THE WAGE STRUCTURE The Supply and Demand for workers and skill determine the structure of wages in the economy – the rewards for work and human capital invesments. Dispersion and inequality in the allocation of rewards among workers : ¾ There exist productivity differences among workers
Differences Ò Ö unequal wage distributionÒ ¾ The rate of return to skill will vary across labor markets and overtime, responding to changes in the supply and demand for skill
Rewards Ò Ö unequal wage distributionÒ
The Earning Distribution INTERNASIONAL DEFFERENCES IN THE INCOME DISTRIBUTION Country
Australia Canada France Germany India United Kingdom United States
Percent of total income Bottom 10% households Top 10% households
2,5 2,8 2,5 3,7 4,1 2,4 1,5 The Wage Structure - 1
24,8 23,8 24,9 22,6 25,0 27,7 28,5
INCOME RATIO OF HIGHEST 20% TO LOWEST 20% Country
China Hong Kong Korea Indonesia Malaysia Singapore Papua New Guinea
Year
Income Ratio
1998 1996 2000 2000 1999 1998 1996
7,9 % 9,6% 5,3% 5,2% 7,1% 9,8% 12,6%
Terdapat perbedaan tingkat upah yang disebabkan : ¾ Perbedaan human capital ¾ Young workers terus me-upgarade skill
THE WAGE DISTRIBUTION IN THE UNITED STATES (1997) 0,18 0,16
Frequency
0,14 0,12 0,10 0,08 0,06 0,04 0,02 0,00
100
300
500
700
900
1100
1300
1500
1700
1900
Weekly Earnings
Keterangan : There is a lot of wage dispersion across workers Wage distribution is not symmetrical (bulk of worker earn relatively low wages)
The Wage Structure - 2
INCOME DISTRIBUTION WHEN WORKERS DIFFER IN ABILITY
Rate of Interest
MRR
L
MRR'
MRR
H
r
H
L
H
H'
Human Capital
H
MRR Æ Marginal Rate of Return Wage
high-ability
worker
lebih
tinggi
karena
membutuhkan lebih banyak human capital. Human capital : unique set of ability and acquired skills
Changes in The Wage Structure CHANGE IN THE REAL WEEKLY WAGES FOR FULL-TIME WORKERS (1963-1995) GROUP
PERCENT CHANGE IN REAL WAGE
All Workers
6,8 %
Sex : Men Women
0,9 % 17,1 %
Education : less than high school High school Some Colege College Graduate
-4,4 % 5,7 % 4,5 % 25,1%
Experience : Less than 5 years Between 25 and 35 years
-5,2 % 6,6 %
The Wage Structure - 3
Wanita mengalami peningkatan tinggi karena wanita mulai aktif masuk ke labor market. Terdapat penurunan pada worker dengan pendidikan less than high school dan pengalaman kurang dari 5 tahun TREND IN THE EDUCATIONAL WAGE GAP Wage differential between College Graduates and High School Graduates 90 80
Percent
70 60 50 40 30 20 10 0 1965
1970
1975
1980
1985
1990
1995
2000
Year
TREND IN THE WAGE GAP BETWEEN EXPERIENCED WORKERS AND NEW LABOR MARKET ENTRANTS (FOR HIGH SCHOOL GRADUATES)
Percent Wage Differential
70 60 50 40 30 20 10 0 1965
1970
1975
1980
1985
Year
The Wage Structure - 4
1990
1995
Why did Wage Inequaly Increase ? Relative Wage of Skilled Workers
S
S
0
1
C
r1 A
r0
B D P
0
P
1
D
1
0 Relative Employment of Skilled Workers
Asumsi :
Terdapat 2 jenis oleh worker : Skilled dan Unskilled Wage ratio between skilled and Unskilled Æ r Ratio of number of skilled to the number of unskilled Æ p Demand curve berbentuk DOWNWARD SLOPING karena semakin besar wage gap maka employer semakin sedikit merekrut skilled worker. Supply curve INELASTIC karena tidak memperhatikan wage gap antara skilled dan unskilled.
Kenaikan wage gap : ¾
Supply bergeser ke kiri Æ skilled worker turun
¾
Demand bergeser ke kanan Æ demand naik
Supply curve S0 Æ Equilibrium A
Supply curve S1 Æ Equilibrium B, menyebbakan relative wage skilled worker turun
Demand curve bergeser Æ D1 Æ Equilibrium C The Wage Structure - 5
Inequality Across Generations THE INTERGENERATIONAL LINK IN SKILLS Earnings of Children
A, Slope = 1
C, Slope is between 0 and 1
B, Slope = 0
45' Earnings of Parents
PARENTS dapat berperan dominan dalam menentukan dan membiayai proses pembentukan human capital anaknya. Hubungan antara skill of parents dan children disebut The Rate of Socila Mobility Slope : Intergenerational Correlation Slope = 1 (Titik A) Æ bila perbedaan earning antara 2 parents sebesar $100 diikuti perbedaan earning anak-anak mereka sebesar $ 100 pula. Slope = 0,5 (Titik C) Æ perbedaan earning antara 2 parents sebesar $100 diikuti perbedaan earning anak-anak mereka sebesar $50 Slope = 0 (Titik B) Æ tidak terdapat hubungan Most empirical studies Æ less than 1 The Wage Structure - 6
