British and American Changes in Interindustry Wage Structure Under Full Employment

Abstract

V IRTUALLY the full employment of available labor and resources was tacitly assumed by most of the nineteenth-century wage theorists. Actual full employment has been a rather rare condition in the western world during the last two centuries. However, the economies of both Great Britain and the United States moved decisively toward full employment in the period between the years just before World War II and the subsequent wartime and postwar years. In what ways and to what extent has this relatively new condition of prolonged full employment affected the structure of wages? There are many ways of answering such a question, depending on what aspect of wage structure is considered. For example, it is now reasonably clear that a transition to full employment works toward the narrowing of wage differentials between workers of different grades of skill.' What happens to the relative levels of wages paid by different industries, as an economy moves toward full employment? Comparatively little attention has been devoted to this question. One outstanding study of interindustry wage structure has been the recent analysis by Donald Cullen.2 This painstaking study was mostly concerned with long-period relationships between the average wages paid by different American industries. Cullen found that the rank-order of industries was very stable, even over long periods of time, as regards the average annual earnings of their respective employees. Over a mere ten-year period, there was, naturally, even less change in interindustry wage structure than occurred over longer periods. Thus for the decade I939-49, Cullen's coefficient of rank correlation for seventy American industries was .92.3 These findings suggest that even a sharp change from very considerable unemployment (I939) to virtual full employment (I949) will have little effect on the structure of wages as between industries -at least that such a change will not alter materially the rank-order of the average wages of the various industries. In Great Britain, the full employment conditions of wartime and postwar years provide a similar contrast with the slack employment of the prewar period. Did the relative wages paid by different industries also remain stable in the face of this drastic change in labor market conditions? We shall see presently that the answer depends on how one chooses the method of measurement. Our first test of interindustry wage structure was selected to provide the greatest possible comparability between the British and American wage data and the method and data used by Cullen. We were able to find British and American wage information, prewar and postwar, for 28 industries which were reasonably comparable with the American industries selected by Cullen.4 We used i938 as a repre'E.g., see Harry Ober, Occupational Wage Differentials, I907-I947, U.S. Department of Labor, Monthly Labor Review, August I948; Louis R. Salkever, Toward a Theory of Wage Structure, Industrial and Labor Relations Review, April I953; K. G. Knowles and D. J. Robertson, Differences Between the Wages of Skilled and Unskilled Workers i8881950, Bulletin of the Oxford Institute of Statistics, xm (Apr1l I95I), I09-27 and Earnings in Engineering, I926I948, ibid. (June I95I), I79-200. Our limited purpose is to investigate interindustry differences in average earnings. We are acutely aware of the variability of wages between firms within an industry, between workers of different levels of skill, and the week-to-week variability of the earnings of individual workers. Compare Robert R. L. Raimon, The Indeterminateness of Wages of Unskilled Workers, Industrial and Labor Relations Review, vi (January 1953), I80-94; and K. G. J. C. Knowles and Ann Romanis, Dockworkers' Earnings, Bulletin of the Oxford University Institute of Statistics, xiv (September and Octo-