Sains Malaysiana 49(4)(2020): 909-918

http://dx.doi.org/10.17576/jsm-2020-4904-20

A Hedonic Wage Regression Model for Vulnerable Workers in Malaysia: The Use of Exclusion Restriction as a Remedy for Self-Selection Bias

(Model Regresi Gaji Hedonik untuk Pekerja Terancam di Malaysia: Penggunaan Sekatan Pengetepian sebagai Remedi untuk Bias Pilihan Sendiri)

HAZRUL SHAHIRI¹, KIHONG PARK^2* & ZULKIFLY OSMAN³

¹Centre for Sustainable and Inclusive Development, Faculty of Economics & Management, Universiti Kebangsaan Malaysia, 43600 UKM Bangi, Selangor Darul Ehsan, Malaysia

²Department of Economics, Division of the Humanities and Social Sciences, Korea Army Academy at Yeong-cheon (KAAY), Yeongcheon-si, Gyeongbuk-do, 770-849, South Korea

³Majlis Perundingan Gaji Negara, Kementeriam Sumber Manusia, Persiaran Sultan Sallahuddin Abdul Aziz Shah, Presint 1, 62000 Putrajaya, Federal Territory, Malaysia

Received: 17 July 2019/Accepted: 27 December 2019

ABSTRACT

This paper uses an exclusion restriction variable as the key to resolve an identification problem in self-selection bias of a wage regression model. The study basically utilizes Hedonic Wage Theory (Rosen 1986, 1974) to test the relationship between vulnerable workers and wage. Analysis was made using the Mincerian semi-log earnings function (Mincer 1974) specified in the tradition of Becker's Human Capital Model (Becker 1964) with a correction for self-selection bias. A total of 1705 private sector employees were selected and the result showed that the coefficient for predicted vulnerable worker variable was significant but non-positive. The implication of this result is that no adjustments in wages are made to compensate workers for undesirable job conditions. A third party, namely government interventions, is therefore needed in order to protect and enhance the well-being of the vulnerable workers.

Keywords: Bias; self-selection; vulnerable; wage

ABSTRAK

Kajian ini menggunakan pemboleh ubah sekatan pengetepian untuk menyelesaikan masalah bias pilihan sendiri dalam model regresi gaji. Secara prinsipnya, kajian ini menggunakan Teori Gaji Hedonik (Rosen 1986, 1974) untuk menguji hubungan antara pekerja terancam dan gaji. Analisis dijalankan dengan menggunakan fungsi pendapatan Semi log (Mincer 1974) yang diterangkan dalam Model Sumber Manusia Becker (Becker 1964) yang memperbetulkan bias pilihan sendiri. Sejumlah 1705 pekerja sektor swasta telah dipilih. Keputusan menunjukkan pekali kepada pemboleh ubah pekerja terancam adalah signifikan tetapi negatif. Implikasinya, tiada pembetulan gaji dibuat sebagai pampasan kepada pekerja yang terlibat dalam persekitaran pekerja yang tidak sihat. Pihak ketiga iaitu campur tangan kerajaan diperlukan untuk melindungi dan meningkat kebajikan pekerja terancam ini.

Kata kunci: Bias; gaji; pilihan sendiri; terancam

REFERENCES

Abdullah, M.B. 1996. Detection of influential observations in principle component regression. Sains Malaysiana25(1): 145-160.

Becker, G.S. 1964. Human Capital. New York: National Bureau of Economic Research.

Bocquier, P., Nordman, J. & Vescovo, A. 2010. Employment Vulnerability and Earnings in Urban West Africa. Paris: IRD, Dauphine University.

Brown, C. 1980. Equalizing differences in the labor market. The Quarterly Journal of Economics 94(1): 113-134.

Business, Enterprise & Regulatory Reform (BERR). 2008. Vulnerable Worker Enforcement Forum: Final report and government conclusions. United Kingdom: Department for Business, Enterprise & Regulatory Reform, (www.berr.gov.uk).

Chua Yen Yen. 1984. Wage differentials in Peninsular Malaysia. PhD Thesis. Santa Barbara: University of California (Unpublished).

Connell, J. & Burgess, J. 2013. Vulnerable workers in an emerging Middle Eastern economy: What are the implications for HRM? The International Journal of Human Resource Management 24(22): 4166-4184.

Department of Trade and Industry (DTI). 2006. Success at Work: Protecting Vulnerable Workers, Supporting Good Employers. A Policy Statement for This Parliament. London: Department of Trade & Industry.

Elliott, R.F. & Sandy, R. 1998. Adam Smith may have been right after all: A new approach to the analysis of compensating differentials. Economics Letters 59(1): 127-131.

Frank, R.H. 1999. What price the moral high ground. Southern Economic Journal 63: 1-17.

Heckman, J. 2010. Selection bias and self-selection. In Microeconometrics, edited Durlauf, S.N. & Blume, L.E. The New Palgrave Economics Collection. Palgrave Macmillan, London.

Heckman, J. 1979. Sample selection bias as a specification error. Econometrica 47(1): 153-161.

Hwang, H., Mortensen, D.T. & Reed, W.R. 1998. Hedonic wages and labor market search.  Journal of Labor Economics 16(4): 815-847.

International Labour Organization (ILO). 2013. Global Employment Trends 2013. Geneva: International Labour Office.

Lamm, F. 2014. The challenges of researching OHS of vulnerable workers in small businesses. Small Enterprise Research 21(2): 161-179.

Latifah Mohd Nor. 2000. Occupational sex segrerration and discrimination in Peninsular Malaysia. Jurnal Pengurusan19: 89-107.

Latifah Mohd Nor. 1998. An overview of gender earnings differentials in Peninsular Malaysia. IIUM Journal of Economics and Management 6(1): 23-49.

Lavrakas, P. 2008. Encyclopedia of Survey Research Methods. Thousand Oaks, CA: Sage Publications, Inc.

Law Commission of Ontario. 2012. Vulnerable Workers and Precarious Work. Toronto.

Liu, J.T., Hammitt, J.K. & Liu, J.L. 1997. Estimated hedonic wage function and value of life in a developing country. Economics Letters 75(3): 353-358.

Maddala, G.S. & Nelson, F. 1975. Switching regression models with exogenous and endogenous switching. Proceedings of the American Statistical Association. pp. 423-426.

Malaysia. 2013. Laporan Penyiasatan Tenaga Buruh Malaysia 2012. Kuala Lumpur: Jabatan Perangkaan Malaysia.

Mincer, J. 1974. Schooling, Experience and Earnings. New York: Columbia University Press.

Muhammad Ullah, Muhammad Aslam, Saima Altaf. & Munir Ahmed. 2019. Some new diagnostics of multicollinearity in linear regression model. Sains Malaysiana 48(9): 2051-2060.

Nakosteen, R. & Zimmer, M. 1980. Migration and income: the question of self-selection. Southern Economic Journal 46: 840-851.

Oaxaca, R. 1973. Male-female wage differentials in urban labor markets. International Economic Review 14(3): 693-709.

Osman-Rani, H. 1980. Faktor-faktor yang mempengaruhi perolehan pekerja industri di Semenanjung Malaysia. Jurnal Ekonomi Malaysia 2: 68-95.

Pollert, A. 2007. The Unorganised Vulnerable Worker: The Case for Union Organising. Liverpool, United Kingdom: Institute for Employment Rights.

Pollert, A. 2008. The Vulnerable Worker in Britain and Problems at Work. Saint Etienne: UWE Bristol Business School.

Pollert, A. & Charlwood, A. 2009.The vulnerable worker in Britain and problems at work. Work Employment Society 23: 343-362.

Psacharopoulos, G. & Patrinos, H.A. 2004. Returns to investment in education: A further update. Education Economics 12(2): 111-134.

Rahmah Ismail. 2011. Gender wage differentials in Malaysian services sector. African Journal of Business Management 5(19): 7781-7789.

Rahmah Ismail. & Zulridah Mohd Noor. 2005. Gender wage differentials in the Malaysian manufacturing sector. IIUM Journal of Economics and Management 13(2): 119-137.

Rahmah Ismail, Zulkifly Osman. & Syazwani A. Malek. 2013. Perbezaan upah mengikut jantina dan diskriminasi majikan dalam sektor teknologi maklumat dan komunikasi. Jurnal Teknologi (Social Sciences) 63(1): 41-50.

Rosen, S. 1986. The theory of equalizing differences. In Handbook of Labor Economics, edited by Ashenfelter, O. & Layard, R.  New York: Elsevier Science Publishers.

Rosen, S. 1974. Hedonic price and implicit markets: Product differentiation in pure competition. Journal of Political Economy 82: 34-55.

Saunders, R. 2006. Risk and opportunity: Creating options for vulnerable workers. Ottawa: Canadian Policy Research Networks, Document No|7.

Saunders, R. 2003. Defining vulnerability in the labour market. Ottawa: Canadian Policy Research Networks, Document No|1, Research Paper W|21.

Sgobbi, F. 2015. Wage policy models: What implications for vulnerable employees? International Journal of Manpower 35(6): 912-930.

Shamsulbahriah, K.A.R. 2016. Working for welfare: Inequality and shared vulnerability among the Malaysian Middle Classes. Malaysian Journal of Economic Studies 53(1): 9-31.

Smith, A. 1776. An Inquiry into the Nature & Causes of the Wealth of Nations. Vol. 1. London: W. Stranhan & T. Cadell.

Trades Union Congress (TUC). 2007. Hard Work and Hidden Lives. Commission on Vulnerable Employment. London: Trades Union Congress (TUC) (www.vulnerableworkers.org.uk).

Trades Union Congress (TUC). 2006. Who are the vulnerable workers in the UK labour market? The hidden one-in-five. TUC Vulnerable Report. London: TUC (www.tuc.org.uk/extras/oneinfive.pdf).

Zulkifly Osman & Ishak Yussof. 1998. The impact of unionism on wages in the manufacturing sector. In Malaysian Industrialization: Governance & The Technical Change, edited by Ishak Yusoff & Ghafar Ismail. Bangi: Penerbit UKM.

Zulkifly Osman. & Hazrul Shahiri. 2017. Pulangan monetari pekerja terancam di Malaysia berdasarkan teori upah hedonik. Jurnal Ekonomi Malaysia 51(1): 67-76.

Zulkifly Osman. & Hazrul Shahiri. 2014. Pekerja terancam berdasarkan piawai minimum pemburuhan Malaysia. Jurnal Ekonomi Malaysia 48(1): 13-21.

Zulkifly Osman, Ishak Yussof. & Abu Hasssan Shaari Mohd Nor. 2010. Inflasi pendidikan mengikut ketentuan dalam pasaran buruh Malaysia. Jurnal Ekonomi Malaysia 44: 61-71.

*Corresponding author; email: kma3316@gmail.com