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Urban Labor Markets in Sub-Saharan Africa
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Employee Benefits and Labor Markets in Canada and the United States
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Variation in income tax policies and health insurance costs are shown to be theoretically appropriate instruments to identify endogenous firm wage and benefit offers in a labor supply model. Empirical results show that firms are more likely to provide health insurance benefits in states with high marginal income tax rates and low hospitalization costs. The model implies that over the 1983-1995 period, large increases in health insurance costs and reductions in marginal income tax rates lowered the probability of receiving health insurance benefits from employers by 10 percentage points. This decrease in benefits lowered hours of labor supply by 4-7%.
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When you next look for a job—during the summer, perhaps during the school year, or after you graduate from college—what characteristics will you be seeking in your job? Some possibilities include: good pay, opportunities for advancement, opportunities for learning, doing a variety of interesting activities, a feeling that you are contributing something of value, and a comfortable and congenial work environment. And what will you want to avoid? Studies of human happiness find that one of the leading causes of dissatisfaction in modern life is a long commute. Other things that are generally not preferred include work that is dangerous, dirty, or physically uncomfortable, mindlessly repetitive, or exhausting. Low pay is generally a disincentive, as is a lack of benefits such as health care and paid vacations. Traditionally, economics has been most concerned with understanding the compensation attached to different jobs. We will see that some of the other characteristics of work just me.
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This paper provides an overview of how African labor markets have performed in the 1990s. It is argued that the failure of African labor markets to create good paying jobs has resulted in excess labor supply in the form of either open unemployment or a growing self-employment sector. One explanation for this outcome is a lack of labor market 'flexibility' keeping formal sector wages above their equilibrium level and restricting job creation. We identify three attributes of labor market flexibility. First whether real wages decline over time, secondly the tendency for wages to adjust in the face of unemployment, and thirdly the extent of wage differentials between sectors and/or firms of various size. Recent research shows that real wages in Africa during the 1990s may have been more downwardly flexible than previously thought and have been surprisingly responsive to unemployment rates, yet large wage differentials between formal and informal sector firms remain. This third.
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International Tax and Public Finance
