Labor Relations Commons^™

Unions And The Labor Market For Managers, John Dinardo, Kevin F. Hallock, Jörn-Steffen Pischke

Kevin F Hallock

We examine the relationship between the employment and compensation of managers and CEOs and the presence of a unionized workforce. We develop a simple efficiency wage model, with a tradeoff between higher wages for workers and more monitoring, which requires more managers. The model also assumes rent sharing between workers, managers and the owners of the firm. Unions, by redistributing rents towards the workers, lead to lower employment and lower pay for managers. Using a variety of data sets, we examine the implications of the model for the relationship between the employment and wages of managers and unionization. We find …

The Value Of Stock Options To Non-Executive Employees, Kevin F. Hallock, Craig A. Olson

Kevin F Hallock

This study empirically investigates the value employees place on stock options using information from the option exercise behavior of individuals. Employees hold options for another period if the value from holding them and reserving the right to exercise them later is higher than the value of exercising them immediately and collecting a profit equal to the stock price minus the exercise price. This simple model implies the hazard describing employee exercise behavior reveals information about the value to employees of holding options another time period. We show the parameters of this model are identified with data on multiple option grants …

Data Improvement And Labor Economics, Kevin F. Hallock

Kevin F Hallock

The expansion of available data for research has transformed empirical labor economics over the past generation. This paper briefly highlights some of the changes and describes a few examples of papers that illustrate the advances. It also documents the changing ways data have been used in the Journal of Labor Economics over the past 30 years, including a trend toward a higher fraction of papers using any data and, among those papers using any data, a higher fraction using nonpublic data, a higher fraction using international data, and more frequent use of multiple data sources. Finally, this paper describes work …

Estimating Pay Gaps For Workers With Disabilities: Implications From Broadening Definitions And Data Sets, Kevin F. Hallock, Xin Jin, Linda Barrington

Kevin F Hallock

Purpose: To compare pay gap estimates across 3 different national survey data sets for people with disabilities relative to those without disabilities when pay is measured as wage and salary alone versus a (total compensation) definition that includes an estimate of the value of benefits.

Method: Estimates of the cost to the employers of employee benefits at the occupational level from an employer survey data set are matched to individual-level data in each of the 3 data sets. Multiple regression techniques are applied to estimate wage and salary and total compensation gaps between full-time men with and without …

Job Loss And The Fraying Of The Implicit Employment Contract, Kevin F. Hallock

Kevin F Hallock

[Excerpt] Most workers have one employment contract that is explicit and another one that is implicit. The explicit employment contract specifies working hours, compensation, and job tasks. The implicit contract involves expectations about the extent to which the employment relationship is not just a payment for labor on the spot market but instead is likely to continue over time. The possibility of a longer-term commitment between an employer and its employees in turn has a number of implications: for example, whether firms will seek to avoid mass layoffs unless or until absolutely necessary; whether firms may cushion the wages and …

Discrimination By Gender And Disability Status: Do Worker Perceptions Match Statistical Measures?, Kevin F. Hallock, Wallace Hendricks, Emer Broadbent

Kevin F Hallock

We explore whether perceptions of discrimination are related to ordinary statistical measures. The majority of disabled respondents report feeling some discrimination due to their disability, the majority of women feel some discrimination because of their gender, and a surprising number of men also report some discrimination. We do not find a strong link between perceptions of discrimination and measured discrimination perhaps because those who perceive discrimination feel that it occurs along other dimensions than pay. However, we do find a connection between whether a person feels his or her income is inadequate and measured discrimination for all groups studied.

[Review Of Pay Without Performance: The Unfulfilled Promise Of Executive Compensation], Kevin F. Hallock

Kevin F Hallock

[Excerpt] Every once in a while someone comes out with an important book concerning corporate governance or executive compensation. Like Aldolf A. Berle and Gardiner C. Means's The Modern Corporation and Private Property (New York: Harcourt, Brace, and World, 1932) and Graef S. Crystal's In Search of Excess: The Overcompensation of American Executives (New York: W.W. Norton, 1991), Bebchuk and Fried's new book is thought-provoking and interesting. It is a very important book and should be read not just by those interested in executive pay or corporate governance but by anyone interested in how corporations work.

[Review Of Personnel Economics In Imperfect Labour Markets], Kevin F. Hallock

Kevin F Hallock

Excerpt] This book is an attempt to consolidate what we know about Personnel Economics by focusing on Personnel Economics in Imperfect Labor Markets. Even on the first page of the book, the author is clear about this mission. In particular he notes that "The view of personnel economics analyzed in this book is based on two key properties of... labour markets: labour markets are imperfect and jobs are associated to [sic] rents; labour market institutions interact with personnel policies. Notably, wages are partly set outside the firm-worker pair (minimum wages and collective agreements are widespread)" and "job termination policies are …

Reciprocally Interlocking Boards Of Directors And Executive Compensation, Kevin F. Hallock

Kevin F Hallock

Is executive compensation influenced by the composition of the board of directors? About 8% of chief executive officers (CEOs) are reciprocally interlocked with another CEO—the current CEO of firm A serves as a director of firm B and the current CEO of firm B serves as a director of firm A. Roughly 20% of firms have at least one current or retired employee sitting on the board of another firm and vice versa. I investigate how these and other features of board composition affect CEO pay by using a sample of 9,804 director positions in America's largest companies. CEOs who …

Dual Agency: Corporate Boards With Reciprocally Interlocking Relationships, Kevin F. Hallock

Kevin F Hallock

[Excerpt] This paper studies reciprocal interlocks of boards of directors of large firms where an employee of firm A sits on firm B's board and at the same time an employee of firm B sits on firm A's board. The study of Boards of Directors by those in economics and finance is not new. In fact, Dooley (1969) writes of interlocking directorates, but his definition is different in that he presents evidence of interlock where "at least one director ... sat on the board of at least one other of the largest companies". Books by Mizruchi (1982) and Pennings (1980) …

A Descriptive Analysis Of Layoffs In Large U.S. Firms Using Archival Data Over Three Decades And Interviews With Senior Managers, Kevin F. Hallock

Kevin F Hallock

This paper uses data on over 4,600 layoff announcements in the U.S., covering each firm that ever existed in the Fortune 500 between 1970 and 2000, along with 40 interviews of senior managers in 2001 and 2002 to describe layoffs in large U.S. firms over this period. In order to motivate further work in the area, I investigate six main issues related to layoffs: timing of layoffs, reasons for layoffs, the actual execution of layoffs, international workers, labor unions, and the types of workers by occupation and compensation categories. The paper draws on literature from many fields to help further …

Job Loss: Causes, Consequences, And Policy Responses, Kristin F. Butcher, Kevin F. Hallock

Kevin F Hallock

From 2001 to 2003, 5.3 million workers were displaced. Beyond quantifying the numbers of jobs lost lie important questions about gains and losses from these changes and what policies may affect them. These questions will be addressed at an upcoming Chicago Fed conference.

Assessing The Impact Of Job Loss On Workers And Firms, Kristin F. Butcher, Kevin F. Hallock

Kevin F Hallock

Many economists agree that the United States’ openness to competition and technological change raises our living standards, but sometimes results in job losses. This article summarizes “Job Loss: Causes Consequences, and Policy Responses,” a conference which was cosponsored by the Federal Reserve Bank Chicago and the Joyce Foundation.

Ceo Pay-For-Performance Heterogeneity: Examples Using Quantile Regression, Kevin F. Hallock, Regina Madalozzo, Clayton G. Reck

Kevin F Hallock

We provide some examples of how quantile regression can be used to investigate heterogeneity in pay–firm size and pay-performance relationships for U.S. CEOs. For example, do conditionally (predicted) high-wage managers have a stronger relationship between pay and performance than conditionally low-wage managers? Our results using data over a decade show, for some standard specifications, there is considerable heterogeneity in the returns to firm performance across the conditional distribution of wages. Quantile regression adds substantially to our understanding of the pay-performance relationship. This heterogeneity is masked when using more standard empirical techniques.

Individual Heterogeneity In The Returns To Schooling: Instrumental Variables Quantile Regression Using Twins Data, Omar Arias, Kevin F. Hallock, Walter Sosa-Escudero

Kevin F Hallock

Considerable effort has been exercised in estimating mean returns to education while carefully considering biases arising from unmeasured ability and measurement error. Recent work has investigated whether there are variations from the “mean” return to education across the population with mixed results. We use an instrumental variables estimator for quantile regression on a sample of twins to estimate an entire family of returns to education at different quantiles of the conditional distribution of wages while addressing simultaneity and measurement error biases. We test whether there is individual heterogeneity in returns to education and find that: more able individuals obtain more …

Managerial Pay And Governance In American Nonprofits, Kevin F. Hallock

Kevin F Hallock

This article examines the compensation of top managers of nonprofits in the United States using panel data from tax returns of the organizations from 1992 to 1996. Studying managers in nonprofits is particularly interesting given the difficulty in measuring performance. The article examines many areas commonly studied in the executive pay (within for-profit firms) literature. It explores pay differences between for-profit and nonprofit firms, pay variability within and across nonprofit industries, managerial pay and performance (including organization size and fund raising) in nonprofits, the effect of government grants on managerial pay, and the relationship between boards of directors and managerial …

The Timeliness Of Performance Information In Determining Executive Compensation, Kevin F. Hallock, Paul Oyer

Kevin F Hallock

We study whether boards of directors concentrate on performance near compensation decision times rather than providing consistent incentives for chief executive officers (CEO). throughout the fiscal year. We show empirically that managers can profit by moving sales revenue among fiscal quarters. Though this may suggest that boards use short-term trends when determining rewards, we find evidence consistent with boards tying pay to recent sales growth so as to use the best information about future performance. We also find that the timing of profits throughout the year does not affect CEO pay, which may suggest that smoothing firm income is important …