The Influence of Pattern-Bargaining on Manufacturing Wages in the Cleveland, Ohio, Labor Market, 1945-1950

Abstract

ONE of the most popular explanations for the rapid rise in wage rates after World War II is the pattern theory. This is the viewpoint that the bargains between large unions and large multiplant firms in the basic industries, such as the basic steel and automobile industries, became patterns for wage raises throughout the rest of the economy. The pattern theorists hold that the postwar rounds of wage increases in those industries resulted in waves of similar wage increases in the same and other industries because of pattern-following by other firms and unions.' The purpose of this study is to determine with empirical data the extent of pattern-following by manufacturing firms in a representative labor market in the five years immediately following World War II. Cleveland, Ohio, was selected as the locale for this study because of the size and diversity of the area as a labor market. The office of the Associated Industries of Cleveland was used as a base for the collection of data. The data obtained from each of the firms that participated in the survey were the plantwide straight-time average hourly earnings for any one payroll period in each of the following six benchmark periods: September I945, September I946, September I947, September I948, September I949, and the summer of I950. The use of these benchmarks permitted detailed year-by-year comparisons of Cleveland wage increases with the pattern increases. Since "pattern-setting" major industry agreements were concluded in early I946, early I947, and the early middle of I948, the first four benchmarks delineated three complete rounds of wage increases. During the first 23 months after September I948, no major acrossthe-board wage increases were given in either the steel or auto industries. However, in both of those industries pension and welfare programs were agreed upon in late I949 and early I950. These became the patterns for those industries that year. Therefore, the last three benchmarks (including September I948) delineated two years without major wage changes in either pattern-setting industry. Data were collected from I20 manufacturing firms with more than ten employees each. These firms were classified according to size, industry, and unionization for purposes of the tabulations. Information was also obtained from 2I of these employers on their wage chronologies (i.e., dates and amounts of their across-theboard wage changes) during the period. In addition, supplementary information on wage changes was obtained from interviews with a number of employers and the secretaries of the Cleveland Newspaper Publishers Association and the Ladies' Garment Employers Association. In the analysis below, wage changes and increases in straight-time average hourly earnings are compared primarily with the patterns established in the steel industry. The steel industry was selected for this purpose in preference to the automobile-manufacturing industry * The author has benefited from discussions with many persons on this subject, but especially Professors Harbison, Rees, Wallis, and Lewis of the University of Chicago. Grateful acknowledgment is made to Messrs. McClancy, Black, and Capes, and other members of the staff of the Associated Industries of Cleveland, without whose assistance this study could not have been made. The author assumes all responsibility for errors of fact or judgment in this report. ' The pattern theory is held in different forms by a number of labor and management representatives, as well as labor economists and arbitrators. The results of the I949 negotiations in the Basic Steel Industry show clearly the influence of the pattern theory. In that case, the Presidential fact-finding board rejected the union's request for a wage raise on the grounds that the pattern-setting effects of that raise would cause further inflation. However, it approved a pension and welfare program for the industry because of its supposed desirable economic effects. See Report to the President of the United States on the Labor Dispute in the Basic Steel Industry (Washington, 1949), pp. 50-52 and 74.