Walter Y. Oi

A Disneyland Dilemma: Two-Part Tariffs for a Mickey Mouse Monopoly

I. Two-part tariffs and a discriminating monopoly, 78.—II. Determination of a uniform two-part tariff, 81.—III. Applications of two-part tariffs, 88.—Appendix: Mathematical derivation of a uniform two-part tariff, 93.

Chapter 33 Firm size and wages

Abstract Jobs differ along many dimensions including firm size. The wage gap due to firm size of 35% is comparable to the gender wage gap of 36% for men over women and greater than the wage gap of 14% for whites over black employees. The size-wage premium is larger for men and varies across industries. It is larger in the US than in other industrialized countries. Large firms demand a higher quality of labor defined by such observable characteristics as education, job tenure, and a higher fraction of full-time workers. Part 3 examines three behavioral explanations. (1) Productive employees are matched with able entrepreneurs to minimize the sum of wages and monitoring costs. (2) Big firms pay efficiency wages to deter shirking. (3) Big firms adopt a discretionary wage policy to share rents, or in Slichters words, “Wages over a considerable range reflect managerial discretion. When management can easily afford to pay high wages, they tend to do so.” We advance a productivity hypothesis. A large organization sets a higher performance standard that raises labor productivity but has to be supported by a compensating wage difference. In the service industries, the pace of work depends on the customer arrival rate. The economies of massed reserves generates a positive wage-size profile. The capital/labor ratio is higher in bigger firms which also are early in adopting new technologies. Both forces raise the demand for skilled labor where skill and productivity are often unobservable traits. Production organized around teams calls for conformance to common work rules which result in paying rents to infra-marginal team members. The odds of survival are higher for big firms which enable them to “produce” more durable employees who are more productive because they get more training. Firm size is a function of external market forces, technology, managerial decisions, and luck. The surplus of revenues over labor costs per employee is positively related to firm size for three reasons, lower prices for non-labor inputs, possibly greater market power, or larger overhead costs to amortize the sunk costs for capital and firm -specific work force. Rent sharing cannot be dismissed as an explanation for the wage-size premium. Taxation and regulation can also affect the size distribution of firms. The organization of work and the selection of employees (whose productive traits are not always observable) are responsible for the positive relation between wages and employer size.

Work for Americans with Disabilities

The available data indicate that less than a third of disabled working-age adults are employed, and, when they are, they are paid lower wages. Their incomes are low even after including transfer payments. The problem of identifying a disabled person and the nature of the labor market are reviewed in this article. It is argued that in addition to imposing functional limitations, disability steals time and shortens life expectancy. The Americans with Disabilities Act is intended to improve the plight of the disabled by mandating equal employment rights, a rights approach that worked well for race and gender but will not do for the task at hand. People with disabilities do not constitute an identifiable minority. They move into and out of a state of being disabled and exhibit different degrees of limitation and different life expectancies. The aim of eliminating labor market discrimination is important, but equal access to jobs and public places will not significantly improve the well-being of disabled persons unless it is integrated into a larger disability policy program including rehabilitation, medical care, and income transfers.

Academic tenure and mandatory retirement under the new law.

Federal abrogation of the age-based mandatory retirement provisions in existing academic tenure contracts calls for a review of tenure and salary policies. Here two alternative explanations for the institution of tenure are examined. Then five alternative policy responses that might be adopted by university administrations are described and analyzed. The proposal favored by the author consists of a two-track salary plan in which a distinction is drawn between tenure and employment.

The consequences of minimum wage legislation

A policy which could raise wages in the low-wage labour market without job losses would be remarkable. Employers will respond to a wage floor not only by changing the employment level but by altering the other components of job packages. The‘new economics’of the minimum wage largely ignores such effects.

Are Workers Overpaid By Big Firms

What is pay? Under what conditions might overpayment be said to occur? The author develops a theory of wages. He explores reasons for firm size differentials. He examines post-war developments in the U.S. labour market to attempt to answer the question posed in the papers title.