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Our purpose is to examine the level of reservation wages among older unemployed (45+), and investigate what happens to the level of reservation wages as the length of unemployment increases. Using data from questionnaires completed by unemployed, we examined the reservation wages of 364 individuals and asked whether they would be willing to compromise in terms of their occupation, profession or geographic location to find a job. 112 of the participants responded to two questionnaires over a three-month period to determine the changes in their expectations over time. Additionally, we conducted qualitative interviews with 10 unemployed. We found that older people experienced longer periods of unemployment, and had a greater willingness to reduce salary expectations. The study establishes an innovative connection between older unemployed, reservation wages and the duration of unemployment, showing that higher reservation wages among older unemployed is the cause of prolonging their unemployment.

The concept of the reservation wage has played an important role in labour market theory, particularly in models of job search, labour supply and labour market participation. We focus on the determinants of reservation wages, with a particular focus on health, which has attracted very little attention despite its importance from a policy perspective. Using UK data we estimate an endogenous switching model which predicts reservation wages for the unemployed and market wages for the employed. Our results have important policy implications since they suggest that poor health is a major cause of economic inactivity.

What happens if an employer cuts wages by one cent? Much of labor economics is built on the assumption that all the workers will quit immediately. Here, Alan Manning mounts a systematic challenge to the standard model of perfect competition.Monopsony in Motionstands apart by analyzing labor markets from the real-world perspective that employers have significant market (or monopsony) power over their workers. Arguing that this power derives from frictions in the labor market that make it time-consuming and costly for workers to change jobs, Manning re-examines much of labor economics based on this alternative and equally plausible assumption. The book addresses the theoretical implications of monopsony and presents a wealth of empirical evidence. Our understanding of the distribution of wages, unemployment, and human capital can all be improved by recognizing that employers have some monopsony power over their workers. Also considered are policy issues including the minimum wage, equal pay legislation, and caps on working hours. In a monopsonistic labor market, concludes Manning, the \"free\" market can no longer be sustained as an ideal and labor economists need to be more open-minded in their evaluation of labor market policies.Monopsony in Motionwill represent for some a new fundamental text in the advanced study of labor economics, and for others, an invaluable alternative perspective that henceforth must be taken into account in any serious consideration of the subject.

Reservation wages are part of the transmission mechanism between minimum wages and unemployment via the labour force participation decision. The limited available empirical evidence on the relationship between reservation wages and legal minimum wages suggest that individuals use minimum wages as benchmarks against which their reservation wages are set. This has a profound behavioural effect that may encourage individuals to either enter the labour force or price themselves out of potential employment. We employ a fuzzy regression discontinuity design to explore the influence of minimum wages on reservation wages. Our findings suggest that the behavioural response is too small to be extracted from the variability of the reservation wage data. For policy makers this finding is important. While minimum wages raise earnings and living standards, they can push some workers out of the labour force by increasing their reservation wage beyond the minimum. We do not find any evidence of such a response of the reservation wage of jobseekers to the minimum wage in the UK.

Using CPS data from 2007 to 2012, we examine the contemporaneous effect of the Great Recession on the relative wages of immigrant men. Compared to pre-recession period, immigrants see a modest decline in their relative wages during the recession regardless of model specification. After the recession, immigrants’ relative wages largely recover from the recession-induced decline, but the wage disadvantage does not completely revert back to its pre-recession level. Selective in- and out-migration by immigrants or selection of natives into employment do not seem to drive the results. It appears that, during the recession, immigrants may have traded higher employment with lower wages and employers might have been willing to hire them as a cost-saving measure. The results could have implications for how relative wages of immigrants respond to the ongoing COVID-19 Pandemic Recession.

The present study investigated whether gender differences in wage expectations (reservation wage and expected wage level after probation) could be considered as a reliable explanation of the gender wage gap. First, whether women are willing to accept lower wage offers than men do was examined. Then socio-economic and demographic factors that affect wage expectations in relation to a post of a regional manager in a winery were identified. A total of 381 Slovaks (201 female) participated in the study. Generally, women and men stated similar wage expectations despite significantly different actual incomes. Next, correlation analysis showed that reservation wage was positively related to personal income and masculinity controlling for age (the expected wage level after the probationary period was not related to any of the measured variables), whereas hierarchical multiple regression analysis revealed personal income and masculinity as significant predictor of reservation wage. Finally, after dividing participants into age quartiles, ANOVA revealed that with increasing age wage expectations increased as well.

While widely accepted labor market search models imply a constant reservation wage policy, empirical evidence strongly suggests that reservation wages decline in search duration. This paper reports the results of the first real-time-search laboratory experiment. The controlled environment subjects face is stationary, and the payoff-maximizing reservation wage is constant. Nevertheless, subjects' reservation wages decline sharply over time. We investigate two hypotheses to explain this decline: 1. Searchers respond to the stock of accruing search costs. 2. Searchers experience non-stationary subjective costs of time spent searching. Our data support the latter hypothesis, and we substantiate this conclusion both experimentally and econometrically. (JEL C91, D83, J64)

Purpose The purpose of this paper is to study gender differences in wage bargaining by comparing the unexplained wage gap in desired, realised and reservation wages. Design/methodology/approach The notion of desired wages is applied, which shows workers’ first bet to potential employers during the job-search process. A large job-search data set is drawn from the main Estonian electronic job-search site CV Keskus. Findings It is found that the unexplained gender wage gap is around 20 per cent in desired wages and in realised wages, which supports the view that the gender income gap in expectations compares well with the realised income gap. The unexplained gender wage gap is larger in desired wages than in reservation wages for unemployed individuals, and this suggests that women ask for wages that are closer to their reservation wages men do. Occupational and sectoral mobility is unable to explain a significant additional part of the gender wage gap. Originality/value The paper adds to the scarce empirical evidence on the role of the non-experimental wage negotiation process in the gender wage gap. In addition, the authors seek to explain one of the largest unexplained gender wage gaps in Europe, the one in Estonia, by introducing a novel set of variables for occupational and sectoral mobility from a lengthy retrospective panel.

Unemployment insurance provides temporary cash benefits to eligible unemployed workers. Benefits are sometimes extended by discretion during economic slumps. In a model that features temporary benefits and sequential job opportunities, a worker’s reservation wages are studied when policymakers can make discretionary extensions to benefits. A worker’s optimal labor-supply choice is characterized by a sequence of reservation wages that increases with weeks of remaining benefits. The possibility of an extension raises the entire sequence of reservation wages, meaning a worker is more selective when accepting job offers throughout their spell of unemployment. The welfare consequences of misperceiving the probability and length of an extension are investigated. Properties of the model can help policymakers interpret data on reservation wages, which may be important if extended benefits are used more often in response to economic slumps, virus pandemics, extreme heat, and natural disasters.

Purpose The purpose of this paper is to expand our understanding of the decisions on labour supply, with particular attention given to the role of conditions of a contract between an employer and an employee. In the paper the value, from the employee’s perspective, of different characteristics of an employment contract are assessed. Design/methodology/approach Discrete choice experiment methodology is applied to evaluate employment attributes. Using data from a dedicated survey of students and graduates of social sciences in Poland, parameters of the employment-related utility function are estimated with a multinomial logit model and random parameter logistic regression. Due to the opt-out alternative in the design, reservation wages for different types of contracts are calculated. Findings The paper suggests that development conditions and psychological aspects of work are extremely important for employees’ decisions and their reservation wages. Research limitations/implications Due to limitations related to data generation process, generalisation of the results to the whole population is not possible. Practical implications The results of the study may help to develop tools of contract optimisation and remuneration systems. Such tools might lead to improvements in the efficiency of contracts in the labour market by simultaneously reducing employment costs and increasing workers’ utility. Originality/value The analysis of preferences and reservation wages contributes to our understanding of the observed wage differentials. It also helps to understand some apparent paradoxes of the labour supply behaviour, which are impossible to explain within the traditional approach to wage modelling.