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Family firms offer higher job security but lower wages
than other firms
Family firms are ubiquitous in most countries. The
differences in objectives, governance, and management styles between those firms and
their non-family counterparts have several implications for the workforce, which
scholars have only recently started to investigate. Family firms offer greater job
security, employ different management practices, have a comparative advantage to avoid
conflicts when employment relations are more hostile, and provide insurance to workers
through implicit contracts when labor market regulation is limited. But all this also
comes at a cost.
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How and why do the careers of men and women
differ? What policies could reduce the differences?
The gender wage gap is largely due to men and
women holding different kinds of jobs. This job segregation is partly driven
by gender differences in careers in corporate hierarchies. Research has
shown that the careers of men and women begin to diverge immediately upon
entry into the labor market and that subsequent career progress exacerbates
the divergence. This divergence of career progress explains a large part of
the gender wage gap. Understanding how and why the careers of men and women
differ is necessary to design effective policies that can reduce the gender
differences in hierarchies.
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Machines’ ability to perform cognitive,
physical, and social tasks is accelerating, dramatically changing jobs and
labor markets
The information technology revolution has had
dramatic effects on jobs and the labor market. Many routine and manual tasks
have been automated, replacing workers. By contrast, new technologies
complement non-routine, cognitive, and social tasks, making work in such
tasks more productive. These effects have polarized labor markets: While
low-skill jobs have stagnated, there are fewer and lower paid jobs for
middle-skill workers, and higher pay for high-skill workers, increasing wage
inequality. Advances in artificial intelligence may be accelerating
computers’ ability to perform cognitive tasks, heightening concerns about
automation of even high-skill jobs.
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Donors rely on overhead costs to evaluate
charities, but that reliance creates disincentives for charities to hire
skilled workers
Charity rating agencies often focus on overhead
cost ratios in evaluating charities, and donors appear to be sensitive to
these measures when deciding where to donate. Yet, there appears to be a
tenuous connection between this widely-used metric and a charity’s
effectiveness. There is evidence that a focus on overhead costs leads
charities to underinvest in important functions, especially skilled workers.
To evaluate policies that regulate overhead costs, it is necessary to
examine whether donors care about overhead costs, whether they are good
measures of charity effectiveness, and what effects a focus on overhead
costs has on charities.
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Higher inequality decreases capital accumulation and increases
informality, which, in turn, raises the income of the poor
Higher inequality reduces capital accumulation and increases
the informal economy, which creates additional employment opportunities for low-skilled and
deprived people. Despite this positive feedback, informality raises problems for public
finances and biases official statistics, reducing the effectiveness of redistributive
policies. Policymakers should consider the links between inequality and informality because
badly designed informality-reducing policies may increase inequality. However, convincing
empirical evidence is still lacking and is usually limited to correlations rather than causal
effects.
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Peer pressure can affect productivity and explain why
workers’ wages and productivity depend on their co-workers’ productivity
Should one expect a worker’s productivity, and thus wage,
to depend on the productivity of his/her co-workers in the same workplace, even if the
workers carry out completely independent tasks and do not engage in team work? This may
well be the case because social interaction among co-workers can lead to productivity
spillover through knowledge spillover or peer pressure. The available empirical evidence
suggests that, due to such peer effects, co-worker productivity positively affects a
worker’s own productivity and wage, particularly in lower-skilled occupations.
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Giving employees more discretion at work can
boost their satisfaction and well-being
A wide range of high involvement management
practices, such as self-managed teams, incentive pay schemes, and
employer-provided training have been shown to boost firms’ productivity and
financial performance. However, less is known about whether these practices,
which give employees more discretion and autonomy, also benefit employees.
Recent empirical research that aims to account for employee self-selection
into firms that apply these practices finds generally positive effects on
employee health and other important aspects of well-being at work. However,
the effects can differ in different institutional settings.
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How teams are chosen and how they are compensated
can determine how successfully they solve problems and benefit the firm
The keys to effective teamwork in firms are (1)
carefully designed team-formation policies that take into account what level
of diversity of skills, knowledge, and demographics is desirable and (2)
balanced team-based incentives. Employers need to choose policies that
maximize the gains from teamwork through task coordination, problem solving,
peer monitoring, and peer learning. Unions and labor market regulations may
facilitate or hinder firms’ attempts at introducing teams and team-based
incentives.
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The cost of a firm’s commitment to CSR may be
offset by its appeal to motivated employees who work harder for lower
wages
Survey and register data indicate that many
employees prefer a socially responsible employer and will accept a lower
wage to achieve this. Laboratory experiments support the hypothesis that
socially responsible groups are more productive than others, partly because
they attract cooperative types, partly because initial cooperation is
reinforced by group dynamics. Overall, the findings indicate corporate
social responsibility may have cost advantages for firms.
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