François Rycx

Industry wage differentials, unobserved ability, and rent-sharing: Evidence from matched worker-firm data, 1995-2002

This paper investigates inter-industry wage differentials in Belgium, taking advantage of access to a unique matched employer-employee data set covering the period 1995-2002. Findings show the existence of large and persistent wage differentials among workers with the same observed characteristics and working conditions, employed in different sectors. The hypothesis that workers with better unmeasured abilities are over-represented in high-wage sectors may not be rejected on the basis of Martins’ (2004) methodology. However, the contribution of this explanation to the observed industry wage differentials appears to be limited. Further results show that ceteris paribus, workers earn significantly higher wages when employed in more profitable firms. Our instrumented wage-profit elasticity stands at 0.063 and Lester’s range of pay is about 41 per cent of the mean wage. This rent-sharing phenomenon accounts for a large fraction of the industry wage differentials. We find indeed that the magnitude, dispersion and significance of industry wage differentials decreases sharply when controlling for profits.

Wages and the Bargaining Regime under Multi-Level Bargaining: Belgium, Denmark and Spain

We use a harmonized matched employer—employee dataset to study the impact of the collective bargaining regime on wages in the manufacturing sector in three countries with a multi-level system of bargaining: Belgium, Denmark and Spain. Single-employer bargaining has a positive effect both on wage levels and on wage dispersion in Belgium and in Denmark. In Spain, it also increases wage levels but reduces wage dispersion. Our interpretation is that in Belgium and Denmark, single-employer bargaining is used to adapt pay to the specific needs of the firm while, in Spain it is mainly used by trade unions in order to compress the wage distribution.

The Part-Time Wage Penalty in European Countries: How Large Is It for Men?

Economic theory advances a number of reasons for the existence of a wage gap between part-time and full-time workers. Empirical work has concentrated on the wage effects of part-time work for women. For men, much less empirical evidence exists, mainly because of lacking data. In this paper, we take advantage of access to unique harmonised matched employer-employee data (i.e. the 1995 European Structure of Earnings Survey) to investigate the magnitude and sources of the part-time wage penalty for male workers in six European countries (i.e. Belgium, Denmark, Ireland, Italy, Spain, and the UK). Findings show that the raw gap in hourly gross pay amounts to 16 per cent of male part-timer’s wage in Spain, to 24 per cent in Belgium, to 28 per cent in Denmark and Italy, to 67 per cent in the UK and to 149 per cent in Ireland. Human capital differences explain between 31 per cent of the observed wage gap in the UK and 71 per cent in Denmark. When a larger set of control variables is taken into account (including occupation, industry, firm size, and level of wage bargaining), a much smaller part of the gap remains unexplained by differences in observed characteristics (except in Italy). Overall, results suggest that policy initiatives to promote lifelong learning and training are of great importance to help part-timers catch up. Moreover, except for Italy, they point to a persisting problem of occupational and sectoral segregation between men working part-time and full-time which requires renewed policy attention.

Does Offshoring of Materials and Business Services Affect Employment? Evidence from a Small Open Economy

The fear of massive job losses has prompted a fast-growing literature on offshoring and its impact on employment in advanced economies. This article examines the situation for Belgium. It improves the offshoring intensity measure by computing a volume measure of the share of imported intermediates in output, and it is among the first to address both materials and business services offshoring to high wage and low wage countries. Estimations of static and dynamic industry-level labour demand equations augmented by offshoring intensities do not reveal a significant impact of either materials or business services offshoring on total employment for Belgium between 1995 and 2003. This result holds for both the manufacturing sector and the service sector and it proves robust to splitting the manufacturing sector into high technology and low technology industries.

Why do large firms pay higher wages? Evidence from matched worker‐firm data

Purpose – This paper analyses the magnitude and sources of the firm‐size wage premium in the Belgian private sector.Design/methodology/approach – Using a unique matched employer‐employee data set, our empirical strategy is based on the estimation of a standard Mincer wage equation. We regress individual gross hourly wages (including bonuses) on the log of firm‐size and insert step by step control variables in order to test the validity of various theoretical explanations.Findings – Results show the existence of a significant and positive firm‐size wage premium, even when controlling for many individual characteristics and working conditions. A substantial part of this wage premium derives from the sectoral affiliation of the firms. It is also partly due to the higher productivity and stability of the workforce in large firms. Yet, findings do not support the hypothesis that large firms match high skilled workers together. Finally, results indicate that the elasticity between wages and firm‐size is signifi...

Rent-Sharing under Different Bargaining Regimes: Evidence from Linked Employer–Employee Data

In many European countries, the majority of workers have their wages directly defined by industry-level agreements. In addition, for some workers, industry agreements are complemented by firm-specific agreements. Yet, the relative importance of firm and industry agreements (in other words, the degree of centralization) differs drastically across industries. The authors of this paper use unique linked employer-employee data from a 2003 survey in Belgium to examine how these bargaining features affect the extent of rent-sharing. Their results show that there is substantially more rent-sharing in decentralized than in centralized industries, even when controlling for the endogeneity of profits, for heterogeneity among workers and firms and for differences in characteristics between bargaining regimes. Moreover, in centralized industries, rent-sharing is found only for workers that are covered by a firm agreement. Finally, results indicate that within decentralized industries, both firm and industry bargaining generate rent-sharing to the same extent.

Rent-sharing and the gender wage gap in Belgium

This study investigates, on the basis of a unique combination of two large‐scale data sets, how rent sharing interacts with the gender wage gap in the Belgian private sector. Empirical findings show that individual gross hourly wages are significantly and positively related to firm profits‐per‐employee even when controlling for group effects in the residuals, individual and firm characteristics, industry wage differentials and endogeneity of profits. Our instrumented wage‐profit elasticity is of the magnitude 0.06 and it is not significantly different for men and women. Of the overall gender wage gap (on average women earn 23.7 per cent less than men), results show that around 14 per cent can be explained by the fact that on average women are employed in firms where profits‐per‐employee are lower. Thus, findings suggest that a substantial part of the gender wage gap is attributable to the segregation of women in less profitable firms.

Industry wage differentials and the bargaining regime in a corporatist country

This paper examines the role of the bargaining regime in bringing about inter‐industry wage differentials in the Belgian private sector. Empirical findings, based on the 1995 Structure of Earnings Survey, emphasise that sectors offering high/low wages are similar for workers covered by different bargaining regimes, even when controlling for individual characteristics, working conditions and firm size. Moreover, results show that, ceteris paribus, the dispersion of inter‐industry wage differentials is higher when wages are collectively renegotiated at the firm level, and workers covered by a company collective agreement (CA) earn 5.1 per cent more than their opposite numbers whose wages are solely covered by national and/or sectoral CAs.

The Heterogeneous Effects of Workforce Diversity on Productivity, Wages, and Profits

We estimate the impact of workforce diversity on productivity, wages, and productivity–wage gaps (i.e., profits) using detailed Belgian linked employer–employee panel data. Findings show that educational (age) diversity is beneficial (harmful) for firm productivity and wages. While gender diversity is found to generate significant gains in high-tech/knowledge-intensive sectors, the opposite result is obtained in more traditional industries. Estimates neither vary substantially with firm size nor point to sizeable productivity–wage gaps except for age diversity.

Wage Structure Effects of International Trade: Evidence from a Small Open Economy

In the last decades, international trade has increased between industrialised countries and between high- and low-wage countries. This important change has raised questions on how international trade affects the labour market. In this spirit, this paper aims to investigate the impact of international trade on wage dispersion in a small open economy. It is one of the few to: i) use detailed matched employer-employee data to compute industry wage premia and disaggregated industry level panel data to examine the impact of changes in international trade on changes in wage differentials, ii) simultaneously analyse both imports and exports, and iii) examine the impact of imports according to the country of origin. Looking at the export side, we find (on the basis of the system GMM estimator) a positive effect of exports on industry wage premia. The results also show that import penetration has a significant and negative impact on industry wage differentials whatever the country of origin. However, the country of origin appears to matter quite a lot. Indeed, the detrimental effect of imports on wages is found to be significantly bigger when the latter come from low-income countries than from high-income countries.