Shifting Norms in Wage Determination

Abstract

IN 1980, I noted three characteristics of the U.S. union labor market: a tendency for union wage increases to outpace nonunion, an insensitivity of wage decisions to real demand conditions, and a gradual erosion of the membership base.1 In 1982, as dramatic developments in the determination of union wages began to unfold, I reported on a series of wage concessions that had been negotiated in industries as diverse as automobile manufacturing, intercity trucking, and meatpacking.2 Despite the widespread concessions, however, it was impossible at that time to detect any substantial change in the union labor market as described above. With an additional three years of observation permitting firmer conclusions, I explore here an apparent union wage norm shift and its implications for wage determination generally over the next few years. Four basic points are made. First, union wage indexes have recently been rising at surprisingly slow rates, given economic circumstances. Second, various institutional developments in the union sector reinforce the evidence of a wage norm shift. Third, the form of union wage concessions made in the past few years suggests that future union wage growth will be moderate and somewhat less responsive to price inflation than it was in the past. Fourth, the union sector is large enough to affect aggregate wage indexes, even if no norm shift has occurred in the nonunion sector.