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

Author
Esther Redmount, Arthur Snow, Ronald S. Warren Jr.
Content Type
Working Paper
Institution
Department of Economics and Business, Colorado College
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.
Topic
Economics, Markets, Labor Issues
Political Geography
United States