Knowledge that Transforms

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. Copyright 2000 by University of Chicago Press.

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.

Sales quotas are a fixture of sales compensation plans and are often associated with a significant discrete bonus. This article shows that, under certain assumptions about salesperson utility and the distribution of sales outcomes, the optimal compensation is a discrete bonus for meeting a sales quota. The results are similar when the assumption of agent risk neutrality is relaxed. The model has implications for many moral hazard problems where the agent has a liability limitation and job‐specific skill.

We estimate the employment effects of federal minimum wage increases using monthly Current Population Survey (CPS) data from 1979 through 1997. We find that the empirical differences in the new minimum wage literature based on CPS data primarily can be traced to alternative methods of controlling for macroeconomic conditions. We argue that the macroeconomic controls commonly included in models where no employment impact is found are inappropriate. We consistently find a significant but modest negative relationship between minimum wage increases and teenage employment using alternative controls or allowing employer responses to the policy to occur with some delay.

The Swedish record of enormous compression of relative wages under centralized “solidarity” bargaining, followed by substantial decompression of wages after central bargaining broke down, supplies observations well suited to empirical evaluation of arguments about the response of productive efficiency to shifts in wage distribution. We obtain no results supporting “fairness, morale, and cohesiveness” theories implying that wage leveling within workplaces and industries may enhance productivity. Reduction of interindustry wage differentials evidently did, however, contribute positively to aggregate output and productivity growth, most likely for the structural reasons first emphasized by Swedish trade union economists almost a half century ago.

A structural econometric model of retirement of dual-career couples is specified and estimated with panel data from the National Longitudinal Survey of Mature Women. A coincidence of spouses retiring together, despite the younger ages of wives, suggests explicit efforts at coordination. The estimates suggest that one reason is a correlation of tastes for leisure. More important, each spouse, and perhaps husbands in particular, values retirement more once their spouse has retired. The opportunity set accounts for peaks in the retirement hazards of each spouse individually, but not for peaks in the simultaneous retirement of both spouses. Copyright 2000 by University of Chicago Press.

Using data from the National Longitudinal Survey of Youth (1979-96) and the Panel Study of Income Dynamics (1981-91), I seek to determine whether there is any net positive return to tenure with the current employer once we control for industry-specific capital. Including total experience in the industry as an additional explanatory variable, I show that the return to seniority is markedly reduced using GLS while it virtually disappears using IV-GLS, at both the one-digit and three-digit levels. Therefore, it seems that what matters most for the wage profile in terms of human capital is industry-specificity, not firm-specificity. Copyright 2000 by University of Chicago Press.

Previous research on unemployment insurance (UI) has emphasized the program's effect on individual search behavior. This state‐contingent income may also reduce the labor supply of family members during the unemployment spell. We investigate this question within the context of wives' labor supply responses to their husbands' unemployment spells. We find strong “crowdout” of this form of family self‐insurance; our estimates imply that for each dollar of UI receipt wives earn up to 73 cents less. The reduction in spousal hours of work is over 40% as large as previous estimates of the effect of UI on search time of husbands.

This article 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 also helps explain the recent widening of wage differentials and disparities in job opportunities within narrowly defined groups.