The impact of minimum wages in Mexico and Colombia

There are diverging views about how minimum wages affect labor markets in developing countries. Advocates of minimum wages hold that they redistribute resources in a welfare-enhancing way, and can thus reduce poverty, improve productivity, and foster growth. Opponents, on the other hand, contend that minimum wage interventions result in a misallocation of labor and lead to depressed wages in the very sectors - the rural and informal urban sectors - where most of the poor are found, with the effect of wasting resources and reducing the growth rate. Data from Colombia and Mexico for the 1980s provide an opportunity to evaluate the impact of minimum wages. In Mexico in the 1980s, the minimum wage fell in real terms roughly 45 percent. By 1990, Mexico's minimum wage was about 13 percent of the average unskilled manufacturing wage. During the same period, the minimum wage in Colombia increased at nearly the same rate, reaching roughly 53 percent of the average unskilled wage. The author charts how the mandated minimum wage affected the demand for skilled and unskilled labor in both countries during that decade. Findings are as follows. In Mexico, minimum wages have had virtually no effect on wages or employment in the formal sector. The main reason: the minimum wage is not an effective wage for most firms or workers. In the informal sector, in turn, there is considerable noncompliance with the mandated minimum wage, especially among part-time and female workers. As a result, significant numbers of workers are paid at or below minimum wages. In Colombia, minimum wages have a much stronger impact on wages, judging from their proximity to the average wage and both cross-section and time series estimates. The estimates imply that the elasticity of low-paid unskilled employment with respect to minimum wages is in the range of 2 to 12 percent.Wages, Compensation&Benefits,Environmental Economics&Policies,Labor Policies,Banks&Banking Reform,Municipal Financial Management,Environmental Economics&Policies,Wages, Compensation&Benefits,Child Labor,Banks&Banking Reform,Municipal Financial Management

Does a Flexible Industry Wage Structure Increase Employment?: The U.S. Experience

This paper examines the flexibility of wages across industries inthe U.S. and seeks to determine the potential impact which changes in the industrial wage structure may have for employment. With regard to the flexibility of wages across industries, we find that the U.S., alone among the major OECD countries, has experienced substantial changes in the industry wage structure since 1970, with the variation of log wages among industries increasing dramatically, particularly in the 1970s. This represents a widening of the gap between wages in the high and low wage sectors. In order to evaluate these changes, we estimate equations linking changes in industry wages over an extended period of time to a variety of potential wage determining characteristics. We find that industrial wages are positively correlated with value productivity per worker, even after controlling for institutional and supply side factors which may have contributed to the increased dispersion of wages in the 1970s. Our results are not consistent with the standard competitive model of industry labor markets, in which wages and productivity are uncorrelated across sectors and wages depend on aggregate, rather than sectoral conditions.With regard to the impact of a flexible industry wage structure on employment, we evaluate the circumstances under which flexible wages among industries may be employment enhancing, and the set of circumstances under which flexible wages are likely to be employment reducing. For the U.S.economy in the 1970s we find that the data support the latter set of circumstances. The bottom line of the U.S. experience is that flexible wages by industry have not contributed to employment growth.

The Incentive for Working Hard: Explaining Hours Worked Differences in the U.S. and Germany

This paper seeks to explain the greater hours worked by Americans compared to Germans in terms of forward-looking labor supply responses to differences in earnings inequality between the countries. We argue that workers choose current hours of work to gain promotions and advance in the distribution of earnings. Since US earnings are more unequally distributed than German earnings, the same extra work pays off more in the US, generating more hours worked. Supporting this inequality-hours hypothesis, we show that in both countries hours worked is positively related to earnings inequality in cross section occupational contrasts and that hours worked raises future wages and promotion prospects in longitudinal data.

The competitiveness of U.S. manufactured goods: recent changes and prospects

Competition ; Manufactures ; Prices ; International trade

Union concessions in the 1980s

Industries ; Manufactures ; Labor unions ; Wages ; Employment (Economic theory)

Strengthening Knowledge Co-Production Capacity: Examining Interest in Community-University Partnerships.

Building successful, enduring research partnerships is essential for improving links between knowledge and action to address sustainability challenges. Communication research can play a critical role in fostering more effective research partnerships, especially those concerned with knowledge co-production processes. This article focuses on community-university research partnerships and factors that influence participation in the co-production process. We identify specific pathways for improving partnership development through a prospective analytical approach that examines community officials’ interest in partnering with university researchers. Using survey responses from a statewide sample of Maine municipal officials, we conduct a statistical analysis of community-university partnership potential to test a conceptual model of partnership interest grounded in natural resource management theory and environmental communication. Our findings both support and advance prior research on collaborations. Results reveal that belief in the helpfulness of the collaborator to solve problems, institutional proximity, familiarity, perceived problem severity and problem type and trust influence interest in developing community-university partnerships. These findings underscore the benefits of proactively assessing partnership potential prior to forming partnerships and the important roles for communication research within sustainability science, especially with regard to strengthening partnership formation and knowledge co-production processes

Lump-Sums, Profit Sharing, and the Labor Costs in the Union Sector

This paper documents the increase in the use of lump-sum payments and profit sharing plans in union contracts in the 1980s, and evaluates the extent to which these innovations may have contributed to moderation in the growth of labor costs, and increased pay flexibility. We find evidence that lump-sum and profit sharing arrangements reduced labor cost growth at both the aggregate and firm level. But the evidence linking these plans to labor cost flexibility is mixed; although the evidence suggests that profit sharing plans may be associated with greater flexibility at the firm level, there is no evidence that lump-sum plans increase flexibility at either the firm or aggregate level.