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The Rise of Domestic Outsourcing and the Evolution of the German Wage Structure*
Abstract
The nature of the relationship between employers and employees has been changing over the past three decades, with firms increasingly relying on contractors, temp agencies, and franchises rather than hiring employees directly. We investigate the impact of this transformation on the wage structure by following jobs that are moved outside the boundary of lead employers to contracting firms. We develop a new method for identifying outsourcing of food, cleaning, security, and logistics services in administrative data using the universe of social security records in Germany. We document a dramatic growth of domestic outsourcing in Germany since the early 1990s. Event-study analyses show that wages in outsourced jobs fall by approximately 10-15% relative to similar jobs that are not outsourced. We find evidence that the wage losses associated with outsourcing stem from a loss of firm-specific rents, suggesting that labor cost savings are an important reason firms choose to contract out these services. Finally, we tie the increase in outsourcing activity to broader changes in the German wage structure, in particular showing that outsourcing of cleaning, security, and logistics services alone accounts for around 9% of the increase in German wage inequality since the 1980s. © The Author(s) 2017. Published by Oxford University Press on behalf of the President and Fellows of Harvard College.
... A large and storied literature has explored the causes of this labor market inequality and its spectacular rise. This literature has uncovered a variety of contributing factors, including skill-biased technological change (e.g., Autor et al., 2020;Katz and Murphy, 1992;Bound and Johnson, 1992;Goldin and Katz, 2008;Acemoglu and Autor, 2001), institutional changes such as the erosion of unions and worker bargaining power and a declining real minimum wage (e.g., Card et al., 2004;Farber et al., 2021;DiNardo et al., 1996;Lee, 1999), globalization (e.g., Feenstra and Hanson, 2003;Goldschmidt and Schmieder, 2017), and the sorting of workers across firms (e.g., Abowd et al., 1999;Card et al., 2013;Song et al., 2018). The increase in labor market inequality has not been limited to the U.S., and many of these same forces may also drive similar trends in other OECD countries. ...
... Our sensitivity analyses suggest a range for this estimate of 10 to 13 percent. This decline in the college wage premium is comparable to the effect of outsourcing that Goldschmidt and Schmieder (2017) estimate. ...
... Our baseline estimate is that switching from head-tax to payroll-tax financing would increase the annual earnings of non-college full-time, full-year workers by about $1,700 (about 3 percent). Two useful benchmarks are the estimate of an average 10 percent union wage premium over the last two decades (Farber et al., 2021), and the estimate that domestic outsourcing of workers in Germany causes wages to fall about 10 percent for non-college-educated non-outsourced workers (Goldschmidt and Schmieder, 2017). ...
... The empirical evidence is still limited, primarily due to difficulties in identifying outsourcing events from employeremployee matched datasets. Most recently, Goldschmidt and Schmieder (2017) show that workers subject to outsourcing events suffer large wage losses in a sample of German manufacturing plants. In this paper, we show that such episodes tend to be especially costly for workers when they occur in the last year of a board term. ...
... To summarize, there is a significant difference in the post-displacement effects, depending on whether the separation occurs in the last year of the board term or not, which is fully driven by outsourcing events. A way to rationalize this finding is that, while outsourcing events do lead to earnings losses for the average worker (consistent with Goldschmidt and Schmieder, 2017), there is significant heterogeneity in their long-run effects. Indeed, we find evidence of fairly small earnings losses for workers in the control group. ...
... year of the board term are employed by firms with substantially lower quality, a result that echoes the findings in Goldschmidt and Schmieder (2017). Conversely, when looking at Panel B (non-family firms), we find coefficients that exhibit large fluctuations but do not depict a clear picture. ...
We examine the relationship between managerial incentives and firms' human resource policies by combining Italian social security records with newly collected data on board terms. We exploit the fact that boards of listed companies are appointed every three years as a source of variation in directors' and top executives' horizons. Our evidence shows that average wages cyclically decline in the last year of the board term, as managers approach the end of their tenure, consistent with executives trying to cut labor expenses and, hence, maximize profitability when they are up for reappointment.
By leveraging individual administrative data, we also show that involuntary separations that occur close to the end of a board term lead to significantly worse outcomes for workers compared to involuntary separations that occur at the beginning of a board term; this result is driven by outsourcing events. These effects are not present in firms where managers are more likely to be entrenched, such as family-managed firms.
... Our paper also contributes to emerging literature studying the importance of establishment wage effects for the average cost of job loss (e.g., Lachowska et al. 2020; Moore and Scott-Clayton 2019) and for wage losses at outsourcing Goldschmidt and Schmieder (2017). 5 Our findings of a substantial role of establishment effects for explaining average job losses are consistent with results from other European countries (Fackler et al., 2021;Bertheau et al., 2022). ...
... Another potential concern is that when used as control variables in equation (3), the sampling variation from the estimated AKM effects introduces measurement error. Following Goldschmidt and Schmieder (2017), we address the potential measurement error in establishment effects by implementing a split-sample instrumental variable (IV) estimator, where we randomly split the sample of workers, calculate two sets of AKM estimates, and use one set of establishment effects as instrumental variable for the other. We implement the split-sample IV estimator both for the full sample, as well as for the "rolling window" AKM estimates. ...
... Given findings in Goldschmidt and Schmieder (2017) that workers experiencing domestic outsourcing move to establishments with lower fixed effects, a natural question is to what extent outsourcing (i.e. moving to business service firms) can also explain the average cost of job loss. ...
... Given its relevance, the process of outsourcing has attracted the attention of numerous scholars who have studied the wage penalty in outsourcing using industry-occupational-level data (Dube and Kaplan, 2010) and/or event studies (Goldschmidt and Schmieder, 2017;Bilal and Lhuillier, 2021;Deibler 2021). 1 The existing literature quite unanimously finds that outsourced workers are subject to lower pay than their inhouse peers. Despite this evidence, this topic still deserves attention as there are open issues yet to be investigated. ...
... Second, thanks to the richness of the data employed, we control not only for the individual characteristics of outsourced/non-outsourced workers, but also for different indicators that detail the contractual arrangement and the organisational practices prevailing at the workplace. The latter is relevant because it addresses one of the critiques formulated by Goldschmidt and Schmieder (2017), according to whom part of the outsourcing wage penalty could be imputable to differences in the job characteristics (i.e. tasks) of the outsourced vs non-outsourced workers. ...
... This methodology usually consists in using administrative data to observe changes in the occupational structure at establishment level. The pioneers of this methodology are Goldschmidt and Schmieder (2017), who identify outsourced workers when at least 10 employees operating in an establishment A in time t work at t+1 in an establishment B, which belongs to a service industry within food, cleaning, security, and logistics (FCSL) services. These authors apply this methodology to the case of Germany and find that that wage bill of workers employed in occupations subject to domestic outsourcing is, on average, 10-15% lower compared to workers in similar occupations directly employed by the leading firm. ...
This paper studies if and to what extent the outsourced status entails a wage penalty for workers during the period 2005–2019 in France and how these differences vary between genders. Our findings show that workers in outsourced jobs suffer a wage penalty which is higher for female workers compared to male ones. The outsourcing penalty does not depend on part-time arrangements, the repetitive nature of the job nor sector of employment. The effect of these covariates adds to the direct effect, but only for female workers. The longitudinal analysis reinforces cross-sectional results: the outsourcing wage penalty is not due to changes in individual characteristics of the workers, but to differences in the job status and time-invariant characteristics between them. Overall, being an outsourced worker implies a worsening in the wage treatment and the gender gaps which, considering the expansion of this practice, lead to important policy issues.
... However, this trend stalled in Germany in the 2010s (Bossler et al. 2020). Explanations that aim at assessing the resulting changes in the wage structure either emphasize the role of demand and supply factors through technical change (Autor et al. 1998;Acemoglu and Autor 2011) and globalization (Davis and Haltiwanger 1991;Goldschmidt and Schmieder 2017) or attribute the rising wage dispersion mainly to changing institutional conditions (Dustmann et al. 2009) and deunionization (Biewen and Seckler 2019). Statistically, the overall variation in wages can be decomposed into variation of wages within firms and variation of average wages between firms. ...
... Establishment exits as a function of the wage level,1976-2017 ...
Although wage inequality is an important and widely studied issue, the literature is vastly silent on the relationship between firm entry and exit and the wage dispersion between firms. Using a 50% random administrative sample of West German establishments over the period 1976–2017, I study wage dispersion dynamics between and within the groups of entering, exiting, and incumbent establishments by examining the distribution of average wages across establishments. The results show that entering establishments became increasingly unequal over time, thereby contributing to the rise in wage dispersion between establishments. However, exit rates of young and low-wage establishments have dampened this effect. These findings suggest considering the consequences for wage inequality when designing and assessing policy instruments for firm entry and exit.
... Similarly, Biewen and Seckler (2019) conclude that the dramatic decline in union coverage is reponsible for the observed inequality trends, coupled with a shrinking of sectors in which collective settlements were used. At the same time, many large firms have outsourced their lowest paid work (such as cleaning, security, logistics and food jobs) to uncovered firms (Goldschmidt and Schmieder, 2017). Yet robotisation in German manufacturing, while highly advanced, has not led to employment declines (Dauth, Findeisen, Suedekum and Woessner, 2021). ...
Income inequality in Germany has increased dramatically. Measuring inequality locally at the level of cities annually since 1985, we find that behind this development is the rapidly worsening inequality in the largest cities, driven by increasing income polarisation. In the cross-section, local income inequality rises substantially in city size, and this city-size inequality penalty has increased steadily since1985, reaching an elasticity of .2 in 2010. Inequality decompositions reveal that overall income inequality is almost fully explained by the within-locations component, which in turn is driven by the largest cities. The worsening inequality in the largest cities is amplified by their greater population weight. Examining the local income distributions directly reveals that this is due to increasing income polarisation that is strongest in the largest places. Both upper and lower distributional tails become heavier over time, and are the heaviest in the largest cities. We establish these results using a large and spatially representative administrative data set, and address the top-coding problem in these data using a parametric distribution approach that outperforms standard imputations.
JEL Codes: D31 , D63 , J31 , R23
... On the left-hand side, we use two alternative measures of "firm splitting". The first (Def1) is an outsourcing measure in the spirit of Goldschmidt and Schmieder (2017). The outcome is an indicator equal to 1 if there is a flow of workers from one tax ID to another satisfying 4 conditions: (i) the linked movement of workers is ≥ 0.3 of the initial firm's employment in year t − 1; (ii) either the new employer is a new firm (new tax ID), or the inflow is ≥ .66 of the receiving firm's employment in year t; (iii) the number of workers at the initial firm in year t − 1 is at least 5; and (iv) the receiving firm operates in the same industry. ...
... While this trend may have the benefit of reducing labor costs for large employers, study after study finds that it worsens labor market conditions for workers who serve as outsourced manpower. Goldschmidt and Schmieder (2017), Drenik et al. (2021), Bilal and Lhuillier (2021), Dube and Kaplan (2010), and Spitze (2022) find that these workers enjoy lower wages or benefits, such as employer-financed health insurance, than non-outsourced workers. 1 Several governments around the world have responded to this situation by enacting measures to improve outsourced workers' living standards. For example, Mexico and Ecuador have implemented strict bans to outsourcing since 2008, and 2021, respectively. ...
In early 2022 the Peruvian government restricted the existing unlimited out-sourcing permits to only allow outsourcing for tasks identified as outside of the core activity of the firm. Using quarterly data from the Peruvian NationalHousehold Surveys (Encuesta Nacional de Hogares, ENAHO) between 2021and 2022, we perform a series of difference-in-differences estimations for the short-run labor market outcomes from bounding outsourcing. We find that limiting domestic outsourcing is only effective in reducing outsourcing, by 1.7 percentage points, but it does not have a significant negative effect on formality and real wages, and, if anything, it is associated with increases in employment and labor force participation, though non-causally. These findings are very robust to different tests and alternative specifications. These results indicate that a policy of restricting outsourcing just reduces outsourcing in the short-run without any other labor market effect: it does neither destruct jobs nor does it improve workers’ employment conditions.
... Finally, large and high-paying firms have increasingly evaded CBAs for their lowest-paid workers by outsourcing jobs to uncovered supplier firms. For example, the proportion of retail establishments with a cleaning worker on their own staff declined from 82 percent in 1975 to 20 percent in 2009 (Goldschmidt and Schmieder, 2017), reflecting a surge in outsourcing of food, cleaning, security, and logistics jobs in the economy. The sources of the erosion and decentralization of German collective bargaining since the 1990s remain an active area of debate; we discuss the main candidates below. ...
... Finally, large and high-paying firms have increasingly evaded CBAs for their lowest-paid workers by outsourcing jobs to uncovered supplier firms. For example, the proportion of retail establishments with a cleaning worker on their own staff declined from 82 percent in 1975 to 20 percent in 2009 (Goldschmidt and Schmieder, 2017), reflecting a surge in outsourcing of food, cleaning, security, and logistics jobs in the economy. The sources of the erosion and decentralization of German collective bargaining since the 1990s remain an active area of debate; we discuss the main candidates below. ...
... The major motivation for firms to outsource is to take advantages of wage and benefit savings offered by the third party, especially those located overseas (Abraham & Taylor, 1996;Goldschmidt & Schmieder, 2017;Mankiw & Swagel, 2006). Furthermore, Porter (1980) and Quinn and Hilmer (1994) identified that properly planned outsourcing activities allowed company managers to leverage skills and resources most efficiently so that they could focus on core competencies and strategically outsource other activities. ...
... The major motivation for firms to outsource is to take advantages of wage and benefit savings offered by the third party, especially those located overseas (Abraham & Taylor, 1996;Goldschmidt & Schmieder, 2017;Mankiw & Swagel, 2006). Furthermore, Porter (1980) and Quinn and Hilmer (1994) identified that properly planned outsourcing activities allowed company managers to leverage skills and resources most efficiently so that they could focus on core competencies and strategically outsource other activities. ...
... approximately 10-15% relative to similar jobs that are not outsourced (Goldschmidt and Schmieder, 2017). One consequence to these shifts in the organization of work has been a significant increase in the output of cleaning services per labor hour, or workload as reported by cleaners (Seixas et al., 2013). ...
Workers performing cleaning duties experience higher injury rates, especially in the form of musculoskeletal disorders (MSDs), than other industries. It is essential to understand the inherent risks associated with the nature of this occupation. Based on the Balance Theory (Smith & Carayon-Sainfort, 1989), this review surveys the current literature, especially those published since the previous review paper (Kumar & Kumar, 2008), and identifies which elements contributing to MSD risks were examined: task, technology, organization, environment, individual, and their interactions. Thirty-nine research papers published between 2005 and 2021 are identified and summarized. Among these papers, task and individual elements received the most attention, at 42 and 34 occurrences, respectively. The interaction elements of technology-organization, technology-environment, and organization-environment received less than three mentions. The goal of this literature review is to update the knowledge base and identify current trends for the cleaning occupation. Possible interventions for risk reduction and future research directions are suggested.
In this paper I discuss what can be learned about ‘trickle-down’ ideas from recent empirical evidence on tax incidence, or the effect of tax policies on the distribution of welfare. I underscore three lessons. First, recent research suggests that business income taxes affect the earnings of workers, but these effects largely derive from taxing rents and rent-sharing, highlighting the importance of these channels for determining the ultimate incidence. Second, when workers are affected by these taxes, the burden is not borne equally by all workers, but predominantly by those at the top of the earnings distribution. Third, across different tax policies that statutorily affect the rich, the burden is largely borne by the rich, but heterogeneity in responses across tax incentives and taxpayers provides context for incidence analyses. Throughout, I discuss the value of analysing heterogeneous responses, particularly how tax incidence depends on labour markets, product markets, and tax systems.
Keeping up with “The Joneses” matters. This paper examines a model of reference-dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labor market, social comparisons with coworkers create a big fish in a small pond effect, inducing incomplete labor market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. (JEL D85, J22, J24, J61)
Recent years have seen intense debate about the causes of the observed decline in the labor share. We extend this inquiry by investigating whether the design and enforcement of competition law and policy are associated with changes in the labor share. Using a panel of 22 industries in 12 OECD economies, we find a positive statistical association between the effectiveness of competition policy and changes in the labor share over the period 1995–2005. This suggests a potential link between the design and effectiveness of competition policy and the labor share, and more broadly to distributional outcomes. Our results reinforce the importance of accounting for country-specific factors, including the design and enforcement of local laws, when examining dynamics in the labor share. The analysis implies that effective competition law and policy could mitigate the decline of the labor share, particularly in settings characterized by low levels of labor protection and limited labor bargaining power. (JEL: E21, E24, E64, J01, J21, K21, L40).
This paper examines the labor market implications of the EU posting policy, a large temporary migration program facilitated by the liberalization of the free provision of services in Europe. Posting allows EU firms to send (“post”) their employees abroad to export customer-facing services. Combining administrative data and quasi-experimental policy variation, I find that the policy permanently increased total factor mobility in Europe without crowding-out of traditional migration. This result suggests that unrealized gains from trade in factor services remained despite the absence of regulatory barriers to trade and migration in the EU. Furthermore, posted workers are mostly sent from low-wage countries to perform manual tasks in sectors formerly insulated from trade, and they represent a substantial share of EU migrant workers. In receiving countries, posting had persistent negative effects on employment for domestic workers in the more exposed sectors and local labor markets, but it had no effects on domestic wages. In low-wage sending countries, firms in formerly “nontradable” sectors experienced increased sales, profits, and tax payments when exporting services through posting. Posted workers earn more once sent abroad but remain paid at lower wages than comparable domestic workers in the receiving country. Wage gains for posted workers are mostly explained by minimum wages enforced by the EU policy, highlighting the role of labor market regulations in shaping the way gains from globalization are shared between labor and capital owners in origin countries.
Germany faces an intense debate around labor and skills shortages. The authors argue that increased competition in the labor market and consequently higher wages and better working conditions are a crucial factor to address labor scarcity. This does not mean that other measures to combat labor scarcity, such as reforms to the immigration system, provision of childcare, or tax disincentives are redundant. However, as the demographic transition will dramatically reduce labor supply, increased competition for labor is important to allocate a scarce factor more efficiently.
We analyze the impact of outsourcing on the well‐being of internal call center employees in the U.S. telecommunications industry. Our findings draw on mixed‐methods data. The qualitative findings suggest that internal employees experienced escalating job demands connected to errors by third‐party call center vendors and their employees due to additional work and intensified customer frustrations. SEM results show sequential mediation between the time internal employees spent correcting vendor errors, customer mistreatment of employees, emotional exhaustion, job satisfaction, and absenteeism. Employee autonomy over customer‐related decisions appeared to help workers manage these job demands and their effects on well‐being.
We study how being furloughed affects household financial distress during the COVID‐19 pandemic in the United Kingdom. Furlough increases the probability of late housing and bill payments by 30% and 19%, respectively. At the aggregate level, furlough increases the incidence of financial distress by 3.38 percentage points. To offset furlough‐induced income reductions, individuals significantly reduce consumption and spend savings. Relative to unemployment, the potential alternative in the absence of a furlough scheme, furlough reduces the incidence of financial distress by 95%. Estimates show an 80% government contribution to furloughed workers' wages minimizes the incidence of financial distress at the lowest cost to taxpayers.
We document the sources behind the costs of job loss over the business cycle using administrative data from Germany. Losses in annual earnings after displacement are large, persistent, and highly cyclical, nearly doubling in size during downturns. A large part of the long-term earnings losses and their cyclicality is driven by declines in wages. Key to these long-lasting wage declines and their cyclicality are changes in employer characteristics, as displaced workers switch to lower-paying firms. These losses increase with duration of nonemployment. Changes in characteristics of displaced workers or displacing firms, and other post-job loss career outcomes explain little of the cyclicality. (JEL E24, E32, J31, J63, J64, J65)
We combine matched employer-employee data with firms& financial records to study a 2001 Italian reform that lifted constraints on the employment of temporary contract workers while maintaining rigid employment protection regulations for employees hired under permanent contracts. Exploiting the staggered implementation of the reform across different collective bargaining agreements, we find that this policy change led to an increase in the share of temporary contracts but failed to raise employment. The reform had both winners and losers. Firms are the main winners as the reform was successful in decreasing labor costs, leading to higher profits. By contrast, young workers are the main losers since their earnings were substantially depressed following the policy change. Rent-sharing estimates show that temporary workers receive only two-thirds of the rents shared by firms with permanent workers, helping explain most of the labor costs and earnings reductions caused by the reform.
The sweatshop debate is contentious and enduring – some see salaried sweatshop jobs as the only chance out of poverty for the poorest. Others see abominable sweatshop conditions as human rights violations in which the poorest are prey. Despite these stark assessments, is it possible to organize notions of acceptable sweatshop jobs and isolate defining characteristics of sweatshop jobs of the worst forms that ought to be eliminated or at least regulated? This chapter examines the economics of sweatshop employment, covering measurement, theories, and policies. Drawing on recent research and observations from surveys and interviews on the ground, this chapter cautions against once-size-fits-all policies, and sheds light on three sweatshop preconditions as indicators of sweatshop jobs of the worst forms: (i) the lack of agency, (ii) middlemen market power, and (iii) job insecurity without compensation. This chapter discusses how these departures from the textbook competitive labor market gives rise to sweatshop jobs that should be reined in, for they are both exploitative of the poor and economically inefficient overall. Two important implications of these findings are discussed. First, measurement of sweatshop employment should embrace a balanced emphasis on both sweatshop symptoms, as well as sweatshop preconditions. Second, further research is warranted to uncover other relevant sweatshop preconditions, and the implications of the juxtaposition of multiple sweatshop preconditions in a single workplace.
Purpose
How to manage outsourced employees in interorganizational teams with triangular relationships has not yet attracted enough attention. Based on relative deprivation theory, this study explores how relative deprivation affects outsourced employees’ innovative behavior and investigates the complex moderating effects of dual organizational support.
Design/methodology/approach
The authors tested their hypothesis by conducting a two-wave survey; responses to a questionnaire were collected from 283 outsourced employees and their managers among 52 client organizations.
Findings
Results found that relative deprivation negatively influences the outsourced employees’ innovative behavior by eliciting their perceptions of status conflict. Support from client (supplier) organization attenuates (aggravates) the positive impact of relative deprivation on innovative behavior throughout status conflict. The moderating effect of client organizational support was moderated by support from supplier organization.
Research limitations/implications
The authors selected the outsourced employees in a Chinese context to conduct this study, and the results need to be generalized in future research.
Practical implications
Client organizational support can alleviate the negative effect of relative deprivation on outsourced employees, whereas supplier organization support aggravates the negative effect; managers should pay attention to the different effects of the two organizations’ support and provide reasonable support for outsourced employees.
Originality/value
This study identified the mechanism of relative deprivation’s effect on outsourced employees’ innovative behavior from the perspective of interpersonal interaction and compared the effect of support from dual organizations. This study expands the research on triangular relationships, relative deprivation, status conflict and other field.
L'outsourcing ha conosciuto una forte espansione negli ul-timi decenni, diffonden-dosi trasversalmente in diverse aree, imprese e settori. La sua capacità di adattarsi a mutevoli situazioni sociali e nor-mative lo ha reso lo strumento principale dei processi di ristrutturazio-ne produttiva, finendo per essere considerato una forma paradigmatica dell'organizzazione del capitalismo contemporaneo. Sebbene gran parte dell'attenzione nella letteratura sociologica sulle implicazioni dell'ester-nalizzazione sia stata posta sulla trasformazione dei regimi contrattuali, sulle con-dizioni di lavoro e sulla rappresentanza, noi evidenziamo co-me l'outsourcing ab-bia conseguenze significative anche su altre dimen-sioni del rapporto di lavoro, tra cui il processo lavorativo, la determina-zione della retribuzione e la composizione della manodopera. Riveden-do e combinando alcuni filoni della letteratura, soste-niamo quindi che il carattere paradigmatico dell'outsourcing, oltre alla sua grande diffusione a livello globale, va ricercato nella sua capacità di innescare processi di trasformazione multipli e concatenati che modificano profondamente il rapporto di lavoro.
Using new establishment-by-occupation microdata, we show that the use of discretionary wage setting significantly expanded in the 1970s and 1980s. Increasingly, wages for blue-collar workers were not standardized by job title or seniority but instead subject to managerial discretion. When establishments abandoned standardized pay rates, wages fell, particularly for the lowest-paid workers in a job and for those in establishments that previously paid above market rates. This shift away from standardized pay rates, in context of a broader decline in worker bargaining power, accelerated the decline in real wages experienced by blue-collar workers in the 1980s. (JEL J31, J33, J52, M52, O33)
We provide a comprehensive analysis of income inequality and income dynamics for Germany over the last two decades. Combining personal income tax and social security data allows us—for the first time—to offer a complete picture of the distribution of annual earnings in Germany. We find that cross‐sectional inequality rose until 2009 for men and women. After the Great Recession, inequality continued to rise at a slower rate for men and fell slightly for women due to compression at the lower tail. We further document substantial gender differences in average earnings and inequality over the life cycle. While for men earnings rise and inequality falls as they grow older, many women reduce working hours when starting a family such that average earnings fall and inequality increases. Men's earnings changes are on average smaller than women's but are substantially more affected by the business cycle. During the Great Recession, men's earnings losses become magnified and gains are attenuated. Apart from recession years, earnings changes are significantly right‐skewed reflecting the good overall state of the German labor market and increasing labor supply. In the second part of the paper, we study the distribution of total income including incomes of self‐employed, business owners, and landlords. We find that total inequality increased significantly more than earnings inequality. Regarding income dynamics, entrepreneurs' income changes are more dispersed, less skewed, less leptokurtic, and less dependent on average past income than workers' income changes. Finally, we find that top income earners have become less likely to fall out of the top 1 and 0.1%.
Purpose
This study intends to explore the relationship between digital finance and the vertical specialization of firms. The following questions are discussed: (1) As a representative new financial development model, what is the role of digital finance in the vertical specialization of firms? (2) If digital finance improves the level of vertical specialization of firms, what is the mechanism behind such improvement? (3) How does digital finance impact the vertical specialization of firms in different regions, industries, and firms?
Design/methodology/approach
A two-way fixed-effect model of panel data is proposed to verify the relationship between digital finance and the vertical specialization of firms. This model is constructed by matching the city-level data of digital finance with the data of China's A-share listed companies from 2011 to 2018. Meanwhile, the instrumental variable (IV) method and difference-in-difference (DID) method are adopted to deal with the endogeneity problem of the model.
Findings
The authors' study finds that digital finance has significantly improved the level of vertical specialization of firms. The result is robust under the endogeneity consideration and a series of robustness tests. After the dimensionality of the index is reduced, the depth of digital finance usage is more conducive to the improvement of the vertical specialization of firms compared with the width of digital finance coverage and the level of financial digitization. Digital finance mainly improves the level of vertical specialization of firms by reducing transaction costs and increasing the market thickness of the intermediate products. Moreover, digital finance has certain heterogeneity in promoting the vertical specialization of firms, an effect that is more significant in the eastern region, manufacturing industry and state-owned enterprises (SOEs).
Research limitations/implications
The first limitation is the mechanism test. This research only analyzes the mechanism from transaction cost and the market thickness of the intermediate products. With the rapid development of information technology, digital finance will be further integrated into people's production and life. There will then be more mechanisms that should be explored between digital finance and the vertical specialization of firms. Another limitation is the data sample of this paper. The conclusions of this research are based only on the data of listed companies. However, in the authors' opinion, the specialization level of small and medium-sized enterprise (SMEs) should be higher. Therefore, the conclusions of this work are underestimated, which can be considered as the lower limit of digital finance for enterprise specialization.
Social implications
As a favorable financing channel to supplement traditional financial service functions, digital finance plays a critical role in the operating efficiency of enterprises and the effective allocation of macro resources. The authors' research shows that digital finance has significantly improved the vertical specialization of firms. This conclusion provides guides to improve the production efficiency of enterprises and the quality of economic development.
Originality/value
This paper has three main contributions. (1) The relationship between financial development and the vertical specialization of firms is innovatively discussed from the perspective of digital finance, which implies that digital finance can effectively promote the level of vertical specialization of firms. (2) This paper provides new perspectives and ideas to reveal the impact mechanism of digital finance on the real economy by systematically analyzing the mechanism of digital finance on the vertical specialization of firms from the perspectives of transaction costs and financing constraints. (3) The regional differences in the development of digital finance, industry differences in the vertical specialization of firms and differences in the nature of enterprise property rights are all under consideration, which improves the effectiveness and pertinence of digital finance in promoting the vertical specialization of firms.
We estimate how much firms differentiate pay premia between regular and outsourced workers in temp agency work arrangements. We leverage unique Argentinian administrative data that feature links between user firms (the workplaces where temp workers perform their labor) and temp agencies (their formal employers). We estimate that a high-wage user firm that pays a regular worker a 10% premium pays a temp worker on average only a 4.9% premium, compared to what these workers would earn in a low-wage user firm in their respective work arrangements—the midpoint between the benchmarks for insiders (one) and the competitive spot-labor market (zero).
We give an overview of the “German model” of industrial relations. We organize our review by focusing on the two pillars of the model: sectoral collective bargaining and firm-level codetermination. Relative to the United States, Germany outsources collective bargaining to the sectoral level, resulting in higher coverage and the avoidance of firm-level distributional conflict. Relative to other European countries, Germany makes it easy for employers to avoid coverage or use flexibility provisions to deviate downwards from collective agreements. The greater flexibility of the German system may reduce unemployment, but may also erode bargaining coverage and increase inequality. Meanwhile, firm-level codetermination through worker board representation and works councils creates cooperative dialogue between employers and workers. Board representation has few direct impacts owing to worker representatives’ minority vote share, but works councils, which hold a range of substantive powers, may be more impactful. Overall, the German model highlights tensions between efficiency-enhancing flexibility and equity-enhancing collective action.
This article utilizes a new nationally representative survey, executed in January 2020, that measures non-standard work. The author estimates the incidence of contract company employment and freelancing and describes who goes into non-standard employment. He then studies earnings and access to employer-provided training among contract company employees—the largest and most mis-measured group of non-standard workers. Training is important because it affects wage growth and career trajectories and also gives insight into the evolving character of employment relationships. Findings indicate that contract company employees face an earnings penalty but that considerable heterogeneity occurs within this category. The analysis of multiple forms of formal training finds that contract company employees receive less training than do standard employees even after multiple controls. Informal training is more textured due to the nature of social interactions inherent in its availability. Throughout the analysis, racial and ethnic disparities are apparent.
While privatization of state-owned enterprises (SOEs) remains a popular policy tool in many countries, the impacts on workers are unclear. This paper studies the case of Brazil, which implemented a large privatization program in the 1990s. Following privatization, incumbent workers in privatized SOEs suffer a wage decline of roughly 25 percent relative to a matched control group. Additionally, private sector firms that are connected to privatized SOEs by labor mobility also reduce wages. A summary calculation suggests that privatization decreased the formal sector wage by 3 percent, with about two-thirds of this effect due to the indirect impact on private sector workers. (JEL J31, J62, L32, L33, O14, O15)
Wage inequality is on the rise in most developed economies, and this phenomenon has fostered a growing body of research on its potential drivers. Using German data over the period 1985‐2009, Card, Heining and Kline (The Quarterly Journal of Economics 2013, 128(3), 967‐1015) argue that rising workplace heterogeneity has contributed substantially to the rise in wage inequality. I revisit their findings in two ways. First, because the generalization of their findings remains an open question, I apply their methodological approach to Danish register data and test whether rising workplace heterogeneity explains a significant share of the rise in wage inequality in Denmark. I find that, contrary to Germany, workplace heterogeneity remained practically stable over time, and this pattern contributed slightly negatively to the rise in wage inequality. Second, I complement Card et al.’s (2013) methods with the variance decomposition exercise proposed by Song et al. (2019) to identify more precisely the sources of the rise in wage inequality in Denmark. Although the rise in wage inequality is partly a between‐establishment phenomenon, I show that the strengthening of assortative matching patterns and the rising heterogeneity of workers within establishments are the main drivers of growing inequality.
This article analyzes the effect of anti-corruption measures on female political empowerment. We exploit a measure that prescribes the dissolution of city councils for mafia infiltration, leading to an exogenous decrease in the level of corruption within local government. We find that the percentage of female councilors and aldermen elected after compulsory administrations, as well as the probability of a female mayor, sharply increases relative to the control group; the effect of the measure is decreasing over time. The evidence suggests that the most likely mechanism mediating the result relies on the reduction in the voter bias against women as policymakers rather than the (self-)selection of women (JEL D72, D78, J16, J71, I38).
We present a simple new method to decompose the wage effects of displacement into components due to differences in the way that displaced and non-displaced workers are sorted across higher- and lower-paying employers (a sorting effect), differences in the quality of worker–employer matches that they enter into (a matching effect), and differences in their unobservable characteristics (a selection effect). In an extended application, we apply our decomposition to understand how the determinants of displaced workers’ wages in Germany changed following the 2003–2005 Hartz reforms. We find that the wages of displaced workers fell substantially after the reforms, and that over 80 percent of the decline was because they found re-employment at lower-paying employers. Sorting into worse matches explains a smaller 5–9 percent of the wage decline experienced by men, and 12–23.5 percent of the female wage decline. Collectively, the sorting and matching channels explain almost all of the post-reform decline in displaced workers’ wages, and selection played little role.
What is the most efficient way to respond to recessions in the labor market? To this question, policymakers on the two sides of the pond gave diametrically opposed answers during the COVID-19 crisis. In the United States, the focus was on insuring workers by increasing the generosity of unemployment insurance. In Europe, instead, policies were concentrated on saving jobs, with the expansion of short-time work programs to subsidize labor hoarding. Who got it right? In this article, we show that far from being substitutes, unemployment insurance and short-time work exhibit strong complementarities. They provide insurance to different types of workers and against different types of shocks. Short-time work can be effective at reducing socially costly layoffs against large temporary shocks, but it is less effective against more persistent shocks that require reallocation across firms and sectors. We conclude that short-time work is an important addition to the labor market policy-toolkit during recessions, to be used alongside unemployment insurance.
The employment-to-population ratio among prime-aged adults aged 25–54 has fallen substantially since 2000. The explanations proposed for the decline in the employment-to-population ratio have been of two broad types. One set of explanations emphasizes cyclical factors associated with the recession; the second set of explanations focuses on the role of longer-run structural factors. In this paper, we argue that while the decline in manufacturing and the consequent reduction in demand for less-educated workers put downward pressure on their employment rates in the pre-recession 2000–2006 period, the increased demand for less-educated workers because of the housing boom was simultaneously pushing their employment rates upwards. For a few years, the housing boom served to "mask" the labor market effects of manufacturing decline for less-educated workers. When the housing market collapsed in 2007, there was a large, immediate decline in employment among these workers, who faced not only the sudden disappearance of jobs related to the housing boom, but also the fact that manufacturing's steady decline during the early 2000s left them with many fewer opportunities in that sector than had existed at the start of the decade.
We study the role of establishment-specific wage premiums in generating recent increases in West German wage inequality. Models
with additive fixed effects for workers and establishments are fit into four subintervals spanning the period from 1985 to
2009. We show that these models provide a good approximation to the wage structure and can explain nearly all of the dramatic
rise in West German wage inequality. Our estimates suggest that the increasing dispersion of West German wages has arisen
from a combination of rising heterogeneity between workers, rising dispersion in the wage premiums at different establishments,
and increasing assortativeness in the assignment of workers to plants. In contrast, the idiosyncratic job-match component
of wage variation is small and stable over time. Decomposing changes in mean wages between different education groups, occupations,
and industries, we find that increasing plant-level heterogeneity and rising assortativeness in the assignment of workers
to establishments explain a large share of the rise in inequality along all three dimensions. JEL Codes: J00, J31, J40.
Nonstandard employment relations—such as part-time work, tempo-rary help agency and contract company employment, short-term and contingent work, and independent contracting—have become increasingly prominent ways of organiz-ing work in recent years. Our understanding of these nonstandard work arrangements has been hampered by inconsistent definitions, often inadequate measures, and the paucity of comparative research. This chapter reviews the emerging research on these nonstandard work arrangements. The review emphasizes the multidisciplinary nature of contributions to this field, including research by a variety of sociologists, economists, and psychologists. It also focuses on cross-national research, which is needed to in-vestigate how macroeconomic, political, and institutional factors affect the nature of employment relations. Areas for future research are suggested.
"Economists have long been interested in the determinants and components of job creation and destruction. In many countries administrative datasets provide an excellent source for detailed analysis on a fine and disaggregate level. However, administrative datasets are not without problems: restructuring and relabeling of firms is often poorly measured and can potentially create large biases. We provide evidence of the extent of this bias and provide a new solution to deal with it using the German Establishment History Panel (BHP). While previous research has relied on the first and last appearance of the establishment identifier (EID) to identify openings and closings, we improve on this approach using a new dataset containing all worker flows between establishments in Germany. This allows us to credibly identify establishment births and deaths from 1975 to 2004. We show that the misclassification bias of using only the EID is very severe: Only about 35 to 40 percent of new and disappearing EIDs with more than 3 employees correspond unambiguously to real establishment entries and exits. Among larger establishments misclassification is even more common. We show that many new establishment IDs appear to be 'Spin-Offs' and these have become increasingly more common over time. We then demonstrate that using only EID entries and exits may dramatically overstate, by as much as 100 percent, the role of establishment turnover for job creation and destruction. Furthermore correcting job creation and destruction measures for spurious EID entries and exits reduces these measures and aligns them closer with the business cycle." (Author's abstract, IAB-Doku) ((en))
We use a simple theoretical framework and a randomized manipulation of access to information on peers' wages to provide new evidence on the effects of relative pay on individual job satisfaction and job search intentions. A randomly chosen subset of employees of the University of California (UC) was informed about a new website listing the pay of University employees. All employees were then surveyed about their job satisfaction and job search intentions. Our information treatment doubles the fraction of employees using the website, with the vast majority of new users accessing data on the pay of colleagues in their own department. We find an asymmetric response to the information treatment: workers with salaries below the median for their pay unit and occupation report lower pay and job satisfaction, while those earning above the median report no higher satisfaction. Likewise, below-median earners report a significant increase in the likelihood of looking for a new job, while above-median earners are unaffected. Our findings suggest that job satisfaction depends directly on relative pay comparisons, and that this relationship is non-linear.Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.
Drawing on case studies from the telecommunications and auto industries, the authors argue that the vertical disintegration of major German employers is contributing to the disorganization of Germany’s dual system of in-plant and sectoral negotiations. Subcontractors, subsidiaries and temporary agencies often have no collective bargaining institutions or are covered by different firm-level and sectoral agreements. As core employers move jobs to these firms, they introduce new organizational boundaries across the production chain and disrupt traditional bargaining structures. Worker representatives are developing new campaign approaches and using residual power at large firms to establish representation in new firms and sectors, but these have not been successful at rebuilding co-ordinated bargaining.
A firm's decision to contract out for business support services may be influenced by the wage and benefit savings it could realize, the volatility of its output demand, and the availability of specialized skills possessed by the outside contractor. Analysis of newly available establishment-level data shows that all three of these factors help to explain observed contracting behavior. The reported empirical findings are relevant both for understanding the recent growth in business support service contracting and for understanding firms' relationships with their own employees. Copyright 1996 by University of Chicago Press.
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.
A recent "revisionist" literature characterizes the pronounced rise in U.S. wage inequality since 1980 as an "episodic" event of the first half of the 1980s driven by nonmarket factors (particularly a falling real minimum wage) and concludes that continued increases in wage inequality since the late 1980s substantially reflect the mechanical confounding effects of changes in labor force composition. Analyzing data from the Current Population Survey for 1963 to 2005, we find limited support for these claims. The slowing of the growth of overall wage inequality in the 1990s hides a divergence in the paths of upper-tail (90/50) inequality-which has increased steadily since 1980, even adjusting for changes in labor force composition-and lower-tail (50/10) inequality, which rose sharply in the first half of the 1980s and plateaued or contracted thereafter. Fluctuations in the real minimum wage are not a plausible explanation for these trends since the bulk of inequality growth occurs above the median of the wage distribution. Models emphasizing rapid secular growth in the relative demand for skills-attributable to skill-biased technical change-and a sharp deceleration in the relative supply of college workers in the 1980s do an excellent job of capturing the evolution of the college/high school wage premium over four decades. But these models also imply a puzzling deceleration in relative demand growth for college workers in the early 1990s, also visible in a recent "polarization" of skill demands in which employment has expanded in high-wage and low-wage work at the expense of middle-wage jobs. These patterns are potentially reconciled by a modified version of the skill-biased technical change hypothesis that emphasizes the role of information technology in complementing abstract (high-education) tasks and substituting for routine (middle-education) tasks. Copyright by the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Economic impacts of unionization on employers are difficult to estimate in the absence of large, representative data on establishments
with union status information. Estimates are also confounded by selection bias, because unions could organize at highly profitable
enterprises that are more likely to grow and pay higher wages. Using multiple establishment-level data sets that represent
establishments that faced organizing drives in the United States during 1984–1999, this paper uses a regression discontinuity
design to estimate the impact of unionization on business survival, employment, output, productivity, and wages. Essentially,
outcomes for employers where unions barely won the election (e.g., by one vote) are compared with those where the unions barely lost. The analysis finds small impacts on all outcomes that we examine; estimates for wages are close to zero. The evidence
suggests that—at least in recent decades—the legal mandate that requires the employer to bargain with a certified union has
had little economic impact on employers, because unions have been somewhat unsuccessful at securing significant wage gains.
This paper provides evidence that the decline in the real value of the minimum wage and in the rate of unionization account for a significant share of the increase in wage inequality in the United States between 1979 and 1988. The role of the minimum wage is particularly important for women, while deunionization has the largest impact on men. The authors develop a semiparametric procedure that applies kernel density methods to appropriately weighted samples. The procedure provides a visually clear representation of where in the density of wages institutional and labor market forces exert the greatest impact. Copyright 1996 by The Econometric Society.
This paper provides empirical assessments of the two leading explanations of measured inter-industry wage differentials: (1)
true wage differentials exist across industries, and (2) the measured differentials simply reflect unmeasured differences
in workers' productive abilities. First, we summarize the existing evidence on the unmeasured-ability explanation. Second,
we construct a simple model which shows that if matching is important then endogenous job-change decisions can create important
self-selection biases even in first-differenced estimates of industry wage differentials. Third, we analyze a sample that
approximates the experiment of exogenous job loss. We find that (i) the wage change experienced by a typical industry switcher
closely resembles the difference in the relevant industry differentials estimated in a cross-section, and (ii) pre-displacement
industry affiliation plays an important role in post-displacement wage determination.
The high purpose of these sessions is symbolized by a passage from Michael Polanyi:
Science is not conducted by isolated efforts like those of the chess players or shellers of peas and could make no progress that way. If one day all communications were cut between scientists, that day science would practically come to a standstill. … The co-ordinative principle of science … consists in the adjustment of each scientist’s activities to the results hitherto achieved by others. In adjusting himself to the others each scientist acts independently, yet by virtue of these several adjustments scientists keep extending together with a maximum efficiency the achievements of science as a whole.1
Over the past 3 decades, the U. S. Temporary Help Services (THS) industry grew five times more rapidly than overall employment. Contemporaneously, courts in 46 states adopted exceptions to the common law doctrine of employment at will that limited employers' discretion to terminate workers and opened them to litigation. This article assesses the contribution of "unjust dismissal" doctrine to THS employment specifically, and outsourcing more generally, finding that it is substantial-explaining 20% of the growth of THS between 1973 and 1995 and contributing 500,000 additional outsourced workers in 2000. States with smaller declines in unionization also saw substantially more THS growth.
This paper analyzes the role of establishments in the upward trend in dispersion of earnings that has become a central topic in economic analysis and policy debate. It decomposes changes in the variance of log earnings among individuals into the part due to changes in earnings among establishments and the part due to changes in earnings within establishments. The main finding is that much of the 1970s– 2010s increase in earnings inequality results from increased dispersion of the earnings among the establishments where individuals work. Our results direct attention to the role of establishment-level pay setting and economic adjustments in earnings inequality.
There is growing evidence that firm-specific pay premiums are an important source of wage inequality. These premiums will
contribute to the gender wage gap if women are less likely to work at high-paying firms or if women negotiate (or are offered)
worse wage bargains with their employers than men. Using longitudinal data on the hourly wages of Portuguese workers matched
with income statement information for firms, we show that the wages of both men and women contain firm-specific premiums that
are strongly correlated with simple measures of the potential bargaining surplus at each firm. We then show how the impact
of these firm-specific pay differentials on the gender wage gap can be decomposed into a combination of sorting and bargaining
effects. We find that women are less likely to work at firms that pay higher premiums to either gender, with sorting effects
being most important for low- and middle-skilled workers. We also find that women receive only 90% of the firm-specific pay
premiums earned by men. Importantly, we find the same gender gap in the responses of wages to changes in potential surplus
over time. Taken together, the combination of sorting and bargaining effects explain about one-fifth of the cross-sectional
gender wage gap in Portugal.
For much of the twentieth century, large companies employing many workers formed the bedrock of the U.S. economy. Today, on the list of big business's priorities, sustaining the employer-worker relationship ranks far below building a devoted customer base and delivering value to investors. As David Weil's groundbreaking analysis shows, large corporations have shed their role as direct employers of the people responsible for their products, in favor of outsourcing work to small companies that compete fiercely with one another. The result has been declining wages, eroding benefits, inadequate health and safety conditions, and ever-widening income inequality.From the perspectives of CEOs and investors, fissuring--splitting off functions that were once managed internally--has been a phenomenally successful business strategy, allowing companies to become more streamlined and drive down costs. Despite giving up direct control to subcontractors, vendors, and franchises, these large companies have figured out how to maintain quality standards and protect the reputation of the brand. They produce brand-name products and services without the cost of maintaining an expensive workforce. But from the perspective of workers, this lucrative strategy has meant stagnation in wages and benefits and a lower standard of living--if they are fortunate enough to have a job at all.Weil proposes ways to modernize regulatory policies and laws so that employers can meet their obligations to workers while allowing companies to keep the beneficial aspects of this innovative business strategy.
In the late 1990s and into the early 2000s, Germany was often called "the sick man of Europe" (for example, Economist 2004), a phrase usually attributed to comments by Czar Nicholas I of Russia about the troubles faced by the Ottoman Empire in the mid-19th century. Indeed, Germany's economic growth averaged only about 1.2 percent per year from 1998 to 2005, including a recession in 2003, and unemployment rates rose from 9.2 percent in 1998 to 11.1 percent in 2005 (according to World Bank data). Today, after the Great Recession, Germany is described as an "economic superstar" (for example, in the movie "Made in Germany: Europe's Economic Superstar," http://films.com/ItemDetails.aspx?TitleId=29218). Germany's number of total unemployed fell from 5 million in 2005 to about 3 million in 2008, and its unemployment rate had declined to 7.7 percent in 2010 (according to data from Germany's Federal Employment Agency, the Bundesagentur für Arbeit). In contrast to most of its European neighbors and the United States, Germany experienced almost no increase in unemployment during the Great Recession, despite a sharp decline in GDP in 2008 and 2009 (an episode discussed in Möller 2010; Burda and Hunt 2011). Germany's exports reached an all-time record of $1.738 trillion in 2011, which is roughly equal to half of Germany's GDP, or 7.7 percent of world exports. Even the euro crisis seems not to have been able to stop Germany's strengthening economy and employment.
This paper investigates the impact of outsourcing on sectoral reallocation in the U.S., which, over the period 1948-2007, mainly coincides with the remarkable rise in services. The service sector accounts today for more than 83% of total employment, while the same share was 60% in 1947. Roughly 40% of this growth comes from a single industry within services, namely Professional and Business Services. This is an unusual sector, given that more than 90% of its output is used by other firms as an intermediate input or investment; and it is where most of the service outsourcing activity is concentrated. The same evidence appears in the structure of the input-output tables: the rise of the share of Professional and Business Services is in fact the main change that has taken place over the past 60 years. Using a simple accounting framework, which is capable of capturing the fully-fledged input-output structure of the economy, I calculate the contribution of outsourcing to the reallocation of employment across sectors. I find that Professional and Business Services outsourcing alone accounts for 14% of the total increase in the share of services in total employment.
Germany is known as one of the countries where the collective representation of interests through associations (‘corporatism’) is particularly strong. However, after the tripartite Alliance for Jobs, Training and Competitiveness failed to agree on solutions for combating high unemployment, an independent commission established by the government (the ‘Hartz commission’) has currently set the agenda for labour market reform. This article addresses the question of whether these events signal the end of corporatism in labour market policy in Germany. An analysis of temporary agency work, an atypical form of employment addressed by the Hartz reforms, shows that fundamental reform in Germany must be initiated outside the system of tripartite interest negotiation. However, the implementation of such reforms depends on the traditional structures of interest negotiation between the social partners.
Using a comprehensive linked employer-employee database from Brazil for the period 1995-2001, we are able for the first time to compare firms founded as employee spinoffs to new firms without parents and to diversification ventures of existing firms entering a new industry. Employee spinoffs are defined either as the director/manager having moved from a parent in the same industry or as one-quarter of the employees having shifted from a common parent. Depending on definition, employee spinoffs account for between one-sixth and one-third of the new firms in Brazil’s private sector during this period. Regardless of definition, size at entry is larger for employee spinoffs than for new firms without parents but smaller than for diversification ventures of existing firms. Similarly, exit rates for employee spinoffs are less than for new firms without parents and comparable to those for diversification ventures of existing firms. These results suggest that we can think of some part of a firm’s productivity draw in the Jovanovic (1982) model as embodied in the firm’s employees and portable by them to a new firm.
This paper shows that wage inequality in West Germany has increased over the past three decades, contrary to common perceptions.
During the 1980s, the increase was concentrated at the top of the distribution; in the 1990s, it occurred at the bottom end
as well. Our findings are consistent with the view that both in Germany and in the United States, technological change is
responsible for the widening of the wage distribution at the top. At the bottom of the wage distribution, the increase in
inequality is better explained by episodic events, such as supply shocks and changes in labor market institutions. These events
happened a decade later in Germany than in the United States.
"The IEBS is a random sample drawn from the Integrated Employment Biographies (IEB) of the IAB. The IEB are not to be understood as a self-contained dataset but as a procedure for merging data from four different sources for the purpose of data quality control and for drawing samples such as the IEBS. The four data sources are - the IAB Employee History (BeH) with observations of employment subject to social security taken from the social security notification procedure, - the Benefit Recipient History (LeH) with observations of receipt of unemployment benefit, unemployment assistance and maintenance allowance, - the Participants-in-Measures History File (MTH) with observations of participation in employment and training measures and - the Applicant Pool Data (BewA) with job-search observations. The most important changes compared with the 2005 version of the IEBS are: Updating of the loading status and inclusion of new variables; the variable 'grund' is recoded in the variable spectrum; the missing values are recoded uniformly to the value -7; reforms of district territories in Saxony-Anhalt and Thuringia result in new district numbers from 2007." (author's abstract, IAB-Doku) ((en))Additional InformationHere you can find the German version.
Neoclassical wage theory is based on the premise that a worker's utility is based on his own wage and his own hours of work, without reference to the wages and hours of others. This article reviews anecdotal evidence that the wages of others are a powerful force in determining worker satisfaction, such that utility goes down when the wages of others go up. The resulting comparisons are a powerful force in determining wage structures but do not exclude ultimate effect of neoclassical wage determinants. Copyright 1993 by University of Chicago Press.
Observed human capital explains less than half of wage variation. In BLS Industry Wage Surveys, establishment-based wage differentials
(controlling for occupation) account for 20–70 percent of intra-industry wage variation. This corresponds to a standard deviation
in wages of 14 percent of the mean, almost as large as interindustry wage variation. Investigation suggests that establishment
wage differentials are not random variations or returns to usual measures of human capital.
This paper introduces the fair wage-effort hypothesis and explores its implications. This hypothesis is motivated by equity
theory in social psychology and social exchange theory in sociology. According to the fair wage-effort hypothesis, workers
proportionately withdraw effort as their actual wage falls short of their fair wage. Such behavior causes unemployment and
is also consistent with observed cross-section wage differentials and unemployment patterns.
We find that, conditioning on industry of assignment, cleaners and security guards who participate in activities organized by contract companies earn 15 and 17 per cent less, respectively, than workers in those activities organized in-house. These estimates are hardly affected by the inclusion of a set of jointly statistically significant exogenous variables. We can expect that most of the productive traits that characterize a task are transferred to the contractor in the process of contracting out a cleaning or security task. Thus, our findings are hard to rationalize by a simple competitive labour market setting where the law of one price holds. Copyright (c) Blackwell Publishing Ltd/London School of Economics 2007.
Using a longitudinal sample of one million French workers and 500,000 employing firms, the authors decompose real total annual compensation per worker into components: observable employee characteristics, personal heterogeneity, firm heterogeneity, and residual. Unobserved personal heterogeneity is a very important source of wage variation. Unobserved firm heterogeneity, while important, is not as important as person effects. Enterprises that hire high-wage workers are more productive but not more profitable. Enterprises that pay higher wages, controlling for person effects, are more productive and more profitable. Person effects explain about 90 percent of interindustry and firm-size wage differences while firm effects explain substantially less.
This paper uses cross-sectional and longitudinal data to examine differences in pay for equally-skilled workers in different ind ustries. The major finding is that there is substantial dispersion in wages across industries, even after allowing for measured and unmeas ured labor quality, working conditions, fringe benefits, transitory d emand shocks, the threat of union-ization, union bargaining power, fi rm size, and other factors. In addition, evidence is presented demons trating that turnover has a negative relationship with industry wage differentials. These findings suggest that workers in high-wage indus tries receive noncompetitive rents. Copyright 1988 by The Econometric Society.
“Union Diversity and Varieties of Coverage: The Anatomy of Union Wage Effects in Germany,”
- Fitzenberger
“Why Employers Use Flexible Staffing Arrangements: Evidence from an Establishment Survey,”
- Houseman
“Outsourcing the Cuts: Pay and Employment Effects of Contracting Out,”
- Smith Institute
“What Do We Know about Contracting Out in the United States? Evidence from Household and Establishment Surveys,”
“Lower-Paid Workers at Harvard University,”
- Harvard Committee on Employment Contracting Policies
“Course Correction: Reversing Wage Erosion to Restore Good Jobs at American Airports,”
- Dietz
“Does Outsourcing Reduce Wages in the Low-Wage Service Occupations? Evidence from Janitors and Guards,”
- Dube
“The Rise and Nature of Alternative Work Arrangements in the United States, 1995–2015,”
- Katz
“Restructuring the Employment Relationship: The Growth of Market-Mediated Work Arrangements,”
- Abraham
“Firming Up Inequality,”
- Song
“Managing Export Complexity: The Role of Service Outsourcing,”
- Berlingieri
“Firms and Labor Market Inequality: Evidence and Some Theory,”
- Card