The Strength of Occupation Indicators as a Proxy for Skill

Labor economists have long used occupation indicators as a proxy for unobserved skills that a worker possesses. In this paper, we consider whether inter-occupational wage differentials that are unexplained by measured human capital are indeed due to differences in often-unmeasured skill. Using the National Compensation Survey, a large, nationally- representative dataset on jobs and ten different components of requisite skill, we compare the effects on residual wage variation of including occupation indicators and including additional skills measures. We find that although skills do vary across 3-digit occupations, occupation indicators decrease wage residuals by far more than can be explained by skill differentials. This indicates that “controlling for occupation” does not equate to controlling for skill alone, but also for some other factors to a great extent. Additionally, we find that there is considerable within occupation variation in skills, and that the amount of variation is not constant across skill levels. As a result, including occupation indicators in a wage model introduces heteroskedasticity that must be accounted for. We suggest that greater caution be applied when using and interpreting occupation indicators as controls in wage regressions.human capital measurement; job skills; occupation indicator variables

Which Workers Gain Upon Adopting a Computer?

Using the Canadian Workplace and Employee Survey and controlling for individual and establishment fixed effects, we find that within a year of adopting a computer, the average worker earns a 3.6 percent higher wage than a similar worker who did not adopt a computer. Returns are even larger for managers and professionals, highly educated workers, and those with significant prior computer experience. Employees who use computer applications that require high cognitive skills earn the highest returns.Computer Use, Technology, Computer Applications

Returning to the Returns to Computer Use

This paper re-examines the returns to computer use using a new matched workplace-employee data from Canada. We control for potential selection using instrumental variables. Results suggest that it is not merely the employee having a computer on his desk, but rather having complementary computer skills, that causes wages to increase.computers, computer skills, human capital, technology

Is Job Enrichment Really Enriching?

This study uses a survey of Canadian workers with rich, matched data on job characteristics to examine whether “enriched” job design, with features like quality circles, feedback, suggestion programs, and task teams, affects job satisfaction. We identify two competing hypotheses on the relationship between enriched jobs and job satisfaction. The “motivation hypothesis,” implies that enrichment will generally increase satisfaction and the “intensification hypothesis,” implies that enrichment may decrease satisfaction by increasing the intensity and scope of work. Our results show that several forms of enrichment, specifically suggestion programs, information sharing, task teams, quality circles and training, raise satisfaction. Therefore we argue that the data support the motivation hypothesis. Partitioning the data by education level or union membership further supports this conclusion, while a direct test of the intensification hypothesis does not support the competing hypothesis.Job Satisfaction; Job Enrichment; Human Resource Practices

Job Characteristics and Labor Market Discrimination in Promotions: New Theory and Empirical Evidence

[Excerpt] We present new theory and the first empirical test of promotion discrimination models based on job assignment signaling. In our theory, promotions serve as signals of worker ability, and job hierarchies differ in the degree to which tasks vary across hierarchical levels. When tasks differ substantially across levels, the opportunity cost (in terms of foregone output) of not promoting qualified workers from a disadvantaged group (e.g. racial minorities or females) is large, so employers are less likely to (inefficiently) retain such workers in lower-level jobs. Thus, given performance in the pre-promotion job, the extent to which disadvantaged workers have lower promotion probabilities than advantaged workers should decrease when tasks vary more across hierarchical levels. Also, the difference between the favored and disfavored groups in the wage increase attached to promotion should diminish when tasks vary more across hierarchical levels. We test these implications empirically for the case of racial discrimination in promotions, using personnel data from a large U.S. firm and also data from the National Compensation Survey. We find strong empirical support for the theoretical model’s predictions concerning promotion probabilities, whereas empirical support is mixed for the model’s predictions concerning the wage growth attached to promotions

Optimizing Incentive Plan Design: A Case Study

We study effects of a firm's attempt to optimize an existing incentive scheme to increase sales growth for direct store delivery workers. Before optimization workers reported Ratchet Effects that lowered productivity. The altered incentive plan offered higher compensation for increased sales relative to a sales growth target, and lower compensation for failing to meet the target. We gathered data on performance and attitudes at pilot and control sites before and after the change. Relative to control sites, sales growth increased in the pilot sites by two percent, a meaningful contribution to firm profits. We find no change in distortion of effort or manipulation of the performance measure. Workers did not substantially change number of hours worked, though allocation of time across tasks changed slightly. Despite increased productivity, workers continued to report Ratchet Effects after the change. We also find that an unplanned price increase midway through a fiscal year affected the extent of Ratchet Effects that year.incentives, ratchet effect

Workplace Organization and Innovation

This study uses data on Canadian establishments to test whether particular organizational structures are correlated with the likelihood of adopting process and product innovations, controlling for the endogeneity of the predictors. We find that establishments with decentralized decision-making, information-sharing programs, or incentive pay plans are significantly more likely to innovate than other establishments. Larger establishments and those with a high vacancy rate are also more likely to innovate. These findings are consistent with a model in which workers hold information about production inefficiencies or consumer demands that can lead to productive innovations and that workplace organization attributes facilitate the communication and implementation of those ideas.Innovation, Decision-Making, Information-Sharing