Knowledge that Transforms

We study imperfect competition in the labor market when both workers and firms are heterogeneous. When firms cannot observe workers' skill, firms pay workers equal wages, but workers absorb training costs. When firms can identify worker types, firms pay different net wages to different workers. Voters select the level of general education that is financed by a lump‐sum tax. Workers are on average better off when firms can observe workers' skill for a given level of general human capital, but the median voter prefers a higher level of general human capital when firms cannot observe worker types.

Workers paid by the piece should be happy to introduce new techniques that increase output, but firms always seem to reduce the piece rate when workers start earning too much money. Workers respond by restricting output and keeping good new ideas to themselves. We show that this outcome is inevitable in a competitive environment. However, there are noncompetitive situations where firms can use piece rates to get cooperation from their workers. These predictions are consistent with case history evidence from the cotton spinning industry in England in the nineteenth century and the Lincoln Electric Company in the United States even today.

This article offers an explanation of the postinjury employment, wage, and accommodation patterns of permanently impaired workers. In particular, it argues that the observed tendency of time‐ofaccident employers to rehire at the preinjury wage, accommodate, and then, perhaps, quickly terminate the impaired worker, is a manifestation of the worker's preferred contract. That contract is characterized by wage inflexibility. By removing the opportunity for the postinjury employer to underreport productivity, this contract creates an incentive for the worker to attempt to functionally adapt to the impairment, thereby increasing expected lifetime utility.

The paper analyzes an important aspect of the contemporary reorganization of work within firms: the shift from “Tayloristic” organization (characterized by specialization by tasks) to “holistic” organization (featuring job rotation, integration of tasks and learning across tasks). We examine four driving forces behind this restructuring process: advances in production technologies promoting technological task complementarities, advances in information technologies promoting informational task complementarities, changes in worker preferences in favor of versatile work, and advances in human capital that make workers more versatile. Our analysis can also help explain the recent widening of wage differentials and disparities in job opportunities, not only between occupational, educational, and industry groups, but also within these groups. We are indebted to Michael Orszag for his insightful comments, and have benefited from the suggestions of Ruth Klinov, Reuben Gronau, Eric Mellander, Torsten Persson, Jorgen Weibull, and seminar participants at the Hebrew University of Jerusalem, the Industrial Institute for Economic and Social Research (Stockholm), the Institute for International Economic Studies (Stockholm), and an anonymous referee. We have profited from discussions with Solveig Wikstrom on the reorganization of firms, and are grateful to Jorgen Nilsson for drawing the figures. MULTI-TASK LEARNING AND THE REORGANIZATION OF WORK 1

In this article, we provide quantitative evidence on the effects of monetary incentive schemes designed to reduce racial differences in school attainment and earnings. Our analysis is based on the structural estimation of a dynamic model of schooling, work, and occupational choice decisions over the life cycle. We consider two recent proposals that, although not specifically targeted to blacks, can be expected to have differential racial impacts. One proposal, suggested by Robert Reich, provides a high school graduation bonus to youths from lower‐income families. The other, suggested by Edmund Phelps, provides wage subsidies to low‐wage workers.

I investigate how the relationship between the wage and the length of the work day has changed since the 1890s among prime‐aged men and women. I find that across wage deciles, within wage deciles, and within industry and occupation groups, the most highly paid worked fewer hours than the lowest paid in the 1890s but that by 1973 differences in hours worked were small and by 1991 the highest paid worked the longest day. I examine several explanations for the compression in the length of the work day and investigate the implications of hours inequality for earnings inequality.

This article uses personnel, payroll, and other records from the Union Bank of Australia to examine internal labor markets. It is shown that employment was characterized by limited ports of entry, impersonal rules for pay and promotion, well‐defined career ladders, shielding from the external labor market, and a long‐term employment relationship. In addition tenure within the bank was rewarded considerably more than experience elsewhere, and compensation increased considerably after 25–30 years tenure. These facts are partially consistent with the human capital, matching, and contract theory models but cannot be fully explained by any one model.

Using Current Population Survey data for 1983-93, this article analyzes whether there is a union membership wage premium among full-time, private sector employees covered by union contracts. Ordinary least squares estimates of the membership wage premium are 12%-14%, and allowing membership to be endogenous yields larger estimates. Differences in job tenure, unobservable characteristics, and measurement error cannot fully explain the estimated premium. Significant differences in this premium, as well as in membership rates conditional upon coverage, across various demographic subgroups are also documented. In general, "free riders" do not appear to be free riding.

We investigate the effect of entrepreneurs' personal taxes on their use of labor, analyze the tax returns of sole proprietors before and after the Tax Reform Act of 1986, and determine how the substantial reductions in marginal tax rates affected their hiring decisions and wage bills. Individual income taxes exert a statistically and quantitatively significant influence on the probability of hiring workers. Raising the entrepreneur's “tax price” by 10% raises the mean probability of hiring by about 12%. Further, taxes influence total wage payments to workers. The tax‐price elasticity of the median wage bill is about .37.

Differences in test scores of white and black students have narrowed substantially over time, falling by one‐half since 1970s. Some have speculated that this convergence is due to changes in family background or convergence in school quality. In this article we decompose the convergence in test scores into that portion due to changes in parental education, changes in school quality, and a narrowing of the within‐school gap in test scores. Only about 25% of the overall convergence is attributable to changing family and school characteristics. We find that nearly 75% of the convergence is attributable to changes within schools.