New Publication at the Chair HRM and Organisation

The paper “Do Outside Options Drive Wage Inequalities in Retained Jobs? Evidence from a Natural Experiment“ by Veronika Lukesch and Thomas Zwick recently was accepted for publication at the British Journal of Industrial Relations.

The paper shows that lower outside wage options reduce wage increases of employees. Wage negotiations between employers and their employees are usually not visible for outsiders. In addition, changes in external wage options are usually correlated with changes in the economic environment of employers that also may influence wages. These circumstances make it hard to measure the true impact of outside wage options on wage changes for retained employees. We therefore use a crafts reform in Germany as a natural experiment that reduced the wage options of craftsmen who worked in occupations that were deregulated in comparison to the wage options of craftsmen in similar occupations that remained regulated. We reduce the general impact of the reform on our sample by reducing it on craftsmen employed in the industrial and commerce sectors. We find that wage increases of craftsmen working in deregulated occupations are 5% lower than those of craftsmen working in regulated occupation in the five-years period after the reform. Given that wage differences are concentrated in employers with strong wage increases, differences between both groups seem to be caused by lower wage increases for deregulated occupations than by wage reductions. Wage differences are even measured between both employee groups within one employer and therefore lead to an increase in wage variances between similar employee groups.

A former version of this paper called “Outside options drive wage inequalities in continuing jobs – evidence from a natural experiment“ was published in the ZEW Discussion Paper Series: https://www.zew.de/publikationen/outside-options-drive-wage-inequalities-in-continuing-jobs-evidence-from-a-natural-experiment