how to better take into account distributional effects when formulating policy advice.
... For example, it is of substantive interest to investigate how unionism affects wage dispersion. A number of researches show that wages are flatter in union sectors than they are in nonunion sectors (Freeman (1980), Gosling and Machin (1995), DiNardo et al. (1996), Card (2001)). Freeman (1980) compares the variances of the wages of union workers and nonunion workers, and finds that unionism reduces the wage differential in the organized sector, and that this difference-reducing effect within sectors is larger than the gap-increasing effect across industries. ...
This paper proposes nonparametric tests for the null hypothesis that a treatment has a zero effect on the conditional variance for all subpopulations characterized by the values of the covariates. Rather than the mean of an outcome, which measures the extent to which a treatment changes the level of the outcome, researchers are sometimes interested in how the treatment affects the dispersion of the outcome. We use the variance to measure dispersion and estimate the conditional variances using the series method. We provide a test rule that compares a Wald-type test statistic with the critical value of a chi-squared distribution. We also construct a normalized test statistic that is asymptotically standard normal under the null hypothesis. We illustrate the usefulness of the proposed test by Monte Carlo simulations and an empirical example that investigates the effect of unionism on wage dispersion.
... Haskel (1996), Feenstra and Hanson (1999)), and changes in institutional factors such as the decline of the influence of unions, collective bargaining, and lower minimum wages (see e.g. Gosling and Machin (1993) and Fortin and Lemieux (1997)). ...
... Other research has shown that changes in unionization is associated with changes in wage inequality. Gosling and Machin (1995) found that the decline in unionisation in the UK over the 1980s accounted for 15% of the increase in wage inequality. However, Gosling and Lemieux (2004), comparing the US and the UK, show that the effect of de-unionization has been to increase male wage inequality but has had little effect on female wage inequality. ...
The aim of this review is to assess the effectiveness of education, wage setting institutions and welfare states in reducing inequality.
... For example, Freeman (1980) shows that unions reduce the aggregate level of wage dispersion. Gosling and Machin (1995) find that the fall in unionization accounts for around 15 % of the increase in male wage inequality among semiskilled workers in Britain. There is also evidence that the earnings are less dispersed in the union sectors of the USA (Card 2001), Canada (Card et al. 1999) and the UK (Card et al. 2003). ...
In this paper, we estimate the magnitude of the union–nonunion wage differential and the effect of unions on wage dispersion in the case of Turkey. Using the newly available, individual-level microdata for Turkey in 2004 and 2008, we find out that union membership does have a positive wage differential and this differential is higher at lower quantiles. Furthermore, it seems that the unions systematically reduce the variance of wages for the relevant period, though the magnitudes of the effects are smaller when we control for the work force characteristics.
... Uno de los tópicos del mercado laboral que durante los últimos años ha sido materia de reflexión, es la desigualdad salarial entre trabajadores especializados y no especializados. De acuerdo con Gosling y Machin (1993), el enfoque teórico convencional postula que son las fuerzas del mercado las que explican la dinámica del fenómeno y que por tanto habría que estudiar la oferta y demanda relativa de trabajo como factores determinantes. Sin embargo, existe otra visión que le atribuye un papel preponderante a las instituciones relacionadas con el mercado de trabajo. ...
Resumen En este documento se analizan los determinantes de los salarios relativos en la industria manufacturera de México durante el periodo de 1999-2008. El análisis se desarrolla en el marco de un enfoque integral que considera una perspectiva laboral, comercial y financiera. Se utiliza la metodología de datos de panel e información de la Encuesta Industrial Mensual del inegi. Los resultados sugieren que la demanda relativa de trabajo calificado y no califi-cado incide directamente en el incremento de los salarios relativos de manera significativa. También se encuentra que la relación de las exportaciones e importaciones con los salarios relativos es consistente con lo que postula la teoría. Se identifica que los subsectores que presentan las mayores tasas de salarios relativos son los que presentan mayor dotación de trabajo calificado en relación con el no calificado.
... Specifically, we 5 Changes experienced by a number of industrialised economies in this area during the 1980s are documented in, e.g. Faber (1990); Ride11 (1992); Gosling and Machin (1995); and Machin and van Reenen (1998). examine how the presence of rigidities in the market for unskilled labour affects the decomposition of wage inequality outcomes into trade and technology components. ...
... Machin and Gosling (1995) andFortin and Lemieux (1997) show that the decline in union density in the United Kingdom and the United States caused a decrease in union bargaining power, and this helps to explain the observed increase in wage inequality.6 Blanchflower and Freeman estimated wage models using OLS, with very similar specifications to the model estimated in this paper. ...
This paper attempts to answer the following questions: Do unions influence wage formation and wage distribution? Does bargaining structure affect wage dispersion? We find evidence that unions and bargaining structure are fundamental in explaining the wage dispersion in Brazil, a country already marked by a very high wage inequality. Acknowledgment: This paper is part of a more extensive and detailed study called "Unions and labor market in Brazil", to be published in IPEA/The World Bank Brazil Jobs Report 2002.
... Friedman (1962: 124) argued that "Since unions have generally been strongest among groups that would have been high-paid anyway, their effect has been to make high-paid workers higher paid at the expense of lower paid workers" (also see Johnson 1975). But research in the 1980s and subsequent more sophisticated analyses show that unions' net effect is to reduce income inequality (Freeman and Medoff 1984;Griffin et al. 1989;Freeman 1993;Card 1992;Gosling and Manchin 1995). Card, Lemieux, and Riddell (2004) review research on unions and income distribution. ...
... A number of studies have examined the impact of union decline on wage dispersion in the Great Britain, based on cross-sectional estimates and using measures of union membership. Studies examining the effects over the 1980s have attributed between 15 and 40 per cent of the rise in inequality to declining unionisation (Gosling and Machin, 1995;Machin 1997 that around 90 per cent of the increase in variance can be attributed to union decline using naïve estimates. Using skill-adjusted calculations, Card et al. (2003: 31) estimate the union effect to be 9 per cent over 1983-2001, highlighting the 'steady erosion' of the equalising effect of unions over the 1980s and 1990s. ...
This paper estimates the effects of union decline on the wage structure of full-time men in Great Britain between 1991 and 1997. The estimates are based on a similar methodology to that developed by Card (2001). Our approach differs from existing analyses of the impact of union decline on the wage structure in Great Britain (Card et al., 2003 and Addison et al., 2003) because we compare and contrast the results obtained from estimates of union effects based on union membership and collective bargaining coverage, and also incorporate results from panel estimates. We argue that results based on collective bargaining coverage are more accurate because free-riding increased considerably over the course of the 1980s and 1990s. Our results are sensitive to the methodology used in calculating the union wage mark-up. Calculations based on cross-sectional estimates of the union wage mark-up suggest that declining union power was the key reason for increasing wage dispersion among full-time male employees during the 1990s while estimates based on panel data suggest that declining union power explains around half of the increase in wage dispersion.
This chapter analyses the relationship between education and socio-economic inequalities. Education is the determinant factor of the human capital and therefore has a strong impact on the labour productivity. Therefore, education affects wages inequalities through the different levels of human capital. More educate people have greater possibilities to enter into the labour market in a shorter period and receive a better job and a higher wage. The impact of socio-economic inequalities on the access to education system is also analyzed and explains the deterioration of socio-economic inequalities. The irrigational mobility and the impact on education level is also analyzed. Finally, the policies implemented by the government in order to restrict inequalities are also presented and analyzed.
This chapter:
analyses the impact of education on the level of wages
explains the socio-economic inequalities on the basis of the differences in the level of education
focuses on the role of human capital in explaining differences in wages
analyses the impact of education on intergenerational mobility
This study uses surveys from the past 60 years to study union membership in Denmark, France, West Germany, Italy, Sweden, the United Kingdom, and the United States. We first revisit aggregate union densities finding that, for France and Italy, they were at times under‐ and overestimated, respectively. Second, we document the evolution of the composition of union membership in terms of gender, occupation, education, and sector. Different stylized facts emerge for different groups of countries. These facts do not lend support to the composition‐based theory that attributes deunionization to deindustrialization, nor to the technological theory that predicts the exit of the high‐skilled from unions.
How unions affect the distribution of income is a subject that has long intrigued social scientists. The publication of What Do Unions Do? and the related papers by Freeman (1980, 1982, 1984) represented a watershed in the evolution of economists’ views on this question. Until the 1970s the dominant view was that unions tended to increase wage inequality (Johnson, 1975). Using micro data on individual workers in the union and nonunion sectors, Freeman (1980) presented results that challenged this view. He showed that the inequality-reducing effects of unions were quantitatively larger than the inequality-increasing effects. The equalizing effect of unions became a key chapter in What Do Unions Do? and an important component of the authors’ overall assessment of the social and economic consequences of unions.
This thesis examines the links between unions, labour market outcomes and changes in the structure of demand for labour. It is split up into three self contained sections. The first looks at the determination of union presence in the private sector workplaces. Given the decentralised structure of wage bargaining in the U.K industrial relation system, the focus is on the presence of a union recognised for the purposes of bargaining over pay and conditions at the workplace. This is found to be determined historically by the characteristics of the labour and product market at the time the workplace is created. This means that unions may still have influence over wages in some industries and markets where their current relative power is weak. It is also shown that the presence of a recognised union at the workplace is the crucial determinant of union membership. Variations in union density, conditional on union coverage, in the workplace appear to be fairly random. The second part of the thesis looks at the relationship between unions and the structure of wages. It presents results suggesting that wage differentials between and within groups are narrower in the union than in the non union sector. It then exploits the finding that union presence in the workplace is determined separately (at a different time) from wages to test whether unions actually alter the wage policies in workplaces or whether negotiations only take place when they are deemed by management to have no effect. It is shown that part of the "sword of justice" role of trade unions, compressing wage differentials amongst semi-skilled workers can be explained by the different composition of the union sector. There still remains some evidence, however, that unions do compress the wage distribution. The last part of the thesis looks directly at the recent changes in the distribution of wages. It is shown that increases in the return to education can explain about half the overall increase in wage inequality and that there has been a sharp drop in the relative wages of new entrants into the labour market without post compulsory schooling. It is also shown that the decline in trade union coverage can explain a significant part of this increase in inequality, although it is accepted that economic factors (such as changes in technology) might have caused both the fall in union presence and the rise in wage inequality. Finally a comparison with West Germany from 1984-1992 reveals the importance of other labour market institutions such as the education and training system in determining the response of an economy to changes in the structure of demand.
This thesis is composed of four empirical studies which use data from Portugal, the United Kingdom and Germany to examine four topical aspects of employment, careers and productivity in these countries' labour markets. The second chapter studies the impact that a 49.3% change in the legal minimum wage for workers aged 18 and 19 in Portugal had on the wages and employment of this age group of workers. It uses firm-level micro data to compare the employment growth of 18-19 year old workers with employment growth of older workers. It also looks separately at firms more and less likely to be affected by the minimum wage shock. The third chapter studies the impact of foreign direct investment (FDI) on the productivity of domestic firms in the UK. It uses a plant-level panel covering UK manufacturing to find evidence of FDI spillovers. It does so by investigating the correlation between a domestic plant's TFP and the foreign-affiliate share of employment in that plant's industry and, independently, in that plant's region. A number of different specifications are estimated in order to minimise potential endogeneity bias. The fourth chapter estimates returns to job tenure and labour market experience in the United Kingdom and Germany using various methods to correct for heterogeneity and endogeneity biases. It also estimates the returns to tenure and experience by qualification group. Results are interpreted in light of the differences between the two labour market's institutions. The fifth chapter compares returns to tenure and experience in union and non-union jobs in the United Kingdom in the 80s and 90s. It uses longitudinal data and instrumental variables methods to correct for potential individual and job match heterogeneity biases. Returns are also calculated separately for jobs with and without seniority wage scales.
The focus of this contribution is on weak productivity growth, in the UK and other advanced economies, which has been slowing down ever since around 2000, and on increasing income inequality; both of which have been caused by a number of factors, including ‘secular stagnation’. Actually, recent evidence clearly suggests that labour productivity and income inequality have been closely and significantly related; this is so since there is a strong relationship between productivity, inequality, economic growth and real wages. Productivity growth is the key determinant of how demand can grow without inflation, thereby reducing inequality of income. The slowdown in productivity growth and increase in inequality have been in evidence in the UK and other advanced economies. Indeed, they have become more pronounced following the Global Financial Crisis. It is the case that although weak productivity growth and increased income inequality predate the Global Financial Crisis, and the Great Recession, they have clearly worsened following them.
This contribution discusses the importance of tackling income inequality, a very serious occurrence over the last forty years or so. Economic policy initiatives to produce a more equal distribution of income thereby become relevant and urgent. Not only would such policies reduce inequalities but would also contribute to the increase of the level of economic activity, as this has been well demonstrated many times. Relevant economic policies for this purpose are briefly discussed in this contribution. Inequality emerged in view of the members of the very top of the income distribution gained at the expense of wage earners; and in the financial sector in particular, which was one of the main causes of the Global Financial Crisis (GFC) of 2007/2008. Wealth and gender inequalities are important in this respect, but they need separate contributions to deal with satisfactorily; we refer to them as necessary. Relevant contributions are included in this publication.
Purpose
The link between human resource practices and earnings for workers is a notable research lacuna and this study addresses this relationship using a matched data set covering all employees and employers in the Irish private sector.
Design/methodology/approach
Our analysis is based on the National Employment Survey (NES). The survey provides measures of individual characteristics such as union membership, collective bargaining coverage, sector, occupation, age, sex and educational attainment. It also provides data on individual employee earnings including overtime and shift allowances, together with weekly hours worked. The particular benefit of the NES is that it is a large-scale matched employer-employee survey.
Findings
Results indicate that extensive use of high involvement practices measured in this study are positively associated with higher earnings for both lower and higher earning employees. We also find that for employees covered by a collective agreement, the positive effects of high involvement work practices are complementary with a union earnings premium.
Research limitations/implications
Some caution is required in the interpretation of our results given the cross-sectional nature of our data. With cross-sectional data it is difficult to establish definitive causal and directional linkages between high involvement measures and levels of earnings and earnings inequality.
Practical implications
For trade unions and their members the results imply that the involvement practices as measured in this study are unlikely to substitute for the earnings premium associated with collective bargaining coverage. For human resource increasing the earnings of low paid employees may carry relatively marginal costs but the benefits maybe considerable in the form of employee engagement, increased effort levels and productivity gains.
Originality/value
This study extends the literature on the outcomes of high involvement practices for employees and firms by addressing their association with employee earnings particularly at the lower end of the wage hierarchy.
This paper explores the relationship between globalization and inter-industry wage differentials in China by using a two-stage estimation approach. Taking advantage of a rich household survey dataset, this paper estimates the wage premium for each industry in the first stage conditional on individual worker and firm characteristics. Alternative measures of globalization are considered in the second stage: trade openness and capital openness. A disaggregation of trade into trade in final and intermediate goods shows that increases in import (export) shares of final goods reduce (increase) the wage premia significantly, whereas imports or exports of intermediate goods do not explain differences in industry wage premia. This finding is supported by stronger effects for final goods trade in coastal than noncoastal regions. Our results also show a positive relationship between capital openness and industrial wage premia, though this finding is less robust when potential endogeneity issues are allowed for.
The question of how organized labor affects the content, enforcement, and outcomes of regulation is especially timely in an era in which protective laws and regulations are being scaled back or minimally enforced and union membership is in decline. This article surveys literature from a wide array of regulatory domains-antidiscrimination, environmental protection, product quality, corporate governance, law enforcement, tax compliance, minimum wage and overtime protection, and occupational safety and health-in an effort to identify common findings on what unions do for regulation. Literature on the topic has taken up five questions: how labor unions affect the passage of protective laws and regulations; how they affect the outcomes that regulators target; how they affect the intensity of regulatory enforcement; the specific activities and channels of influence they use to influence regulated outcomes; and the role they play in self-regulation. Drawing on empirical literature from the domains listed, I review and analyze literature on each of these questions and offer several conclusions and suggestions for future research.
Purpose
After 20 years of social partnership in Ireland the purpose of this paper is to use a national survey of firms and employees to examine the extent of the wage gap between union and non-union workers in the private sector and compare the degree of wage inequality in union and non-union firms and among union and non-union employees.
Design/methodology/approach
The analysis in the paper is based on the National Employment Survey carried out by the Central Statistics Office in October 2008. Approximately 9,000 enterprises were sampled and almost 5,000 enterprises responded – a response rate of over 50 per cent while almost 100,000 employees were sampled and 65,535 completed the questionnaire – a response rate of over 60 per cent. In total 22 per cent (14,619) of respondents worked in the public sector and 78 per cent (50,916) in the private sector.
Findings
It appears that over time the earnings premium enjoyed by unionised workers has declined. This may reflect a long term decline in union bargaining power in the private sector as union density levels have declined. Even so unionised employees enjoy a wage premium over non-union employees and collective coverage appears to reduce levels of income inequality. However, the overall union wage gap is relatively modest – being generally below 10 per cent possibly due to the harmonising effects associated with the period of social partnership supported by government trade unions and employers.
Research limitations/implications
The cross-sectional nature of the data means that the factors associated with variations in employee earnings over time cannot be identified.
Practical implications
There is substantial evidence of a considerable spill-over effect as nationally agreed rates of pay percolated from the union to the non-union sector. It may also be the case that social partnership has acted to reduce wage inequality in non-union as well as union establishments. It appears that partnership type arrangements have the capacity to deliver for all workers in the private sector.
Originality/value
A unique aspect of the national survey data used here is the availability of employer/employee matched data from a robust national level survey with measures of union membership, earnings, individual and employment characteristics.
Copyright 2016 by Emerald Group Publishing Limited.Labour markets across the globe have recently been characterized by rising wage inequality, real wage stagnation or both. Most academic work to date considers each in isolation, but the research in this paper attempts to pull them together, arguing that higher wage inequality takes on an added significance if real wages of the typical worker are not growing, and showing that inequality rises and real wage slowdowns have gone hand-in-hand with one another due to wages decoupling from productivity in the United States and United Kingdom. The lack of growth of real wages at the median in the United States is also shown to be linked to the declining influence of trade unions.
The U.S. and Canadian economies have much in common, including similar collective bargaining structures. During the period 1981–88, however, although both countries witnessed a decline in the percentage of workers belonging to unions and an increase in hourly wage inequality, those changes were much more pronounced in the United States than in Canada. Using data on men in Canada and the United States in 1981 and 1988 (from the Labour Force Survey and supplements to the Current Population Survey), the authors study the effect of labor market institutions on changes in wage inequality by computing simple counterfactuals such as the distribution of wages that would prevail if all workers were paid according to the observed nonunion wage schedule. Their results suggest that much more severe declines in the unionization rate in the United States than in Canada account for two-thirds of the differential growth in wage inequality between the two countries.
In this paper we use the national samples from the European Structure of Earnings Survey (ESES) to analyze the evolution of the wage premium of firm- and industry-level agreements in the Czech Republic, Hungary, and Poland (the CE3) around the time of their accession to the EU. We find that despite a generalized reduction in union coverage in these countries, the union wage premium after accession to the EU became bigger and statistically more significant for Poland and Hungary, particularly for industry-level agreements. We interpret these findings in terms of the institutional reforms that occurred in the CE3 between 2002 and 2006. These reforms, which were prompted by the EU Commission's requirements for EU accession, increased the social partners' ability to bargain and enforce wage agreements, and made industry-level unions more effective in guaranteeing the protections provided by labor standards. Results are less conclusive for the Czech Republic, probably due to factors that attenuate the effect of bargaining coverage upon wages, e.g. a smaller effect of institutional reforms, a greater use of mandatory extension mechanisms, the more radical firm restructuring during transition in that country.
We investigate whether unionisation has a spillover wellbeing effect on non-members. To this end, we adapt the Social Custom Model of trade unions and conduct empirical analyses using linked employer-employee data on private establishments in Britain. We find that unionisation lowers non-members’ job satisfaction, but the effect is confined to workplaces where pay is set through collective bargaining.
This paper studies changes in labour market inequality in the UK, with particular reference to what happened to wage inequality
during the years of Labour government. The analysis uses micro-data through time to document what happened to overall wage
inequality, as well as upper- and lower-tail wage inequality, relative to what went before. Simple supply and demand models
of changing wage differentials by education group are used, so as to consider the drivers of relative demand shifts in favour
of the more educated that underpin rising wage inequality. The changing role of labour market institutions is also discussed,
and in particular the decline of unionization and the importance of the introduction of the national minimum wage in 1999
for the evolution of lower-tail wage inequality.
Using data from a variety of different sources, and straightforward econometric methods, we investigate the differences between union and non–union jobs. Despite the substantial decline in the percentage of workers unionized over the last twenty years, union jobs continue to differ from comparable non-union jobs in a large variety of non–wage characteristics. In general union workers work fewer hours per week, fewer weeks per year, spend more time on vacation and spend more time away from work due to own illness or the illness of a family member. The are also more likely to be offered and to be covered by health insurance, more likely to receive retiree health benefits, more likely to be offered and to be covered by a pension plan, and are more likely to receive dental insurance, long-term disability plans, paid sick leave, maternity leave, and paid vacation time.
Despite a general trend of increasing labor income inequality, there have been differences in the timing, intensity and even direction of these changes across OECD countries. These stylized facts have led to numerous studies about the main determinants of labor income inequality and, as a result, a significant revision of the previous consensus about the key drivers. The most researched channels include skill-biased technological change, international trade, immigration, education as well as the role of labor market policies and institutions.
Recent work on the economic effects of minimum wages has stressed that the standard economic model, where increases in minimum wages depress employment, is not supported by the empirical findings in some labour markets. In this paper we present a theoretical framework which is general enough to allow minimum wages to have the conventional negative impact on employment, but which also allows for the possibility of a neutral or a positive effect. The model structure is based on labour market frictions which give employers some degree of monopsony power. The formulated model has a number of empirical implications which we go on to test using data on industry-based minimum wages set by the UK Wages Councils between 1975 and 1990. Some strong results emerge: minimum wages significantly compress the distribution of earnings and, contrary to conventional economic wisdom but in line with several recent studies, do not have a negative impact on employment. If anything, the relationship between minimum wages and employment is estimated to be positive.
This paper provides a survey on studies that analyze the macroeconomic effects of intellectual property rights (IPR). The first part of this paper introduces different patent policy instruments and reviews their effects on R&D and economic growth. This part also discusses the distortionary effects and distributional consequences of IPR protection as well as empirical evidence on the effects of patent rights. Then, the second part considers the international aspects of IPR protection. In summary, this paper draws the following conclusions from the literature. Firstly, different patent policy instruments have different effects on R&D and growth. Secondly, there is empirical evidence supporting a positive relationship between IPR protection and innovation, but the evidence is stronger for developed countries than for developing countries. Thirdly, the optimal level of IPR protection should tradeoff the social benefits of enhanced innovation against the social costs of multiple distortions and income inequality. Finally, in an open economy, achieving the globally optimal level of protection requires an international coordination (rather than the harmonization) of IPR protection.
This paper investigates movements in relative wages and wage inequality across thirteen of the world's major economies. Focusing on wages received by full-time male workers, the investigation uncovers several empirical regularities: (1) Most advanced industrialized economies show increases, often large. in wage inequality during the 19805; none show declining wage inequality. In contrast. three of four middle income countries considered here show sharply declining wage inequality during the 1980s. (2) Since the early to late 19705, the advanced economies show large and persistent increases in the wages of prime age men relative to the wages of less experienced men. (3) Following a period of sharply declining education differentials in the 1970s, the advanced economies show rising or flat education differentials after 1980. Education differentials fell moderately to sharply in the middle income countries during the 1980s. (4) Wage inequality among observationally similar workers rose sharply during the 1980s in most advanced economies. (5) After 1915, the structure of relative industry wages in the manufacturing sector became increasingly dissimilar across the advanced economies. However. controlling for common time effects, increases in international trade as a fraction of GOP are associated with a partial convergence of relative industry wage structures across countries. The paper discusses several alternative interpretations of wage structure developments in the United States and other countries in the light of these empirical regularities.
This paper examines educational earnings differentials in Canada in the 1980s and compares changes in differentials to those in the United States. Our major finding is that the college/high school differential increased much less in Canada than in the United States. We also find that within educational groups the distribution of earnings widened, gender pay gaps narrowed, and age pay gaps increased in Canada as in the United States. The greater growth of the college graduate proportion of the work force in Canada than in the United States is one important reason why differentials rose more modestly in Canada than in the United States. The greater strength of Canadian unions in wage-setting, and the faster growth of real national output, and better trade balance in Canada may also have contributed to the lesser rise in differentials. Because Canada and the United States have so many characteristics in common, we interpret our results as indicating that the massive rise of skill differentials in the United States was not the result of some inexorable shift in the economic structure of advanced capitalist countries, but rather reflected specific developments in the U.S. labor market and the way in which the country's decentralised wage-setting system adjusted to these developments.
This paper estimates the effect of changing union density on earnings differentials and inequality among male workers in the U.S. and on industry earnings differentials among OECD countries. For the U.S. the evidence indicates that the fall in union density contributed to the 1980s increase in earnings inequality. Cross section-based estimates of union wage effects suggest that 40-50% of the rise in the white collar premium. 15-40% of the rise in the college premium. and 20% of the rise in the standard deviation of In earnings for all men are attributable to the fall in union density. Longitudinal-based estimates of union wage effects suggest that deunionization contributed less to the rise in differentials. Still. the dispersion of earnings grew as much among organized workers as among otherwise comparable nonunion workers, so that overall dispersion would have risen substantially even if the entire work force had been organized. Deunionization was thus a factor in the rise in inequality but not the factor. The cross-country comparisons show that earnings distributions are more compact among union workers than among nonunion workers in OECD countries with different union densities, types of union movements, and with very different union/nonunion wage differentials, making the relation between unionism and dispersion a general outcome of unionism. not something specific to U.S. institutions. In addition, they indicate that earnings differentials by industry are smaller and increased less in the 1980s in highly unionized countries than in less unionized countries, suggesting that strong national union movements can partially offset market pressures for rising inequality.
This study analyzes establishment-level data primarily to examine the effect of unionism on the wage structure within establishments. The major finding is that within-establishment dispersion of wages is significantly narrower in unionized than in nonunionized establishments, a pattern the author attributes in large part to unions' wage practices, such as single rate or automatic-progression modes of wage payment as opposed to merit reviews and individual wage determination. The data also show that dispersion in average wages is narrower among organized plants, but by more modest amounts than the within-establishment differential. Overall, the evidence suggests a major role for explicit union wage policies in explaining the dispersion of wages within firms and in the economy as a whole. (Abstract courtesy JSTOR.)
This study examines the relationship between unionism and earnings dispersion within U.S. manufacturing and nonmanufacturing industries. The author hypothesizes not only that unionism narrows earnings dispersion, as others have shown, but also that the dispersion in earnings, reflecting the degree of worker homogeneity, influences the level of unionism. Estimation of a three-equation model, using 1970 three-digit industry data, provides evidence regarding the simultaneous determination of unionism, earnings, and earnings dispersion within U.S. industries. The estimated equalizing effects of unionism on within-industry earnings distributions are found to be significant both in the manufacturing and nonmanufacturing sectors, the size of these estimates increasing after accounting for simultaneity. In addition, the dispersion in earnings does appear to affect the level of unionism, although the evidence on this point is ambiguous. (Abstract courtesy JSTOR.)
This study examines the effect of trade unionism on the dispersion of wages among male wage and salary workers in the private sector in the United States. It finds that the application of union wage policies designed to standardize rates within and across establishments significantly reduces wage dispersion among workers covered by union contracts and that unions further reduce wage dispersion by narrowing the white-collar/blue-collar differential within establishments. These effects dominate the more widely studied impact of unionism on the dispersion of average wages across industries, so that on net unionism appears to reduce rather than increase wage dispersion or inequality in the United States. (Abstract courtesy JSTOR.)
This paper explores the consequences of cognitive dissonance, coupled with time-inconsistent preferences, in an intertemporal decision problem with two distinct goals: acting decisively on early information (vision) and adjusting flexibly to late information (flexibility). The decision maker considered here is capable of manipulating information to serve her self-interests, but a tradeoff between distorted beliefs and distorted actions constrains the extent of information manipulation. Building on this tradeoff, the present model provides a unified framework to account for the conformity bias (excessive reliance on precedents) and the confirmatory bias (excessive attachment to initial perceptions).
In this paper we compare the changing pattern of unionization in OECD countries, reviewing existing evidence and presenting new information on union-nonunion differentials in labor market outcomes in these countries. Our principal source of information are the micro data files of the International Social Survey Programme cross-country surveys of 1985–87. Our analysis shows that U.S. unions have a larger effect on wages than on other outcomes than unions in other OECD countries, and we argue that the high union premium in the United States has contributed to the decline in union density and divergence of the US. industrial relations system
This paper shows that increases in the minimum wage rate can have ambiguous effects on the working hours and welfare of employed workers in competitive labor markets. The reason is that employers may not comply with the minimum wage legislation and instead pay a lower subminimum wage rate. If workers are risk neutral, we prove that working hours and welfare are invariant to the minimum wage rate. If workers are risk averse and imprudent (which is the empirically likely case), then working hours decrease with the minimum wage rate, while their welfare may increase.
Book description:
The behaviour of the labour market is widely seen as the cause of the UK’s poor macroeconomic performance over the last thirty years. The functioning of the labour market is addressed in this book by an international group of economists. They assemble micro and macroeconomic evidence on the UK, the US, France and Germany, and discuss whether the UK labour market is different, and also if it has changed over time. The microeconomic evidence is assessed by Blanchflower and Freeman and by Gregg and Machin. The Thatcher reforms to industrial relations, surveyed by Metcalf, appear to have increased inequality without producing a more flexible labour market. Gregory and Sandoval suggest that minimum wages might have helped alleviate the rise in inequality in the UK. The effects of the reforms of the 1980s are unclear. Minford and Riley suggest that they have had an impact, whilst Barrell, Pain and Young present evidence that little has changed. The micro and macroeconomic approaches are complemented by Grubb’s detailed survey of the effects of active labour market policies as well as by the overview paper by Anderton and Mayhew.
Using data from the March Current Population Survey, the authors document an increase over the past 30 years in wage inequality for males. Between 1963 and 1989, real average weekly wages for the least skilled workers declined by about 5 percent, whereas wages for the most skilled workers rose by about 40 percent. The authors find that the trend toward increased wage inequality is apparent within narrowly defined education and labor market experience groups. Their interpretation is that much of the increase in wage inequality fro males over the last 20 years is due to increased returns to the components of skill other than years of schooling and years of labor market experience. Copyright 1993 by University of Chicago Press.
This paper uses Current Population Survey data to examine whether workers who use a computer at work earn a higher wage rate
than otherwise similar workers who do not use a computer at work. A variety of models are estimated to try to correct for
unobserved variables that might be correlated with job-related computer use and earnings. Estimates suggest that workers who
use computers on their job earn 10 to 15 percent higher wages. Additionally, the expansion in computer use in the 1980s can
account for one-third to one-half of the increase in the rate of return to education.
Although surveys show that traditional ordering of average wages--i.e. higher earnings with higher schooling and concave age-wage profiles--have not changed during the past three decades, the actual size of the wage differentials measured by education or by work experience has varied from peak to trough by a factor of two-to-one. The patterns are not monotone, but there is a trend toward increased skill premiums. The authors first examine the structure of wages among white men distinguished by age and schooling for the period from 1963 to 1989. They then compare shifts in the distribution of wages and employment among the age x schooling categories to show in reference to a stable demand structure that employment alone cannot account for observed changes in relative wages. Finally, the authors describe the characteristics required of candidate demand shifters and offer examples using linear trend, business cycle shocks, and recent patterns of deficits in international trade. Copyright 1992, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
During the 1980's, a period in which the average level of real wage rates was roughly stagnant, there were large changes in the structure of relative wages, most notably a huge increase in the relative wages of highly educated workers. This paper attempts to assess the power of several alternative explanations of the observed relative wage changes in the context of a theoretical framework that nests all of these explanations. Our conclusion is that their major cause was a shift in the skill structure of labor demand brought about by biased technological change.
Between 1979 and 1987 there were three significant changes in the wage structure in the United States. the pecuniary returns to schooling increased by about a third; the wages of older relative to younger workers with relatively low education increased to some extent; and the wages of women relative to men rose by almost ten percent. It is important for policy purposes to know why these changes occurred and whether they are temporary or permanent. The paper investigates several alternative explanations of these wage structure phenomena, including the most popular ones that their principal causes were shifts in the structure of product demand, skilled-labor saving technological change, and changes in the incidence and level of rents received by lower skilled workers. our reading of the evidence suggests that the major cause of the dramatic movements in the wage structure during the 1980's may have been some combination of changes in both production technology and the average relative nonobserved quality of different labor groups.
Using data on Wages Council coverage from the United Kingdom New Earnings Survey, the authors examine the impact of mandated minimum wages on wage dispersion and employment in the United Kingdom in the 1980s. They find evidence that a dramatic decline in the toughness of the regulation imposed by the Wages Councils through the 1980s-a decline, that is, in the level of the minimum wage relative to the average wage-significantly contributed to widening wage dispersion over those years. There is, however, no evidence of an increase in employment resulting from the weakening bite of the Wages Council minimum pay rates. Instead, consistent with the conclusions of several recent U.S. studies, the findings suggest that the minimum wage had either no effect or a positive effect on employment. (Abstract courtesy JSTOR.)
The gap between rich and poor has increased dramatically over the last 25 years and the incomes of the bottom 10 per cent were no higher in 1991 than in 1967 (see Goodman and Webb (1994b, this issue)). Wages are an important part of household income and the trends in the dispersion of wages mirror very closely the trends in the dispersion of income. Knowing the reasons for the changing structure of the wage distribution is thus crucial to an understanding of the trends in overall household income.
In this paper I document changes in the distribution of employment in the UK labour market in the 1980s. I use two longitudinal data sources, an industry-level panel data set between 1979 and 1990, and the panel component of the 1984 and 1990 establishment-level Workplace Industrial Relations Surveys. There is evidence of a considerable shift towards the increased relative use of what may be termed more skilled labour (i.e. towards non-manual work, away from manual work and towards more highly-educated labour). This seems to be principally driven by within-industry and establishment factors rather than by industry/establishment shifts in product demand. There is some support for the notion that manual employment saving changes, perhaps due to the increased use of computer technology and/or innovation, are of empirical importance.
This paper examines changes in union wage differentials in Britain between 1980 and 1984 on the basis of two comparable establishment-level data sets. This period saw considerable economic and legislative change with potential effects on the outcomes of collective bargaining. Despite these changes, the mean differential has little change between these two years, and what there is is attributable to compositional changes, such as the shift away from the manufacturing sector and the downward shift in the establishment size distribution. The impact of the changes in unemployment and union coverage that took place is found to be minimal. Copyright 1991 by The London School of Economics and Political Science.
Eight explanations for U.K. income inequality trends between 1971 and 1986 are assessed by pooling evidence from inequality index decompositions by population sub-group and by income source. The principal causes of the aggregate trends were a mixture of changes in earnings inequality, employment structure and unemployment, but this mixture changed over time. The impact of wage inequality changes on income inequality changes fell during the 1970s and 1980s, reflecting the secular decline in the importance of employment earnings for household income packages. Unemployment changes had their largest impact at the start of the 1980s. Between 1981 and 1986 self-employment income changes appear to have had the largest influence. Copyright 1995 by The London School of Economics and Political Science.
The paper starts by confirming that on standard inequality measures the UK income distribution widened during the 1980s. This is demonstrated using the same income definition as is used in official DSS series. In doing this we seek to provide a link between academic studies of inequality and those used by policy-makers and the general public. We then consider the causes of the growth in inequality using a simulation model of the tax and benefit system to quantify how far tax and social security policy has contributed to this growth. We also assess the role of differential rates of earnings growth at different income levels and of changes in the size and composition of the employed and non-employed populations. -from Authors
This paper uses establishment-level data to examine the impact on union/nonunion pay differentials of the industrial relations setting in which bargaining takes place. The pre-entry closed shop is found to be of prime importance for the pay of both skilled and semiskilled manual workers. For skilled workers, and for semiskilled workers in larger establishments, the differentials are found to be insignificantly different from zero in the absence of a pre-entry closed shop. Copyright 1987 by Royal Economic Society.
Half of all British employees are union members, yet until recently little was known about the impact of unions on pay, productivity, profits and jobs. Fortunately we no longer have to rely on intuition or prejudice. In the last few years there has been a spate of good solid empirical work on the effects of unions. It is now possible to spell out with confidence the influence that unions have on the performance of companies, the economy and on individual welfare.
This paper examines the problem of estimating the parameters of an underlying linear model using data in which the dependent
variable is only observed to fall in a certain interval on a continuous scale, its actual value remaining unobserved. A Least
Squares algorithm for attaining the Maximum Likelihood estimator is described, the asymptotic bias of the OLS estimator derived
for the normal regressors case and a “moment” estimator presented. A “two-step estimator” based on combining the two approaches
is proposed and found to perform well in both an economic illustration and simulation experiments.
Unions and wage inequality in Canada and the United States Small Differences that Matter: Labor Markets and Income Maintenance in Canada and the United StatesUsearnings levels and earnings inequality: A review of recent trends and proposed explanations
- Lemieux
Lemieux, Thomas (1993) 'Unions and wage inequality in Canada and the United States', in David Card and Richard Freeman (eds.) Small Differences that Matter: Labor Markets and Income Maintenance in Canada and the United States, Chicago: University of Chicago Press. 24 rLevy, Frank and Richard Murnane (1992) 'Usearnings levels and earnings inequality: A review of recent trends and proposed explanations', Journal of Economic Uterature, 30, 1333-81