Inequality in Total Returns to Work in Ukraine: Taking a closer look at workplace (dis)amenities Olena Nizalova University of Kent Kyiv School of Economics 30 th May, 2014
Inequality in Total Returns to Work: Taking a Closer Look at Workplace (Dis)amenities in Ukraine
Aug 23, 2014
This paper examines the importance of non-monetary dimensions of work in studies of overall compensation inequality. Relying on the methodological advances in the
field of multidimensional inequality and using the representative sample of Ukrainian industrial establishments over the period from 1994 to 2004, we show that the focus on monetary compensation is too narrow. It ignores significant dynamics of inequality in workplaces. Analysis of such workplace conditions as risk of on the job injury, various benefits/amenities, and insecurities with wage payments, shows that the inequalities in these conditions do exacerbate inequalities in hourly wages. Workers in establishments paying highest hourly wages have enjoyed relatively greater reductions in the total workplace injury burden, greater retention of various benefits/ amenities, and relatively larger increases in wage payment security (decreased wage arrears), compared to the workers in the lowest paying establishments. These findings present an important lesson for further research on inequality inasmuch as a narrow focus on wages actually disguise the growing inequality in overall returns to work, as well as considerable implications for the development of social policies.
field of multidimensional inequality and using the representative sample of Ukrainian industrial establishments over the period from 1994 to 2004, we show that the focus on monetary compensation is too narrow. It ignores significant dynamics of inequality in workplaces. Analysis of such workplace conditions as risk of on the job injury, various benefits/amenities, and insecurities with wage payments, shows that the inequalities in these conditions do exacerbate inequalities in hourly wages. Workers in establishments paying highest hourly wages have enjoyed relatively greater reductions in the total workplace injury burden, greater retention of various benefits/ amenities, and relatively larger increases in wage payment security (decreased wage arrears), compared to the workers in the lowest paying establishments. These findings present an important lesson for further research on inequality inasmuch as a narrow focus on wages actually disguise the growing inequality in overall returns to work, as well as considerable implications for the development of social policies.
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Inequality in Total Returns to
Work in Ukraine: Taking a closer look at
workplace (dis)amenitiesOlena Nizalova
University of KentKyiv School of Economics
30th May, 2014
Acknowledgements
Importance of the Matter- Work brings major part of income, but takes major
part of our time- ILO “Decent Work Agenda”- Inequality in working conditions => Inequality in
Income => Inequality in future generations- Colleagues – most important reference group in
transition countries
Policy Motivation- Significant increase in wage inequality in Ukraine after
the collapse of the Soviet Union, stable after 1995- Anecdotal evidence of worsening of working
conditions for low wage workers- Movement away from the workplace centered model
of provision of social goods accompanied by the severe crisis across all dimensions of well-being (health, education, recreation, sports, housing, etc.)
Academic Motivation
- Most studies focus on monetary compensation to work
- Some research interest on inequality in other job characteristics: risk of injury, parental leave, health insurance, night shifts, inconvenient hours, other benefits
- But no study since Hammermesh (1999) exploring multiple dimensions of the total returns to work
Research Question
Contribution to the literature- Application of the multidimensional poverty/inequality
methodology to the new area- First attempt to measure inequality in workplace
(dis)amenities and study its time dynamics in Ukraine- Documents the degree of the unequal shift away from
work-centered provision of social services- Highlights importance of further methodological
developments towards multi-dimensional measure of inequality in total returns to work
ClarificationsDisamenities- Risk of on the job injury- Duration of injury- Number of shiftsAmenities- Provision/subsidization of housing, kindergardens, meals; rest houses, paid health expenditures, (interest-free) loans, assistance on retirement, supplement pension, training, transportation
FindingsEstablishments paying higher wages tend to - provide safer and, in general, better working
conditions- less likely to experience difficulties paying wages,
and lower probability of having severe wage arrears- more likely to have amenities and in a variety of
dimensions
FindingsOver the period from 1994(6) to 2004- Move away from risks concentrated at the top end of
distribution to equal distribution of risks- Move from equal distribution in provision of amenities
to such that favors top end of the wage distribution- Similar dynamics across all workplace characteristics
available in the data (not driven by one particular amenity or group of those)
FindingsExplanations?- Changes in the concentration of firms size, export
status, Energy, Food processing and Light industries towards the lower end of wage spectrum
- Not related to shares of blue collar workers or female workers
- Does it Matter?
DataUkrainian Labour Flexibility Survey
1996, 1998, 2000, 2002, 2004
longitudinal representative survey of Ukrainian industrial enterprises which provides comprehensive information on average characteristics of the firms, including wages, workforce, injuries, working time,
shifts, various amenities.
Theory/Methodology- Compensating Wage Differentials (Extension of
Rosen’s theory by Hammermesh): Income vs. Substitution effects
- Descriptive comparison of various workplace characteristics across wage quartiles/deciles
- Distributive Analysis using STATA Package (DASP)- Non-parametric Lowess Estimation- Araar’s (2009) multidimensional inequality index
500
1000
1500
2000
2500
3000
1990 1995 2000 2005 2010
Real Monthly Wage
12
34
5
1990 1995 2000 2005 2010
Work Accidents
.06
.08
.1.1
2
1990 1995 2000 2005 2010
Fatal Work Accidents
05
1015
20
1994 1996 1998 2000 2002 2004
SD Log(Wage)
.35
.4.4
5.5
.55
1994 1996 1998 2000 2002 2004
SD Adj Log(Wage)
.4.6
.81
1.2
1.4
1994 1996 1998 2000 2002 2004
Qrt2 Qrt3
Qrt4
Relative Wage by Quartiles
010
0020
0030
0040
0050
00
1990 1995 2000 2005 2010
ULFS ULFS, energy
ULFS, processing Derzhkomstat, overall
Derzhkomstat, industry Derzhkomstat, processing industry
Derzhkomstat, Energy-gas-water
Monthly Real Wage, 2012 UAH
.4.6
.81
1.2
1.4
1994 1996 1998 2000 2002 2004
Relative Wage by Quartiles
12
34
56
1994 1996 1998 2000 2002 2004
accidents
11.
52
2.5
3
1994 1996 1998 2000 2002 2004
duration
.51
1.5
22.
5
1994 1996 1998 2000 2002 2004
total_injuries
Qrt2 Qrt3
Qrt4
0.2
.4.6
.81
L(p)
0 .2 .4 .6 .8 1Percentiles (p)
1994
0.2
.4.6
.81
L(p)
0 .2 .4 .6 .8 1Percentiles (p)
1995
0.2
.4.6
.81
L(p)
0 .2 .4 .6 .8 1Percentiles (p)
1999
0.2
.4.6
.81
L(p)
0 .2 .4 .6 .8 1Percentiles (p)
2002
0.2
.4.6
.81
L(p)
0 .2 .4 .6 .8 1Percentiles (p)
2004
45° line wagehat
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
1995
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
1999
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
2002
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
2004
45° line TOTINJ
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
1994
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
1995
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
1999
0.2
.4.6
.81
C(p
)0 .2 .4 .6 .8 1
Percentiles (p)
2002
0.2
.4.6
.81
C(p
)
0 .2 .4 .6 .8 1Percentiles (p)
2004
45° line amenities
CI Time Dynamics
1995-2004
1995-1999
1999-2002
2004-2002
Total Injury Burden-
0.5916** -0.1927* -0.0229-
0.3760** (0.0573) (0.0920) (0.1040) (0.0751)
Amenities Score 0.0734** 0.0225* 0.0224 0.0286+(0.0132) (0.0117) (0.0165) (0.0176)
Wage Arrears-
0.3802** -0.0414 -0.1432* -
0.1956** (0.0502) (0.0522) (0.0700) (0.0685)
Araar’s Hybrid MDIMultidimensional Inequality Estimates (lambda=0.5)
Total (MDI) 0.1215 0.1562 0.1081 0.0891Relative contribution of:Wages 9.57% 40.63% 13.98% 22.15%Total Safety Level 3.48% 0.93% 6.12% 0.76%Amenities Score 26.65% 31.15% 37.34% 50.29%Absence of Wage Arrears 60.31% 27.29% 42.56% 26.80%
Araar’s Hybrid MDI: Issues
• Disamenities – “bads”, not “goods”• How to combine “goods” and “bads” in one index?• Transformation?
• E.g. Injury burden close to zero, but “safety=1-normalized injury burden” – close to 0.99 => no observed difference between Concentration Curve and 45 degree line
• Equality is assumed to be a virtue, but do we want equality in risks, shift work, etc.?
• More work needed, for now – study dimension by dimension
Summary Statistics 1995 1999 2000 2002 2004
Wages 3.57 8.86 44.29 15.32 13.71Incidence of Injuries per 100 FTE 1.04 0.81 0.59 0.61 0.40Duration per Injury 3.10 3.80 3.35 3.16 1.73Total Injury Burden per 100 FTE 3.32 2.96 1.99 1.99 0.58Number of shifts per day 2.15 2.28 2.13 2.17 2.17Total working hours 33.72 33.20 33.92 35.85 36.97Amenities Score 9.49 7.61 7.84 7.66 7.40Difficulty paying wages 0.71 0.76 0.63 0.43 0.20Wage Arrears 0.42 0.39 0.27 0.28 0.15 No observations 507 660 773 1327 1945
Conclusions• Wage inequality has not been growing in Ukraine, while
inequality in non-monetary workplace (dis)amenities has been growing significantly
• Growth of inequality observed through the whole spectrum (dis) amenities
• Need for further methodological developments to assess inequality in total returns to work in one measure
• Documented movement away from the workplace-centred provision of social services requires relevant policy response from the government
Thank you
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