LOCAL WAGES AND THE ROLE OF UNEMPLOYMENT

It is argued that national level perspectives of the impact of unemployment on wages need not transfer automatically to the spatial case. In a study, a model was constructed in an attempt to capture some of the complexities. Exogenous changes in local unemployment were seen as playing a dual role in...

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Bibliographic Details
Published in:Scottish journal of political economy 1993-11, Vol.40 (4), p.375-390
Main Author: Molho, Ian
Format: Article
Language:English
Subjects:
Economic indicators
Economic models
Economic theory
Local
Roles
Unemployment
Wages & salaries
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Summary:It is argued that national level perspectives of the impact of unemployment on wages need not transfer automatically to the spatial case. In a study, a model was constructed in an attempt to capture some of the complexities. Exogenous changes in local unemployment were seen as playing a dual role in affecting local wages. An areal attribute effect reflected the idea that in areas of high unemployment, employers would have to pay higher wages in compensation to attract recruits. An excess labor supply effect reflected the greater pool of local unemployed who might be available, allowing the employer potentially to offer lower wages. It was shown that the latter (negative) effect was likely to be stronger when dealing with more aggregated areas. An analysis of pay data at the disaggregate level of local labor markets confirmed the view that increasing unemployment could have opposing effects on pay differentials, and that the negative excess supply effects were stronger at the regional rather than at the local level.
ISSN:0036-9292
1467-9485
DOI:10.1111/j.1467-9485.1993.tb00661.x