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Is There a Trade-off Between Job Security and Wages in Germany and the UK?

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Author Info
Dominik Hübler () (University of Oxford)
Olaf Hübler () (University of Hannover, IAB Nürnberg and IZA Bonn)

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Abstract

This paper looks at the wage effects of perceived and objective insecurity in Germany and the UK using the GSOEP and BHPS panels. The distinction between perceived worry about job loss and economic indicators such as regional unemployment rates and the share of temporary contracts is established. The bargaining hypothesis that job security and wages are complements because of union bargaining power and preference is derived from a variant of the right to manage model. This hypothesis is contrasted with Rosen’s theory of equalising differences where security and wages are substitutes. The empirical literature surveyed finds evidence for both sides. When addressing a number of econometric issues in earlier studies of the bargaining hypothesis this paper finds strong evidence in favour of the former. Accounting for simultaneous determination of job insecurity and wages significantly negative level effects are found for Germany with some evidence for those in the UK. There is also some evidence for growth rate effects (especially for perceived insecurity), but it does not appear robust. Job insecurity, both perceived and objective is found to have influenced wage development in both countries.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 2241.

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Length: 34 pages
Date of creation: Aug 2006
Date of revision:
Handle: RePEc:iza:izadps:dp2241

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Related research
Keywords: job security; wages; Germany; UK;

Other versions of this item:

Find related papers by JEL classification:
J28 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Safety; Job Satisfaction; Related Public Policy
J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
J63 - Labor and Demographic Economics - - Mobility, Unemployment, and Vacancies - - - Turnover; Vacancies; Layoffs
J81 - Labor and Demographic Economics - - Labor Standards - - - Working Conditions

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Leonard, Jonathan S. & Van Audenrode, Marc, 1996. "Persistence of Firm and Individual Wage Components," Cahiers de recherche 9607, Université Laval - Département d'économique. [Downloadable!]
    Other versions:
  2. Schmidt, Stefanie R, 1999. "Long-Run Trends in Workers' Beliefs about Their Own Job Security: Evidence from the General Social Survey," Journal of Labor Economics, University of Chicago Press, vol. 17(4), pages S127-41, October. [Downloadable!] (restricted)
  3. Mohanty, Madhu S, 2001. "Testing for the Specification of the Wage Equation: Double Selection Approach or Single Selection Approach," Applied Economics Letters, Taylor and Francis Journals, vol. 8(8), pages 525-29, August. [Downloadable!] (restricted)
  4. Ernesto Villanueva, 2004. "Compensating Wage Differentials and Voluntary Job Changes: Evidence from West Germany," Economics Working Papers 738, Department of Economics and Business, Universitat Pompeu Fabra. [Downloadable!]
  5. Cahuc, Pierre & Gianella, Christian & Goux, Dominique & Zylberberg, André, 2002. "Equalizing Wage Differences and Bargaining Power: Evidence from a Panel of French Firms," IZA Discussion Papers 582, Institute for the Study of Labor (IZA). [Downloadable!]
    Other versions:
  6. Christian Dustmann & Costas Meghir, 2005. "Wages, Experience and Seniority," Review of Economic Studies, Blackwell Publishing, vol. 72(1), pages 77-108, 01. [Downloadable!] (restricted)
    Other versions:
  7. Markus Pannenberg & Gert G. Wagner, 2001. "Umfang und Kompensation von Überstunden: eine vergleichende Analyse für Westdeutschland und Großbritannien," Discussion Papers of DIW Berlin 234, DIW Berlin, German Institute for Economic Research. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Thomas Cornelißen & Olaf Hübler, 2007. "Unobserved Individual and Firm Heterogeneity in Wage and Tenure Functions: Evidence from German Linked Employer-Employee Data," IZA Discussion Papers 2741, Institute for the Study of Labor (IZA). [Downloadable!]
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