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Wage setters take into account the future consequences of their current wage choices in the presence of downward nominal wage rigidities. Several interesting implications arise. First, a closed-form solution for a long-run Phillips curve relates average unemployment to average wage inflation; the curve is virtually vertical for high inflation rates but becomes flatter as inflation declines. Second, macroeconomic volatility shifts the Phillips curve outward, implying that stabilization policies can play an important role in shaping the trade-off. Third, nominal wages tend to be endogenously rigid also upward, at low inflation. Fourth, when inflation decreases, volatility of unemployment increases whereas the volatility of inflation decreases: this implies a long-run trade-off also between the volatility of unemployment and that of wage inflation.

Multinational corporations often are multilingual entities, yet surprisingly little is known about how foreign-language competencies in their foreign subsidiaries are related to local employees’ career success outcomes. This paper uses human capital and upward mobility theories to link local employees’ English language competencies through career encouragement and internal social capital development behavior to job promotions, wage increases, and career satisfaction in two independent studies conducted in foreign subsidiaries in Japan. Study 1’s findings are derived from 499 local employees at three points in time over 12 months in 376 foreign subsidiaries. These findings suggest that career encouragement mediates the positive relationships between English language competence and job promotions, wage increases, and career satisfaction. Study 2’s findings are from a sample derived from 448 local employees in 265 foreign subsidiaries with a similar time-lagged research design. These findings provide further support for the direct relationship of English language competencies to job promotions, wage increases, and career satisfaction, and that social capital development mediates the positive relationships between English language competencies and job promotions and career satisfaction. This paper contributes to the literature on international business by highlighting the importance of English language competencies to local employees’ career success outcomes in foreign subsidiaries operating in non-English-speaking countries.

Changes in economic systems provide a rare opportunity to redesign basic institutional structures in labor markets. This paper attempts to provide guidance for such institutional choice by drawing on the findings of recent labor market research in market economies on the links between institutional structure and labor market performance. After considering the suitability of research from market economies for the labor market problems faced by economies in transition from central planning, the paper considers the effects of alternative institutions for wage determination (collective bargaining structures and minimum wage and indexation legislation), employment security, income security, and active labor market policy.

Offering evidence from both detailed individual country studies and homogenized statistics across the Latin American and Caribbean region, this book examines the impact of the minimum wage on wages, employment, poverty, income distribution and government budgets in the context of a large informal sector and predominantly unskilled workforces.

Using personnel data from a large US retail firm, I examine the firm’s response to the 1996 federal minimum wage increase. Compulsory increases in average wages had negative but statistically insignificant effects on overall employment. However, increases in the relative wages of teenagers led to significantincreasesin the relative employment of teenagers, especially younger and more affluent teenagers. Further analysis suggests a pattern consistent with noncompetitive models. Where the legislation affected mainly the wages of teenagers and so was only moderately binding, it led both to higher teenage labor market participation and to higher absolute employment of teenagers.

This paper studies whether labor scarcity encourages technological advances, that is, technology adoption or innovation, for example, as claimed by Habakkuk in the context of nineteenth-century United States. I define technology as strongly labor saving if technological advances reduce the marginal product of labor and as strongly labor complementary if they increase it. I show that labor scarcity encourages technological advances if technology is strongly labor saving and will discourage them if technology is strongly labor complementary. I also show that technology can be strongly labor saving in plausible environments but not in many canonical macroeconomic models.

I construct a theoretical framework in which firms offer wage-tenure contracts to direct the search by risk-averse workers. All workers can search, on or off the job. I characterize an equilibrium and prove its existence. The equilibrium generates a nondegenerate, continuous distribution of employed workers over the values of contracts, despite that all matches are identical and workers observe all offers. A striking property is that the equilibrium is block recursive; that is, individuals' optimal decisions and optimal contracts are independent of the distribution of workers. This property makes the equilibrium analysis tractable. Consistent with stylized facts, the equilibrium predicts that (i) wages increase with tenure, (ii) job-to-job transitions decrease with tenure and wages, and (iii) wage mobility is limited in the sense that the lower the worker's wage, the lower the future wage a worker will move to in the next job transition. Moreover, block recursivity implies that changes in the unemployment benefit and the minimum wage have no effect on an employed worker's job-to-job transitions and contracts.

We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real-effort laboratory experiment we show that explicit cost and surplus information that enables an exact calculation of an employer's surplus from the work contract is a crucial prerequisite for a positive wage—effort relation. This demonstrates that an employee's reciprocity requires a clear assessment of the surplus at stake.

This paper examines the impact of a 22% minimum wage increase in Spain on January 2019 on intimate partner violence using a doubly robust difference-in-differences strategy with inverse probability weighting and the nationally representative Spanish Survey of Violence Against Women. We find no effect of the reform on physical or sexual violence. However, treated women—those with a high predicted probability of working at minimum wage jobs—experienced a 42% increase in psychological violence. Labor market analysis of survey respondents reveals that the reform led to a substitution away from female employment toward her partner’s employment, reducing women’s bargaining power within the household. For women whose partner is five years older, the increase in violence is not accompanied with lower female labor market engagement, providing evidence of alternative mechanisms, such as disrupted gender roles, or instrumental violence. These findings highlight unintended consequences of wage policy and highlight the need for complementary policies and services addressing the dangers of gender-based and domestic violence.

In this paper, we argue that important labor market phenomena can be better understood if one takes (a) the inherent incompleteness and relational nature of most employment contracts and (b) the existence of reference-dependent fairness concerns among a substantial share of the population into account. Theory shows and experiments confirm that, even if fairness concerns were to exert only weak effects in one-shot interactions, repeated interactions greatly magnify the relevance of such concerns on economic outcomes. We also review evidence from laboratory and field experiments examining the role of wages and fairness on effort, derive predictions from our approach for entry-level wages and incumbent workers' wages, confront these predictions with the evidence, and show that reference-dependent fairness concerns may have important consequences for the effects of economic policies such as minimum wage laws.