Corporate Finance: Labor Finance
Paper Session
Friday, Jan. 5, 2024 2:30 PM - 4:30 PM (CST)
- Chair: Elena Simintzi, University of North Carolina-Chapel Hill
Pay, Productivity and Management
Abstract
Combining confidential Census matched employer-employee earnings data and firm employment and sales data, we find four key results. First, employees at more productive firms have higher pay across all percentiles of the earnings distribution. Second, the magnitude of this relationship varies substantially across workers, with the elasticity of pay on revenue productivity doubling from 7% for the median paid employee to 15% for the top paid employee; this means that more productive firms have higher within-firm inequality. These different magnitudes appear causal, with similar results when we instrument productivity with market conditions, and are particularly strong at large publicly-traded firms. Third, these patterns are consistent with more productive firms adopting more aggressive performance-based pay schemes for top executives: top workers at more productive firms have higher pay volatility, and we find similar relationships between a firm’s management practices (which include use of incentives) and workers’ pay. Finally, these results imply that rising productivity can account for a share of rising within-firm inequality, but this share is modest. Instead, rising returns in the aggregate stock market can account for a larger share of rising inequality, consistent with managers increasingly being paid based on the state of the macroeconomy rather than their firms’ performance.Too Many Managers: The Strategic Use of Titles to Avoid Overtime Payments
Abstract
We find widespread evidence of firms appearing to avoid paying overtime wages by exploiting a federal law that allows them to do so for employees termed as “managers” and paid a salary above a pre-defined dollar threshold. We show that listings for salaried positions with managerial titles exhibit an almost five-fold increase around the federal regulatory threshold, including the listing of managerial positions such as “Directors of First Impression,” whose jobs are otherwise equivalent to non-managerial employees (in this case, a front desk assistant). Overtime avoidance is more pronounced when firms have stronger bargaining power and employees have weaker rights. Moreover, it is more pronounced for firms with financial constraints and when there are weaker labor outside options in the region. We find stronger results for occupations in low-wage industries that are penalized more often for overtime violations. Our results suggest broad usage of overtime avoidance using job titles across locations and over time, persisting through the present day. Moreover, the wages avoided are substantial - we estimate that firms avoid roughly 13.5% in overtime expenses for each strategic “manager” hired during our sample period.How Do Health Insurance Costs Affect Firm Labor Composition and Technology Investment?
Abstract
Employer-sponsored healthcare insurance is a significant component of labor costs. We examine the causal effect of health insurance premiums on firms’ employment, both in terms of quantity and composition, and their technology investment decisions. To address endogeneity concerns, we instrument for insurance premiums using idiosyncratic variation in insurers' losses, which is plausibly exogenous to their customers who are employers. Using Census micro data, we show that following an increase in premiums, firms reduce employment. Relative to higher-skilled coworkers, lower-skilled workers are more likely to be laid off and remain unemployed for two years following the shock. Firms also invest more in information technology, potentially to substitute for labor.Discussant(s)
Vincent Glode
,
University of Pennsylvania
Alex Edmans
,
London Business School
Bryan Seegmiller
,
Northwestern University
Selale Tuzel
,
University of Southern California
JEL Classifications
- G3 - Corporate Finance and Governance