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Economics D319B1 - Essay Example

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The real wages of European workers have experienced a decline over the last few years. In real terms, the results show a decline of the labor compensation per hour - 16,5 per cent in 1996-1999, 28 per cent in 2000-2003, and 33 per cent in 2003-2006. Moreover, the workforce considered their wages growing less than their labor productivity per hour…
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Economics D319B1
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Download file to see previous pages There are a great number of studies on wage rates and their distribution among workers with certain social and/or demographic characteristics. This essay proposes a theoretical framework and provides an analysis which predominantly complies with the existing literature. The author investigates the reasons behind the wage rates in the manufacturing sector in order to provide a forecast for the next decade.
Today's picture of wage-rates in the manufacturing sector is determined by foreign markets' competition and the increased complexity of the jobs, which are moving away form the usual routine. Over the last few decades, the demand for workers in the manufacturing sector has increased. Employees with a high school diploma or less now face an increasingly sophisticated market in which new basic, physical and mechanical skills are required. The nature of low-skilled workers' jobs has changed due to the changes in labor market institutions. New technologies changed workplace organization and new types of goods and services were introduced. This led to unionization and improved organizational structure of the manufacturing industry.
Topel (1993) defines several wage-rates determinants: immigration, education, inequality and female labor force participation, changes in product demand, international trade, and human capital investment.
A study of Tachibanaki (1975), which covers twelve years (1958-1970), pays special attention to the influence of certain factors for wage-rate differentials. Tachibanaki's (1975) research uses major variables like sex (male or female), occupation, size of the firm, experience of the workers, age, working hours, bonuses, special payments.
Tachibanaki (1975) agrees that the principal wage-rate differentials:
differentials in education;
racial and sexual discrimination;
age;
trade unions.
The last two decades were marked by the constant growing globalization which has been proven to affect the demand on the manufacturing workers' market. This negative impact results in lower wages. According to Bogliacino (2009) there are two possible outcomes in terms of competition-limiting norms, depending on the time period (short run and medium run). Since this essay's goal is to provide a forecast for the future of wage-rates and their determinants, attention should be paid to the results on the mid-run, where "lower productivity growth is detrimental to wage growth" (Bogliacino, 2009).
The question is, how does the process of globalization affect the bargaining power of workers in the manufacturing sector For the purposes of the essay SID (Sectoral Innovation Database) produced at the University of Urbino will be used. SID mixes data from several surveys regarding the economic performance of the EU countries. The unit of analysis comprises 21 industries belonging to manufacturing sector in the countries that comprise approx. 80 per cent of the European economy, namely France, Germany, Italy, Spain, Portugal, the Netherlands, United Kingdom, Poland and Norway in the period between 1994 and 2006 (Table No.1).

Table No. 1 Manufacturing industries included in the SID
Industries
NACE
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