Monopsony power and the demand for low-skilled workers

2021 ◽  
pp. 103530462110424
Author(s):  
Arnd Kölling
Keyword(s):  
Labour Market ◽  
Minimum Wage ◽  
Minimum Wages ◽  
Labour Demand ◽  
Skilled Workers ◽  
Jel Codes ◽  
Employment Effects ◽  
Monopsony Power

This study analyses firms’ labour demand when employers have at least some monopsony power. It is argued that without taking into account (quasi-)monopsonistic structures of the labour market, wrong predictions are made about the effects of minimum wages. Using switching fractional panel probit regressions with German establishment data, I find that slightly more than 80% of establishments exercise some degree of monopsony power in their demand for low-skilled workers. The outcome suggests that a 1% increase in payments for low-skilled workers would, in these firms, increase employment for this group by 1.12%, while firms without monopsony power reduce the number of low-skilled, by about 1.63% for the same increase in remuneration. The study can probably also be used to explain the limited employment effects of the introduction of a statutory minimum wage in Germany and thus leads to a better understanding of the labour market for low-skilled workers. JEL Codes: J23, J42, C23, D24

scholarly journals The Minimum Wage Affects Them All: Evidence on Employment Spillovers in the Roofing Sector

2013 ◽  
Vol 14 (3) ◽  
pp. 282-315 ◽  
Author(s):  
Bodo Aretz ◽  
Terry Gregory ◽  
Melanie Arntz
Keyword(s):  
Minimum Wage ◽  
Scale Effects ◽  
Minimum Wages ◽  
Wage Distribution ◽  
Employment Effects ◽  
Eastern Germany

Abstract This study contributes to the sparse literature on employment spillovers of minimum wages. We exploit the minimum wage introduction and subsequent increases in the German roofing sector that gave rise to an internationally unprecedented hard bite of a minimum wage. We look at the chances of remaining employed in the roofing sector for workers with and without a binding minimum wage and use the plumbing sector that is not subject to a minimum wage as a suitable benchmark sector. By estimating the counterfactual wage that plumbers would receive in the roofing sector given their characteristics, we are able to identify employment effects along the entire wage distribution. The results indicate that the chances for roofers to remain employed in the sector in eastern Germany deteriorated along the entire wage distribution. Such employment spillovers to workers without a binding minimum wage may result from scale effects and/or capital-labour substitution.

scholarly journals The Econometrics and Economics of the Employment Effects of Minimum Wages: Getting from Known Unknowns to Known Knowns

2019 ◽  
Vol 20 (3) ◽  
pp. 293-329 ◽  
Author(s):  
David Neumark
Keyword(s):  
United States ◽  
Minimum Wage ◽  
Past Research ◽  
The United States ◽  
Minimum Wages ◽  
Definitive Answer ◽  
Employment Effects ◽  
Conflicting Evidence ◽  
Known Unknowns ◽  
Wage Increases

Abstract I discuss the econometrics and the economics of past research on the effects of minimum wages on employment in the United States. My intent is to try to identify key questions raised in the recent literature, and some from the earlier literature, which I think hold the most promise for understanding the conflicting evidence and arriving at a more definitive answer about the employment effects of minimum wages. My secondary goal is to discuss how we can narrow the range of uncertainty about the likely effects of the large minimum wage increases becoming more prevalent in the United States. I discuss some insights from both theory and past evidence that may be informative about the effects of high minimum wages, and try to emphasize what research can be done now and in the near future to provide useful evidence to policymakers on the results of the coming high minimum wage experiment, whether in the United States or in other countries.

scholarly journals Why has the British National Minimum Wage had Little or No Impact on Employment?

2008 ◽  
Vol 50 (3) ◽  
pp. 489-512 ◽  
Author(s):  
David Metcalf
Keyword(s):  
Labour Market ◽  
Minimum Wage ◽  
Relative Price ◽  
Gender Pay Gap ◽  
Credit System ◽  
Wage Setting ◽  
Pay Gap ◽  
The Real ◽  
Employment Effects ◽  
Consumer Services

A century has passed since the first call for a British national minimum wage (NMW). The NMW was finally introduced in 1999. It has raised the real and relative pay of low wage workers, narrowed the gender pay gap and now covers around 1-worker-in-10. The consequences for employment have been extensively analysed using information on individuals, areas and firms. There is little or no evidence of any employment effects. The reasons for this include: an impact on hours rather than workers; employer wage setting and labour market frictions; offsets via the tax credit system; incomplete compliance; improvements in productivity; an increase in the relative price of minimum wage-produced consumer services; and a reduction in the relative profits of firms employing low paid workers.

Employment Effects of Minimum and Subminimum Wages: Panel Data on State Minimum Wage Laws

ILR Review ◽  
1992 ◽  
Vol 46 (1) ◽  
pp. 55-81 ◽  
Author(s):  
David Neumark ◽  
William Wascher
Keyword(s):  
Time Series ◽  
Young Adults ◽  
Panel Data ◽  
Minimum Wage ◽  
State Legislatures ◽  
Minimum Wages ◽  
Economic Conditions ◽  
Employment Effects ◽  
Time Series Studies

Using panel data on state minimum wage laws and economic conditions for the years 1973–89, the authors reevaluate existing evidence on the effects of a minimum wage on employment. Their estimates indicate that a 10% increase in the minimum wage causes a decline of 1–2% in employment among teenagers and a decline of 1.5–2% in employment for young adults, similar to the ranges suggested by earlier time-series studies. The authors also find evidence that youth subminimum wage provisions enacted by state legislatures moderate the disemployment effects of minimum wages on teenagers.

scholarly journals Dampak Upah Minimum terhadap Probabilitas Keluar dari Sektor Formal

2019 ◽  
pp. 119-139
Author(s):  
Clara Tridiana ◽  
Diah Widyawati
Keyword(s):  
Minimum Wage ◽  
Minimum Wages ◽  
Probit Regression ◽  
Formal Sector ◽  
Skilled Workers ◽  
Job Classification ◽  
Unskilled Workers ◽  
Wage Regulation ◽  
Skilled And Unskilled Workers

The effectiveness of minimum wages is still debated, even though minimum wage regulation increases worker’s wages, yet it causes “disemployment effect”. This study aims to identify differences in minimum wages impact on probabilities out of formal sector for unskilled and skilled workers. The type of skill used is based on job classification. Using Sakernas data in August 2010 and 2015, probit regression was conducted to estimate minimum wages impact on probabilities out of formal sector on skilled and unskilled workers. Based on analysis, minimum wage on probability of exit from formal sector is higher for unskilled workers than skilled workers. ============================= Efektivitas penerapan upah minimum masih diperdebatkan, karena meskipun upah minimum meningkatkan upah pekerja, namun di sisi lain dapat menyebabkan “disemployment effect”. Penelitian ini bertujuan mengidentifikasi perbedaan dampak upah minimum terhadap probabilitas keluar dari sektor formal pada tenaga kerja tidak terampil dan terampil. Tipe keterampilan yang digunakan dalam penelitian ini berdasarkan klasifikasi jenis pekerjaan. Dengan menggunakan data Sakernas Agustus 2010 dan 2015, penelitian ini menggunakan regresi probit untuk mengestimasi dampak upah minimum terhadap probabilitas keluar dari sektor formal pada tenaga kerja terampil dan tidak terampil. Hasil yang diperoleh adalah dampak upah minimum terhadap probabilitas keluar dari sektor formal lebih tinggi pada tenaga kerja tidak terampil dibandingkan tenaga kerja terampil.

scholarly journals Minimum Wage and Unemployment in Greek Labour Market: A Descriptive Analysis

2014 ◽  
Vol 4 (4) ◽  
pp. 36 ◽  
Author(s):  
Kostas Karamanis ◽  
Charis Naxakis
Keyword(s):  
Labour Market ◽  
Minimum Wage ◽  
Wage Rate ◽  
Descriptive Analysis ◽  
Minimum Wages ◽  
Wage Level ◽  
Employment Rates ◽  
The Relationship

The purpose of this paper is to investigate the relationship between the minimum wage level and the rates of unemployment and employment in the Greek labour market. More specifically, this study analyses the evolution of the minimum wage during the period 2000-2013 and also whether these changes have really affected the unemployment and employment rates or not. The main conclusion of our study supports several other studies conclusions suggesting that the level of minimum wage in Greece did not really affect the unemployment and employment rates. The views of economists on effect of the establishing of minimum wages are quite contradictory. The evaluation of relationship between labour market and minimum wage rate is either positive or negative or even not related at all, depending on the assumptions about characteristics of labour market. 

Reply to “Credible Research Designs for Minimum Wage Studies”

ILR Review ◽  
2017 ◽  
Vol 70 (3) ◽  
pp. 593-609 ◽  
Author(s):  
David Neumark ◽  
William Wascher
Keyword(s):  
Panel Data ◽  
Labor Markets ◽  
Minimum Wage ◽  
State Level ◽  
Minimum Wages ◽  
Negative Effects ◽  
Employment Effects ◽  
Research Designs ◽  
Wage Employment

The authors make three points in this reply to the article by Allegretto, Dube, Reich, and Zipperer (ADRZ 2017). First, ADRZ shed no new light on the sensitivity of estimated minimum wage employment effects to the treatment of trends in state-level panel data, and they make some arguments in this context that are misleading or simply wrong. Second, the key issue ADRZ emphasize—using “close controls” to account for shocks that are correlated with minimum wage changes—does not generate large differences in findings, and ADRZ do not address evidence from Neumark, Salas, and Wascher (NSW 2014a) that questions the validity of the close controls used in Allegretto, Dube, and Reich’s (ADR 2011) and Dube, Lester, and Reich’s (DLR 2010) work. Third, ADRZ ignore or dismiss a growing number of studies that address in various ways the same issue of potential correlations between minimum wages and shocks to low-skill labor markets that ADRZ argue generate spurious evidence of disemployment effects, yet often find rather large negative effects of minimum wages on low-skilled employment.

Minimum Wages, Unions, the Economy and Society

2008 ◽  
Vol 19 (1) ◽  
pp. 25-37 ◽  
Author(s):  
John Nevile ◽  
Peter Kriesler
Keyword(s):  
Economic Theory ◽  
Adverse Effects ◽  
Theoretical Analysis ◽  
Labour Market ◽  
Empirical Evidence ◽  
Minimum Wage ◽  
Minimum Wages ◽  
Economics Profession ◽  
Short Run ◽  
Minimum Wage Legislation

One of the characteristics of the WorkChoices legislation introduced by the Howard government was the anti-union bias that permeated it. Some argue that this is appropriate because unions increase minimum wages, and economic theory shows that this will decrease employment and hence output. The Rudd government has signalled that it intends changing this anti-union bias, while at the same time restoring the role and coverage of minimum wages. This paper examines the arguments around these issues and concludes that neither side of the economic theory debate has delivered a knockout blow. The theoretical analysis is followed by a section looking at empirical evidence on the effects of deregulating labour markets. Again there is not complete consensus among the economics profession. However, both sides of the debate on the effects of labour market deregulation agree that strong minimum wage legislation does significantly reduce earnings inequality by increasing earnings at the bottom end of the distribution. The paper concludes that the increase in inequality consequent on labour market deregulation has adverse effects on the economy in the short run and disturbing longer run effects on society.

Minimum wages effects on low-skilled workers in less developed regions of China

2018 ◽  
Vol 39 (3) ◽  
pp. 455-467 ◽  
Author(s):  
Jing Wang ◽  
Morley Gunderson
Keyword(s):  
Minimum Wage ◽  
Comparison Group ◽  
Minimum Wages ◽  
Labour Markets ◽  
Employment Effect ◽  
Double Difference ◽  
Wage Increase ◽  
Minimum Wage Increase ◽  
Skilled Workers ◽  
Content Type

Purpose The purpose of this paper is to estimate the causal effect of minimum wages on the employment of low-skilled workers in less developed regions of China. Design/methodology/approach Based on data from the China Health and Nutrition Survey, a double-difference (DD) methodology is used to compare the employment of low-skilled individuals before and after a minimum wage increase in their provinces with a comparison group of individuals in provinces that did not have a minimum wage increase. Also, a triple-difference methodology (DDD) is used that also includes an additional control group of highly educated workers as a within-province internal comparison group that should not be affected by a minimum wage increase. Findings No evidence of an adverse employment effect is found in any of the 36 different estimates, consistent with recent US evidence that uses a similar DD methodology. Research limitations/implications The data are not national representative; rather heavily weighted towards the less developed Central, Western and parts of the Eastern Regions of China. This may partially explain the absence of the theoretically expected adverse employment effect. Other related reasons are discussed, including: lack of enforcement in those less developed regions; a large presence of state-owned enterprises in the regions where employment security clause remains intact; the relatively less developed labour markets in the regions including where employers may behave in a monopsony fashion in their labour markets; shock effects; and cost offsets from reduced fringe benefits and increases in the pace of work. This paper was unable to disentangle the separate effect of these possible factors. Originality/value This is one of the few studies on minimum wages in China to focus on low-skilled workers in less developed regions, to use individuals as the unit of observation rather than aggregates, and to provide causal estimates based on DD and DDD methodologies.

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