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

  • Hübler, Dominik

    ()

    (University of Oxford)

  • Hübler, Olaf

    ()

    (Leibniz University of Hannover)

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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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:
Publication status: published in: Schmalenbach Business Review, 2010, 62(1), 45-67
Handle: RePEc:iza:izadps:dp2241
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  1. 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.
  2. Stephen Nickell & Tracy Jones & Glenda Quintini, 2000. "A picture of job insecurity facing British men," LSE Research Online Documents on Economics 20141, London School of Economics and Political Science, LSE Library.
  3. Leonard, J.S. & Van Audenrode, M., 1996. "Persistence of Firm and Individual Wage Components," Papers 9607, Laval - Recherche en Politique Economique.
  4. Cahuc, Pierre & Gianella, Christian & Goux, Dominique & Zylberberg, Andre, 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).
  5. 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.
  6. Madhu Mohanty, 2001. "Testing for the specification of the wage equation: double selection approach or single selection approach," Applied Economics Letters, Taylor & Francis Journals, vol. 8(8), pages 525-529.
  7. repec:cup:cbooks:9780521848053 is not listed on IDEAS
  8. 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.
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