The determination of wages of newly hired employees: Survey evidence on internal versus external factors

Galuščák, Kamil; Keeney, Mary; Nicolitsas, Daphne; Smets, Frank; Strzelecki, Paweł; Vodopivec, Matija

doi:10.1016/j.labeco.2012.03.009

Cited by 49 publications

(33 citation statements)

References 27 publications

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“…Similar empirical information is not available for Finland. Galuscak et al (2010) show, however, that the importance of external factors in hiring pay determination is quite strongly negatively correlated with union density and coverage. This implies that the wages of new employees should be more sensitive to external factors in Estonia than Finland.…”

Section: Structural Characteristics Of Our Three Economiesmentioning

confidence: 80%

“…The WDN survey findings about the main determinants of wages paid to newly hired employees provide indirect evidence on the relative flexibility of such wages across different countries. In this regard, Galuscak et al (2010) consider the share of firms that indicated that external factors -wages outside the firm or availability of workers in the market -are more important in determining the wages of the newly hired than factors internal to the firm, such as collective agreements or the pay of incumbent workers. The corresponding figures for Estonia and Spain imply that external labour market conditions are the dominant factor for a substantially larger share of firms in Estonia (32%)…”

Section: Structural Characteristics Of Our Three Economiesmentioning

confidence: 99%

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How Does Labour Market Structure Affect the Response of Economies to Shocks?

2016

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The recent crisis in the Eurozone has led to much discussion about the structure of labour markets in different Eurozone economies. In particular, there has been much talk of the need for structural labour market reform in the Eurozone periphery. But, there are many aspects of labour market structure -eg, wage flexibility, flexibility in hiring and firing, benefits, etcand it is not clear a priori which aspects really matter. In this paper, we analyse how crosscountry differences in labour market characteristics -in particular, wage and employment rigidities -shape the response of different countries to a variety of macroeconomic shocks.To address this question, we use a calibrated small open economy model in which we set the parameters governing the structural characteristics of the labour market based on three European countries: Estonia, Finland and Spain. We found that, given our labour market calibrations, we would expect output and unemployment to be much more adversely affected by the shocks associated with the financial crisis in countries with high unemployment benefit replacement ratios and high job turnover rates. Ebben a tanulmányban azt vizsgáljuk, hogy a munkapiac felépítésének országok közötti eltérései -különösen a bérek és a foglalkoztatás merevségei -miként befolyásolják az országok különböző sokkokra történő alkalmazkodását. E kérdés megválaszolásához egy kalibrált, kis nyitott gazdaságos modellt használunk, amelyben a munkapiac intézményi felépítését vezérlő paramétereket három európai ország munkapiaca alapján állítjuk be: ezek Észtország, Finnország és Spanyolország. Fő eredményeink azt mutatják, hogy a pénzügyi válságot kísérő sokkok hatása a kibocsátásra és a foglalkoztatásra sokkal negatívabb azokban az országokban, ahol magas a munkanélküli juttatások bérekhez viszonyított aránya, illetve ahol nagyok a munkapiaci áramlások.Tárgyszavak: munkapiaci intézmények, munkapiaci rugalmasság JEL kód: E24 suggested that these divergent experiences can be put down to differences in the flexibility of the labour market in these different countries. In particular, it has often been argued that the financial crisis has brought to the forefront the need for labour market reforms in those countries that have performed badly. But, there are many aspects of labour market structure -eg, wage flexibility, flexibility in hiring and firing, benefits, etc -and it is not clear a priori which aspects really matter. In this paper, we analyse how cross-country differences in labour market characteristics -in particular, wage and employment rigidities -shape the response of different countries to a variety of macroeconomic shocks.Much work has been done of late examining wage and employment dynamics in European countries. Some key findings of this research are that there is marked heterogeneity in labour market institutions across countries; that wages are reset less frequently than prices in a way that is both time-dependent and highly synchronised; that changes in base wages are linked to inflation but fi...

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Section: Structural Characteristics Of Our Three Economiesmentioning

confidence: 80%

Section: Structural Characteristics Of Our Three Economiesmentioning

confidence: 99%

How Does Labour Market Structure Affect the Response of Economies to Shocks?

2016

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“…If we instead turn to survey evidence, like Bewley (1999), Bewley (2007) for the U.S. and the study performed within the Eurosystem Wage Dynamics Network (WDN) covering about 17 000 firms in 17 European countries, we see strong evidence of that the wages of new hires are tightly linked to those of incumbents. As reported by Galuscak, Keeney, Nicolitsas, Smets, Strzelecki, and Vodopivec (2010), about 80% percent of the firms in the WDN survey respond that internal factors (like the internal pay structure) are more important in driving wages of new hires than external or market conditions. More direct evidence on the parameter we seek to calibrate is provided by Hall and Krueger (2008), who finds that between 25% and 50% of new hires receive posted wages and hence between 50% and 75% bargain over the wage.…”

Section: Calibrationmentioning

confidence: 96%

Labor-Market Frictions and Optimal Inflation

Carlsson

Westermark

2012

SSRN Journal

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. The Working Paper series presents reports on matters in the sphere of activities of the Riksbank that are considered to be of interest to a wider public. The papers are to be regarded as reports on ongoing studies and the authors will be pleased to receive comments. Terms of use: Documents inThe views expressed in Working Papers are solely the responsibility of the authors and should not to be interpreted as reflecting the views of the Executive Board of Sveriges Riksbank. Labor-Market Frictions and Optimal Inflation

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“…Using information from the second wave of the WDN survey, Galuscak et al (2010) report fairness considerations and the negative impact on morale as the main reasons preventing firms from deviating from the contract wage. On the other hand, labour regulations and collective agreements play a significant role in preventing firms from offering a lower wage to new hires.…”

Section: Theoretical Considerationsmentioning

confidence: 99%

The Adjustment of Maltese Firms to the Post-crisis Economic Environment: Evidence from a Firm-level Survey

Micallef¹

2016

IBR

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In contrast to the experience of southern and peripheral economies in the euro area, Malta has weathered the financial crisis relatively well and its labour market remained resilient in the face of shocks. Using information from a firm-level survey conducted in 2014, this paper focuses on the nature of the shocks hitting the economy after the crisis and the reaction of Maltese firms to these shocks. Concerning the latter, a distinction is made between the firms' decisions to adjust their workforce and on the wages given to new hires compared to incumbents. The empirical analysis is conducted with a multivariate probit framework that controls for both firm and workforce specific characteristics as well as the nature of the shocks faced by the firms. The results highlight the high degree of heterogeneity in demand conditions across sectors although concerns about skill shortages were broad-based.

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The determination of wages of newly hired employees: Survey evidence on internal versus external factors

Cited by 49 publications

References 27 publications

How Does Labour Market Structure Affect the Response of Economies to Shocks?

How Does Labour Market Structure Affect the Response of Economies to Shocks?

Labor-Market Frictions and Optimal Inflation

The Adjustment of Maltese Firms to the Post-crisis Economic Environment: Evidence from a Firm-level Survey

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