Wage Determination, Wage Dispersions and Wage Policy: An Example of Professional Baseball League in Taiwan

• Main Authors: Wen-Jhan Jane, 簡文政
• Format: Others
• Language: en_US
• Online Access: http://ndltd.ncl.edu.tw/handle/86034219835960620622

博士 === 國立中央大學 === 產業經濟研究所 === 95 === The problem of wages is one of the important topics in the relations between labor (e.g., employees) and capital (e.g., employers). It is not only received the attention of the academia, but also be cared by the persons in the industrial circles. Employees hope to obtain the better payments, but employers want to reduce the personnel expenditures for gaining more profits. Due to the cognitive differences that have in both sides between labor and capital, the dispute of the wages is never ended. Therefore, this is a question that both sides must face together. The relevant issues about wages have continuously discussed in the literature of labor economics. In this research, we research three aspects of issues related to the wage. The former two topics aim at the micro data analysis, and the last one focuses on the macro data. The first topic designs the discussion for the system of the wage schemes, the research in this aspect let us examine the situation of the wage system inside an organization. Then, by comparing to the role of monitoring cost in the theory of wage schemes, we discuss the wage schemes in an organization corresponding to the relation in the literatures of labor economics. Furthermore, our conclusions sum up a new explanation about the performance uncertainty. In the second part, we start from the viewpoint of the human resources to examine the theory of the salary determination and investigate the relationships between the employees’ characteristics (e.g. education, experience, and performance) and salary. The third main topic is the question which enterprises care the most--- The structure of the wages and organizational performance. How does the structure of wages influence the organizational performance? And is the degree of wage dispersion an optimal level? The empirical researches about the salary to the individual and organizational performance are relatively less, because this kind of analysis often needs matched employer-employee data. On the contrary, professional sports offer quite abundant materials to study the researches in the field of labor economics. The achievements in these important researches owe the credit to the transparence in the industry and the convenience in obtaining the empirical data. None of research fields like professional sports can offer such a detailed personal performance, historical data of salary and organizational performance (Kahn, 2000). Therefore, the study will adopt 267 players’ (including 183 hitters and 84 pitchers) salary and performance data in 7 teams of Chinese Professional Baseball League for the period from 1990 to 2000 to examine these three major topics in labor economics. Compensation for services rendered can take many forms, but in this work we focus on the piece rate and salary wage schemes to discuss the possible wage structure for an organization. It is commonly argued in the literature that a monitoring cost is the key factor for the piece rate wage scheme to be adopted. To shed further light on this issue we utilize the empirical model first suggested by Lazear (1986) to test the wage structure of an organization. It is to consult the wages equation of Mincer (1974) and Gius and Johnson (2000) to study the research approaches of the wages determination in the second part. Independent variables of players’ characteristics and performance are used to be the regressors in the wage equation. In the third part of the research, we firstly set up a simple theoretical model to descript the relation of organizational performance to the human capital and wage dispersion, the optimal conditions indicate the tradeoff relationship between human capital and wage dispersion. The economic implication shows that the rational manager in a baseball team should not only consider the human capital of the team but the degree of the whole team’s wages dispersion. Taking the decision of drafting as an example, the inequality in wage causes the negative effects when the manager drafts a super star player for a huge expenditure. Then, the method of the empirical regressions will be based on Depken (2000). Using the fixed effect and random effect models identifies the results in our theoretical model. The conclusions are summed up independently as follows: Firstly, the system of the wages is unable to correspond to the predictions of monitoring cost clearly. Our empirical evidence suggests that the small professional baseball leagues in Taiwan will normally adopt the salary payment scheme rather than the piece rate payment scheme, even though the players’ on-field performance can be accurately and easily observed. We note that the key factor for not choosing the piece rate wage scheme may not be due to the high cost of monitoring, as is argued in the literature, but may be caused by performance uncertainty. For the wage determination, individual’s characteristic variables (age and experience) are always significant when we employ the fixed and random effect model. Furthermore, we consider the endogeneity problem from performance variable and use 2SLS regressions to fix the endogeneity, the individual’s characteristic variables still significant and only two in five performance indexes (runs scored and safety hits) achieve the significant level. For the wage structure, the first-stage estimators from 2SLS regression are used to calculate the degree of wage dispersion in a team. The results are more in line with “tournament”. Thirdly, the human capital really has positive influence on team’s performance, and the degree of wage dispersion echoes the important assumptions of second order condition in the theory model. This indicates the inverse U-shape relationship between the wage dispersion and the organizational performance, and there exists the optimal level of wage dispersion in an organization. Therefore, a manager in a team should not only consider the ‘efficiency (benefits)’ from the high stock of human capital but the ‘inequality (costs)’ from the hurt in an organization when they draft players.