The Effect of Wage-Payment Reform on Workers’ Labor Supply and Welfare

Colorado College Working Paper 2009-05

27 Pages Posted: 16 Aug 2009  

Esther Redmount

Colorado College - Department of Economics and Business

Arthur Snow

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Ronald S. Warren Jr.

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics

Date Written: August 14, 2009

Abstract

We analyze the effects of a largely ignored 1885 legislative reform in Massachusetts requiring that firms provide workers the option of receiving weekly wage payments. Using an inter-temporal model of deferred compensation, we derive conditions on elasticities of labor supply that determine the effects of the reform on workers’ effective wage and utility. We then examine empirically the effects of the reform, using weekly data on mill workers in Lowell. Given the implications of our theoretical analysis, the empirical findings of positive wage and reform elasticities imply that the switch to weekly payment increased workers’ effective wage and well-being.

Keywords: elasticity, labor supply, wage, welfare, Massachusetts, wage frequency

JEL Classification: J22, J33, K31, I31

Suggested Citation

Redmount, Esther and Snow, Arthur and Warren, Ronald S., The Effect of Wage-Payment Reform on Workers’ Labor Supply and Welfare (August 14, 2009). Colorado College Working Paper 2009-05. Available at SSRN: https://ssrn.com/abstract=1452852 or http://dx.doi.org/10.2139/ssrn.1452852

Esther Redmount (Contact Author)

Colorado College - Department of Economics and Business ( email )

14 E Cache La Poudre Street
Colorado Springs, CO 80903
United States

Arthur Snow

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602-6254
United States
706-542-3752 (Phone)

Ronald S. Warren Jr.

University of Georgia - C. Herman and Mary Virginia Terry College of Business - Department of Economics ( email )

Athens, GA 30602
United States

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