New Analyses of Worker Well-Being: Volume 38

With the signing of the North American Free Trade Agreement (NAFTA) in 1994, Mexico entered a bilateral free trade agreement which not only lowered its own tariffs on imports but also lowered tariffs on its exports to the United States. We find that women’s relative wage increased, particularly during the period of liberalization. Both between and within-industry shifts also favored female workers. With regards to between-industry shifts, tariff reductions expanded sectors that were initially female intensive. With regards to within-industry shifts, we find a positive association between reductions in export tariffs (U.S. tariffs on Mexican goods) and hiring of women in skilled blue-collar occupations. Finally, we find suggestive evidence that household bargaining power shifted in favor of women. Expenditures shifted from goods associated with male preference, such as men’s clothing and tobacco and alcohol, to those associated with female preference such as women’s clothing and education.

In order to study whether college scholarships can be an effective tool in raising students’ performance in secondary school, we use one aspect of the Kalamazoo Promise that resembles a quasi-experiment. The surprise announcement of the scholarship created a large change in expected college tuition costs that varied across different groups of students based on past enrollment decisions. This variation is arguably exogenous to unobserved student characteristics. We estimate the effects of this change by a set of “difference-in-differences” regressions where we compare the change in student outcomes in secondary school across time for different student “length of enrollment” groups. We also control for student fixed effects. We find positive effects of the Kalamazoo Promise on Promise-eligible students large enough to be deemed important – about a 9 percent increase in the probability of earning any credits and one less suspension day per year. We also find large increases in GPA among African American students.

Using an extensive data set on Finnish workers during the years 1990–2002, we analyze the relation between dispersion of wages within plants and labor productivity. We find a positive and significant relation between dispersion of wages within plant and average sales per worker. This relation is quadratic when dispersion is conditioned on workers’ observable characteristics. We also find positive and significant relation between unconditional dispersion of wages within plant and value added per hours worked, while we find a non-significant relation between conditional wage dispersion and valued added per hours worked. Results indicate that the incentive effect of wage dispersion dominates fairness or sabotage considerations.

Efficiency wage theory predicts that firms can induce worker effort by the carrot of high wages and/or the stick of monitoring worker performance. Another option available to firms is to tilt the remuneration package over time such that the lure of high future earnings acts as a deterrent to current shirking. On the assumption that firms strive for the optimal trade-off between these various instruments, we develop a two-period model of efficiency wages in which increased monitoring attenuates the gradient of the wage-tenure profile. Our empirical analysis, using two cross sections of matched employer-employee British data, provides robust support for this prediction.

This article tests whether workers are indifferent between risky and safe jobs provided that, in labor market equilibrium, wages should serve as a utility equalizing device. Workers’ preferences are elicited through a partial measure of overall job satisfaction: satisfaction with job-related risk. Given that selectivity turns out to be important, we use selectivity corrected models. Results show that wage differentials do not exclusively compensate workers for being in dangerous jobs. However, as job characteristics are substitutable in workers’ utility, they could feel satisfied, even if they were not fully compensated financially for working in dangerous jobs.

This chapter introduces a model of efficiency-wage competition along the lines put forward by Hahn (1987). Specifically, I analyze a two-firm economy in which employers screen their workforce by means of increasing wage offers competing one another for high-quality employees. The main results are the following. First, using a specification of effort such that the problem of firms is well-behaved, optimal wage offers are strategic complements. Second, the symmetric Nash equilibrium can be locally stable under the assumption that firms adjust their wage offers in the direction of increasing profits by conjecturing that any wage offer above (below) equilibrium will lead competitors to underbid (overbid) such an offer. Finally, the exploration of possible labor market equilibria reveals that effort is counter-cyclical.

This paper is the first to present empirical evidence consistent with models of signaling through unemployment and to uncover a new stylized fact using the 1988–2006 Displaced Worker Supplement (DWS) of the Current Population Survey (CPS), namely that, among white-collar workers, post-displacement earnings fall less rapidly with unemployment spells for layoffs than for plant closings. Because high-productivity workers are more likely to be recalled than low-productivity ones, they may choose to signal their productivity though unemployment, in which case the duration of unemployment may be positively related to post-displacement wages. Identification is done using workers whose plant closed as they cannot be recalled, and no incentives to signal arise.

Data from the 1984 Survey of Income and Program Participation are linked to longitudinal records from the Social Security Administration to examine the relationship between the long-term unemployment that prime-aged (ages 25–55) male workers experienced around the time of the 1980–1982 twin recessions with earnings, receipt of either Disability Insurance or Supplemental Security Income (DI-SSI) benefits, and mortality. Separate estimations are made for those who voluntarily and involuntarily left employment and the combined sample of these two groups. We find that 20 years later, long-term joblessness was associated with significantly lower earnings and higher likelihoods of the receipt of DI-SSI benefits as well as mortality.