Job Competition and the Wage Curve

Abstract

Longhi S. Job competition and the wage curve, Regional Studies. The wage curve literature consistently finds a negative relationship between regional unemployment rates and regional wages; the most widely accepted theoretical explanations interpret the unemployment rate as a measure of job competition. This paper proposes new ways of measuring job competition, alternative to the unemployment rate, and finds that the negative relationship still holds when job competition is measured following the job search literature. While for men the wage impact of the theoretically based measures of job competition is rather similar to the wage impact of the unemployment rate, for women the difference is substantial.

Longhi S. La compétition pour l'emploi et la courbe des salaires, Regional Studies. La documentation sur la courbe des salaires affirme systématiquement que le taux de chômage régional est en corrélation faible avec les salaires régionaux. Les explications théoriques les plus reçues considèrent le taux de chômage comme une mesure de la compétition pour l'emploi. Cet article cherche à proposer de nouvelles façons de mesurer la compétition, à part le taux de chômage, et trouve que la corrélation faible persiste quand on mesure la compétition pour l'emploi selon la documentation sur la recheche pour l'emploi. Alors que pour les hommes l'impact sur les salaires des mesures théoriques de la compétition pour l'emploi s'avère plutôt similaire à celui du taux de chômage, la différence pour les femmes s'avère importante.

Courbe des salaires Compétition pour l'emploi Grande-Bretagne

Longhi S. Arbeitsmarktkonkurrenz und Lohnkurve, Regional Studies. In der Literatur über die Lohnkurve wird übereinstimmend eine negative Beziehung zwischen der regionalen Arbeitslosenquote und dem regionalen Lohnniveau festgestellt, wobei die Arbeitslosenquote in den theoretischen Erklärungen der herrschenden Meinung als Maßstab der Arbeitsmarktkonkurrenz interpretiert wird. In diesem Beitrag werden neue Methoden zur Messung der Arbeitsmarktkonkurrenz als Alternative zur Arbeitslosigkeit vorgeschlagen, und es wird festgestellt, dass die negative Beziehung weiterhin bestehen bleibt, wenn die Arbeitsmarktkonkurrenz gemäß der Literatur über Arbeitsuche gemessen wird. Für Männer fällt die Auswirkung der theoretisch basierten Maßstäbe der Arbeitsmarktkonkurrenz auf die Löhne recht ähnlich aus wie die Auswirkung der Arbeitslosenquote auf die Löhne; bei Frauen ist hingegen ein erheblicher Unterschied zu verzeichnen.

Lohnkurve Arbeitsmarktkonkurrenz Großbritannien

Longhi S. Competencia laboral y curva salarial, Regional Studies. En las publicaciones sobre la curva salarial se observa sistemáticamente una relación negativa entre los índices de desempleo y los salarios regionales, de modo que el índice de desempleo se interpreta en general como una medida de competencia laboral en las explicaciones teóricas más aceptadas. En este artículo proponemos nuevas formas de medir la competencia laboral como alternativas al índice de desempleo destacando que la relación negativa aún está vigente cuando se mide la competencia laboral siguiendo las publicaciones sobre búsqueda de empleo. Mientras que para los hombres el impacto salarial de las medidas de competencia laboral basadas en la teoría es bastante similar al impacto salarial del índice de desempleo, para las mujeres la diferencia es considerable.

Curva salarial Competencia laboral Gran Bretaña

Keywords:

• Wage curve
• Job competition
• Great Britain

JEL classifications:

• J31
• R23

Acknowledgements

The author wishes to thank Miles Finney, Annekatrin Niebuhr, Peter Nijkamp, Andrew Oswald, Jacques Poot; the participants at the 37th Annual Conference of the British and Irish Section of the Regional Science Association, Bangor, UK, August 2007; and two anonymous referees for valuable comments and discussion. An earlier version of this paper won the Early Career/Doctoral Student Best Paper Award at the 37th Annual Conference of the British and Irish Section of the Regional Science Association. This work also forms part of a programme of research funded by the Economic and Social Research Council (ESRC) through their grant to the Research Centre on Micro-social Change at the Institute for Social & Economic Research (ISER), University of Essex. The support provided by the ESRC and the University of Essex is gratefully acknowledged. Data on the Labour Force Survey (LFS) for Great Britain are available from the Data Archive at the University of Essex (see http://www.data-archive.ac.uk).

Notes

Measuring vacancies by the number of hirings in the following quarter under the assumption that vacancies in t mostly lead to hirings in t + 1 does not significantly modify the conclusions of this analysis.

The results of the models including only the contemporaneous or only the lagged measure of job competition are not shown here, but are available on request.

Because the log of the sum does not equal the sum of the logs, the models in columns (4) and (5) are not equivalent. This choice is motivated by the need to compare the results with a traditional wage curve and to analyse which component of the supply of labour (unemployed search versus on-the-job search) has a bigger impact on wages. A model specification using the log of the supply of labour (rather than the sum of the logs of its components) would lead to essentially the same results as the models in column (4). Furthermore, the Wald test comparing the regression coefficients with those in column (5) would reject the hypothesis at the 10%, but not at the 5%, level.