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Wage-setting Decisions on Newly Hired Employees:

Author

Listed:
  • Ana María iregui

    ()

  • Ligia Alba Melo B.

    ()

  • María Teresa Ramírez G.

    ()

Abstract

This paper uses a survey on wage formation that was applied to 1,305 Colombian firmsto study wage-setting decisions with respect to newly hired employees. The Colombiancase is interesting, since the country´s labour market performance, especially itsunemployment rate and level of informality, differs not only from the developedcountries, where studies of this type are concentrated, but also from most LatinAmerican countries. The replies to the survey indicate wages for the newly hired arebased mainly on a predefined wage structure. This may help to explain, in part, thepresence of downward nominal wage rigidities in Colombia, since firms are unwillingto differentiate the pay of new hires from the wages of existing workers. Using logitmodels, we find that the probability of wages being bargained between the employeeand the employer is less in the case of larger firms. On the contrary, the larger firms aremore likely to determine wages according to a predefined wage structure. In general,the presence of flexible benefits and variable pay reduces the probability of wagesbeing determined pursuant to a predefined wage structure. The results also indicate theworker´s educational level, experience and job duties are the main determinants of thewages of newly hired employees.

Suggested Citation

  • Ana María iregui & Ligia Alba Melo B. & María Teresa Ramírez G., 2010. "Wage-setting Decisions on Newly Hired Employees:," BORRADORES DE ECONOMIA 007808, BANCO DE LA REPÚBLICA.
    • Handle: RePEc:col:000094:007808
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    File URL: http://www.banrep.gov.co/docum/ftp/borra632.pdf
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    References listed on IDEAS

    as
    1. Ana María Iregui B. & Ligia Alba Melo B. & María Teresa Ranírez G., 2010. "Wage differentials across economic sectors in the Colombian formal labour market: evidence from a survey of firms," Borradores de Economia 629, Banco de la Republica de Colombia.
    2. Ana María Iregui B. & ligia Alba Melo Becerra & María Teresa Ramírez Giraldo, 2013. "RDownward Wage Rigidities and Other Firms Responses to an Economic Slowdown: Evidence from a Survey of Colombian Firms," Investigación Conjunta-Joint Research,in: Laura Inés D'Amato & Enrique López Enciso & María Teresa Ramírez Giraldo (ed.), Inflationary Dynamics, Persistence, and Prices and Wages Formation, edition 1, chapter 15, pages 403-449 Centro de Estudios Monetarios Latinoamericanos, CEMLA.
    3. Galuscak, Kamil & Keeney, Mary & Nicolitsas, Daphne & Smets, Frank & Strzelecki, Pawel & Vodopivec, Matija, 2012. "The determination of wages of newly hired employees: Survey evidence on internal versus external factors," Labour Economics, Elsevier, vol. 19(5), pages 802-812.
    4. Ana María Iregui & Ligia Alba Melo & María Teresa Ramírez, 2009. "Formación e incrementos de salarios en Colombia: Un estudio microeconómico a partir de una encuesta a nivel de firma," Borradores de Economia 582, Banco de la Republica de Colombia.
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    Cited by:

    1. Luis Eduardo Arango & Nataly Obando & Carlos Esteban Posada, 2011. "Los salarios reales a lo largo del ciclo económico en Colombia," Borradores de Economia 666, Banco de la Republica de Colombia.

    More about this item

    Keywords

    Wage setting; newly hired employees; wage rigidities survey evidence; logit; Colombia;

    JEL classification:

    • C25 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions; Probabilities
    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J50 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - General

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