Market-Like Forces and Social Stratification: How Neoclassical Theories of Wages Can Survive Recent Sociological Critiques

Abstract

It is argued that the neoclassical theory of wages has better predictive power than is ciustomarily argued. Wages should closely approximate productivity in analyses involving large samples of workers, and in longitudinal analyses involving extended periods of time. Time and aggregation eliminate many of the market imperfections that make wages unequal to productivity in cross-sectional analyses of individuals. The article also develops a psetido-market model derived from the work of Nelson and Winters that would allow wages to equal productizvity without invoking the marginalist assumptions of continuous perfectly rational wage optimization on the part of finns. Empirical support for the wage productivity link comes from an analysis of the wages of French coal miners from 1900 to 1935. One of the most important problems within the study of social stratification has been the development of a firm-level theory of wages (Berg 1981; Kalleberg & S0rensen 1979; Baron 1984). Although this research agenda is relatively new for sociologists, the study of wage determination has long been a mainstay of traditional micro-economics. There are several different ways in which market mechanisms can be linked to individual remuneration; however, the proposition which has dominated the neoclassical literature is that wages are equal to the marginal productivity of labor (Marshall 1916; Hicks 1963). This position has not been well accepted either by sociologists or by institutional economists. These writers have emphasized the roles of internal labor markets, monopoly power, and class conflict in determining wage rates. The support for these positions has come from two, types of studies. The first examines the decision-making process of organizations and questions whether firms actually perform the rational calculations that are required by marginalist theory (Cyert & March 1963; Lester 1946; Dunlop 1957, 1966; Doeringer & Piore 1971; Thurow 1975; Averitt 1968; Granovetter 1981). The second examines the correlates of wages in cross-sectional samples of workers and notes the superior performance of institutional variables (Medoff & Abraham 1980; Beck, Horan & Tolbert 1978; Bibb & Form 1977; Kalleberg, Wallace & Althauser 1981). *The author would like to thank the National Science Foundation and the University of Wisconsin Graduate School for their financial support for this project. My gratitude as well to Charles Halaby, Gerald Marwell, Erik Wright, Roberto Franzosi, Adrienne Eaton, Kelley Winsborough, and the anonymous reviewers for Social Forces who read and commented on earlier drafts of this manuscript. Please direct correspondence to the author at Department of Sociology, Academic 311, Texas A&M University, College Station, TX