A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics National Bureau of Economic Research (NBER) (Ed.) Periodical Part NBER Reporter Online, Volume 1993 NBER Reporter Online Provided in Cooperation with: National Bureau of Economic Research (NBER), Cambridge, Mass. Suggested Citation: National Bureau of Economic Research (NBER) (Ed.) (1993) : NBER Reporter Online, Volume 1993, NBER Reporter Online, National Bureau of Economic Research (NBER), Cambridge, MA This Version is available at: http://hdl.handle.net/10419/62104 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu NATIONAL BUREAU OF ECONOMIC RESEARCH, INC. SUMMER 1993 Program Report Working Under Different Rules Richard B. Freeman For the past four years, many members of the NBER's Program in Labor Studies have been examining how labor markets and income maintenance systems work in the major developed countries: the United States and its trading partners and competitors in the world economy. The "Working Under Different Rules" project, funded largely by a grant from the Ford Founda­ tion, has focused on: the determination of wages and the inequality of wages in different countries (directed by Lawrence F. Katz and me); training of workers (directed by Lisa M. Lynch); income maintenance programs (di­ rected by Rebecca M. Blank); works council modes of declined. And, poverty has increased for large segments worker representation (directed by Joel Rogers and of the population, although not among the elderly. Wolfgang Streeck); and extreme poverty (directed by Of course, the 1980s were difficult for workers in David E. Bloom). An additional related project, culminat­ much of Europe and in Canada as well. In those coun­ ing in the book described later in this NBER Reporter, tries, unemployment went from below to above U.S. lev­ contrasted labor markets in Canada and the United els. Perhaps even more important, unliKe in the United States (directed by David Card and me). States, unemployed people remained jobless (albeit with On May 7, 1993, the project's leaders presented sum­ relatively generous benefits that partially induced the maries of the work of their research teams at a confer­ longer unemployment spells) for several years. For in­ ence in Washington, DC. These summaries will be pub­ stance, 6 percent of the unemployed in the United lished in a volume titled Working Under Different Rules. States in 1991 were out of work for a year or more, com­ Also, the research papers written for each of the proj­ pared to 37 percent in France, and 51 percent in Spain. ects will be published by the University of Chicago The contrasting unemployment experiences of the Press. My intention in this report is to provide just a brief United States and Europe in the 1980s generated wide­ overview of the entire project. spread discussion of the American jobs miracle, and of the virtues of "flexibility American style." Some ob­ WHY LOOK AT FOREIGN LABOR MARKETS? servers thought that the United States had all the "an­ swers" to the economic problems of the 1980s, and that We conceived this project in response to the difficult Europe had much to learn from us, while we had nothing time that many American workers have had in the past to learn from them. two decades. Real wages have fallen for the less-edu­ The basic premise of our project was more measured: cated worker. Inequality in earnings and employment that while the United States had some positive out­ opportunities among workers with different characteris­ comes in the labor market in the 1980s, it also had tics has increased. Unionism in the private sector has some negative ones. Thus, perhaps there was, some- The National Bureau of Economic Research is a private, nonprofit thing Americans could learn from the labor market expe­ research organization founded in 1920 and devoted to objective quan­ titative analysis of the American economy. Its officers and board of riences and the social programs of Europe, Japan, and directors are: Canada. Chairman-George T. Conklin, Jr. Vice Chairman-Paul W. McCracken Treasurer-Charles A. Walworth FINDINGS President and Chief Executive Officer-Martin Feldstein Executive Director-Geoffrey Carliner Wage Inequality Director of Finance and Administration-Sam Parker DIRECTORS AT LARGE Is the U.S. pattern of rising wage differentials and wage inequality among workers with different levels of Elizabeth E. Bailey Franklin A. Lindsay education a universal development in advanced capital­ John Herron Biggs Paul w. McCracken Andrew Brimmer Leo Melamed ist economies? Or, have some countries not experi­ Carl F. Christ Michael H. Moskow enced huge increases in wage inequality? The evidence George T. Conklin, Jr. Robert T. Parry collected for the 1980s shows that increases in wage in­ Don R. Conlan Peter G. Peterson Kathleen B. Cooper Richard N. Rosett equality were most substantial in the United States and Jean A. Crockett Bert Seidman Great Britain. Because the increased inequality in Brit­ George C. Eads Eli Shapiro ain occurred while real wages were rising, low-paid Brit­ Martin Feldstein James Smith George Hatsopoulos Donald S. Wasserman ish workers actually realized modest increases in their Lawrence R. Klein Marina v. N. Whitman real wages over the decade. By contrast, low-paid American workers had sizable decreases in their real DIRECTORS BY UNIVERSITY APPOINTMENT wages. Wage inequality rose, but by much less, in Canada, Jagdish w. Bhagwati, Columbia William C. Brainard, Yale Japan, and in continental Europe. Inequality barely Glen G. Cain, Wisconsin changed in France and Italy, fell in the Netherlands, and Franklin Fisher, Massachusetts Institute of Technology rose much less in Sweden and Germany than in the Saul H. Hymans, Michigan Marjorie B. McElroy, Duke United States. Nowhere did the ratio of the earnings of James L. Pierce, Califomia, Berkeley college graduates to less-educated workers rise as Andrew Postlewaite, Pennsylvania much as in the United States. Indeed, earnings differen­ Nathan Rosenberg, Stanford Harold T. Shapiro, Princeton tials by education actually declined in the rapidly grow­ Craig Swan, Minnesota ing Korean economy during the same period. Michael Yoshino, Harvard Arnold Zellner, Chicago What differentiates countries with wage differentials that are increasing slightly, or stable, from countries DIRECTORS BY APPOINTMENT OF OTHER ORGANIZATIONS such as the United States, which experienced large in­ Marcel Boyer, Canadian Economics Association creases in inequality? Basically, three things: (1) coun­ Rueben C. Buse, American Agricultural Economics Association tries with fairly stable wage differentials place more em­ Richard A. Easterlin, Economic History Association phasis on wagesetting institutions than the United States Gail Fosler, The Conference Board A. Ronald Gallant, American Statistical Association does; (2) they also either have maintained the strength Robert S. Hamada, American Finance Association of unions or have experienced smaller declines in union­ Charles Lave, American Economic Association Rudolph A. Oswald, American Federation of Labor and Congress ization than the United States; and (3) they have a bet­ of Industrial Organizations ter training system for their less-educated workers. Dean P. Phypers, Committee for Economic Development Many European countries have wage-setting systems James F. Smith, National Association of Business Economists Charles A. Walworth, American Institute of Certified Public that are relatively centralized, either because of govern­ Accountants ment policies or because of strong trade unions. In some countries, the government extends contracts from Contributions to the National Bureau are tax deductible. Inquiries concerning contributions may be addressed to Martin Feldstein, Presi­ union to nonunion workers; this makes collective bar­ dent, NBER, 1050 Massachusetts Avenue, Cambridge, MA 02138-5398. gaining the key to wage determination, even with only The Reporter is issued for informational purposes and has not been moderate or modest union representation. In both Ger­ reviewed by the Board of Directors of the NBER. It is not copyrighted many and France, for example, the ministers of labor and can be freely reproduced with appropriate attribution of source. Please provide the NBER's Public Information Department with copies extend contracts negotiated between employer federa­ of anything reproduced. tions and unions to all employers