The Supply of Labor and Manufacturing Wage Determination in the United States: An Empirical Examination

Abstract

IN RECENT YEARS there has been a proliferation of non-market or combined market and institutional theories of wage determination. This development was a natural response to the spread of collective bargaining in the 1930's. Impressive attempts have been made to measure the relative wage impact of collective bargaining by examining union and nonunion wages.2 Moreover, considerable effort has been devoted to identifying and measuring the effects of those variables which influence the outcome of collective bargaining. Variables such as profit rates, indices of product market monopoly or labor force skill, and labor costs as a share of total costs have all been used as. possible sources of union success. In particular, variables linking union success in one sector with that in another sector are often mentioned (see, for example, [5], [8], [14], [16]). The postulated processes have been described variously as spillover, key bargain. wage leadership, pattern wage adjustment, imitation, and diffusion. According to these theories in their most general form, wage movements in some sectors are influenced not only by traditional market forces in that sector but also by wage movements in some other sector. Although these theories are sometimes restricted to wage determination under collective bargaining, they also have been applied to cases in which allegedly monopsonistic employers administer wages and imitate highly visible economic sectors. We believe that the wage determination literature has moved too far in the direction of institutional theories which often totally exclude market forces, particularly labor supply forces. After all, about 75-80 percent of the A merican labor force is unorganized. Therefore, one should not overestimate the impact of institutional forces as opposed to market forces on aggregate wages. Moreover, even in the union sector market forces may