Changes In Relative Wages Research Articles

Cross-Country Patterns of Change in Relative Wages

This paper investigates movements in relative wages and wage inequality across 13 of the world's major economies. Focusing on wages received by full-time male workers, the investigation uncovers several empirical regularities: (1) Most advanced industrialized economies show increases, often large, in wage inequality during the 1980s; none show declining wage inequality. In contrast, three of four middle-income countries considered here show sharply declining wage inequality during the 1980s. (2) Since the early to late 1970s, the advanced economies show large and persistent increases in the wages of prime age men relative to the wages of less experienced men. (3) Following a period of sharply declining education differentials in the 1970s, the advanced economies show rising or flat education differentials after 1980. Education differentials fell moderately to sharply in the middle-income countries during the 1980s. (4) Wage inequality among observationally similar workers rose sharply during the 1980s in most advanced economies. (5) After 1975, the structure of relative industry wages in the manufacturing sector became increasingly dissimilar across the advanced economies. However, controlling for common time effects, increases in international trade as a fraction of GDP are associated with a partial convergence of relative industry wage structures across countries. The paper discusses several alternative interpretations of wage structure developments in the United States and other countries in the light of these empirical regularities.

Cross-Country Patterns of Change in Relative Wages]: Comment

Cross-Country Patterns of Change in Relative Wages]: Comment

Cross-Country Patterns of Change in Relative Wages]: Discussion

Previous articleNext article Free[Cross-Country Patterns of Change in Relative Wages]: DiscussionPDFPDF PLUS Add to favoritesDownload CitationTrack CitationsPermissionsReprints Share onFacebookTwitterLinkedInRedditEmail SectionsMoreDetailsFiguresReferencesCited by NBER Macroeconomics Annual Volume 71992 Sponsored by the National Bureau of Economic Research (NBER) Article DOIhttps://doi.org/10.1086/654202 Views: 119 Copyright 1992 The National Bureau of Economic Research and The Massachusetts Institute of TechnologyPDF download Crossref reports no articles citing this article.

Cross-Country Patterns of Change in Relative Wages]: Comment

Cross-Country Patterns of Change in Relative Wages]: Comment

Cross-Country Patterns of Change in Relative Wages

This paper investigates movements in relative wages and wage inequality across 13 of the world's major economies. Focusing on wages received by full-time male workers, the investigation uncovers several empirical regularities: (1) Most advanced industrialized economies show increases, often large, in wage inequality during the 1980s; none show declining wage inequality. In contrast, three of four middle-income countries considered here show sharply declining wage inequality during the 1980s. (2) Since the early to late 1970s, the advanced economies show large and persistent increases in the wages of prime age men relative to the wages of less experienced men. (3) Following a period of sharply declining education differentials in the 1970s, the advanced economies show rising or flat education differentials after 1980. Education differentials fell moderately to sharply in the middle-income countries during the 1980s. (4) Wage inequality among observationally similar workers rose sharply during the 1980s in most advanced economies. (5) After 1975, the structure of relative industry wages in the manufacturing sector became increasingly dissimilar across the advanced economies. However, controlling for common time effects, increases in international trade as a fraction of GDP are associated with a partial convergence of relative industry wage structures across countries. The paper discusses several alternative interpretations of wage structure developments in the United States and other countries in the light of these empirical regularities.

Job Displacement, Relative Wage Changes, and Duration of Unemployment

Using special CPS data on displaced workers, this article investigates the wage consequences of job displacement in a framework that emphasizes the effects of past job duration(s) and unemployment duration(s) on postdisplacement wages. Our model also attempts to take account of the simultaneity between unemployment duration and the postdisplacement wage. It is found that duration strongly reduces subsequent earnings and that considerable overstatement of the loss in firm-specific training investments is implied by conventional routes to measuring wage losses.

Relative Wage Variability in the United States 1860-1983

This paper examines the magnitude of changes in relative wages across industries between 1860 and 1983 and analyzes the macroeconomic determinants of such changes at different intervals during this period. The variance across industries in wage growth was at least four times larger before 1948 than afterward. Except for smaller year-to-year variability in output growth across industries after 1948, the macroeconomic factors examined cannot account for this increased rigidity of relative wages. Increases in average establishment size and improved communication of wage trends are probably partially responsible for the observed increase in relative wage rigidity. No single macroeconomic model was consistent with the year-to-year fluctuations in relative wage rigidity in every historical period examined.

Wage Adjustments and Labour Market Systems: A Cross‐Country Analysis*

Evidence is presented on how well alternative systems of wage determination facilitate disaggregate labour market adjustment. Tests of statistical causality are used to relate labour market pressure to relative wage changes. The conclusion is that rates of change of relative wages are determined independently of the microeconomic market balance. This result holds irrespective of the institutional form of the wage‐fixing system.

Inflation and Labour Market Adjustment

The implications of downward nominal and ex ante real wage rigidity,and of wage contracting for the dispersion of relative wage changes in the presence of price inflation are examined. Rigidity implies that unexpected inflation will raise the variability of relative wage changes; contracting implies unexpected inflation reduces variability. Using data on manufacturing industries for 1955-81, and on private nonfarm industries for1965-81,these hypotheses are studied. The dispersion in relative wage cnanges is reduced by greater price inflation. Most of the reduction is a response to unexpected inflation: Expected inflation has little impact on dispersion.These findings hold for subperiods within the sample, and are robust to different choices of measures of price expectations,including those of the Livingston survey, the Survey Research Center household data, and ARMA forecasts. They stand in striking contrast to the commonly accepted result that price inflation is associated with greater dispersion of relative price changes. They suggest that inflation reduces the ability of relative wages to signal disequilibria among labor markets.

The Effects of Demographic Change on the Distribution of Wages, 1967-1990

A multiple skills model was used to examine the impact of changes in labor force composition on the wage distribution of workers by age sex education and race in the US from 1967 through 1990. The model provided for a higher level of specification than previous studies of wage distribution changes. In previous investigations workers were grouped into arbitrary and a priori categories and workers in each category were assumed to be perfectly interchangeable. In contrast the multiple skills model assumed that each worker had multiple skills that each skill had a productive value and that each skill was an imperfect substitute for other skills. The model further assumed that changes in labor force composition would alter the distribution of skills in the labor force which in turn would produce changes in relative wages. Analysis revealed that wages of young college educated white and nonwhite males relative to the wages of older college educated white and nonwhite males declined since 1967 and were expected to decline throughout the 1980s. In contrast the wages of young high school educated white and nonwhite males relative to the wages of older high school educated white and nonwhite males did not decline since 1967 and were not expected to decline during the 1980s. The wages of white females of all ages and of all educational levels relative to the wages of males of all ages and of all educational levels declined throughout the period and were expected to decline in the future. Nonwhite workers made greater gains in wages since 1967 than white males and this trend was expected to continue through the 1980s; however the wages of nonwhite males remained absolutely lower than those of white males. By 1985 the wages of nonwhite females were expected to surpass those of white females. These findings were similar to those observed in other studies except that other studies failed to detect the differential impact on the wages of high school and college educated males.

Incomes Policy and Wage Differentials

Periodic incomes policies have by now become a feature of most Western economies. It has also become clear that there is a trade-off between the features of an incomes policy that make it initially acceptable and the features that make it ultimately effective. For example, most British incomes policies of the 1970s have provided higher permissible proportionate wage increases for low-wage than for high-wage workers. As we argue in Section II below, the primary advantage (and perhaps cause) of such policies is that they can more readily secure the ex ante support of a majority of workers for any specified overall increase in the wage bill or inflation target. If they are effective, however, such policies also result in the narrowing of wage differentials, and this results in new problems. Some economists consider such wage equalization the inevitable cost that an economy must bear for the sake of an effective incomes policy. Others believe the arbitrary narrowing of wage differentials creates industrial relations problems that ultimately cause the incomes policy to fail. In either case, it is important to know how much equalization has been caused by the actual incomes policies and how this compares with what would have been expected from strictly adhered-to policies. In consequence, the first (and major) part of this paper contains a simple analysis of the movement of differentials in Britain in the last decade. Most incomes policies have been explicitly equalizing, but how much equalization occurred, compared with the equalization that would have occurred if the policies had been explicitly adhered to? We show that the 1973 formula of ?1 plus 4 per cent was associated with the full equalizing effect it implied, but the 1975 ?6 a week was largely submerged in other changes and was associated with less than a third of the equalization implied by the formula. Indeed, such mild equalization as occurred between 1975 and 1977 may be explained partly by the lower inflation rate, which reduced that part of the inequality of instantaneous earnings that is caused by different groups of workers settling at different times of year. Against this, higher unemployment may have been tending to increase inequality at the same time. In 1974 threshold payments were associated with an effect of about one-half of their predicted level. The main force that offset the equalizing nature of the threshold formula and the ?6 a week was, we believe, the pressure of employers bidding up the relative earnings of the more skilled workers. Having looked at the overall picture, we then examine more closely which groups have gained and lost from recent changes in relative wages, and what equalization has occurred within the different groups. The groups are defined by occupation and by collective agreement. Our general conclusion is that, however finely the labour force is subdivided, equalization between groups has played a very small role in the overall equalization and the main changes

A Synthesis of Contour and Flexible Wage Hypotheses

A simple application of supply and demand analysis suggests changes in relative wages are explained primarily by changes in labor market tightness for different labor groups. In contrast, John Dunlop's description of the wage contour hypotheses states that wages and benefits are set by particular contours or sectors, and relative wage and benefit relationships are decisive to all compensation decisions.... Factors such as living costs, profits, product prices productivity and occasionally unemployment or skill shortages may play a role in addition to the central matter of relativity (emphasis added).' The essence of this view is that, in the short run, the wage structure is rigid across a variety of dimensions, such as occupation, industry, region, and union-nonunion sectors. Therefore, excess demand or supply for a particular labor subgroup may not affect relative wages.2 It might seem these two views of labor markets are in direct conflict. This impression is heightened by the fact the wage contour hypothesis has been either largely ignored or criticized by neoclassical labor economists.3 In this article I shall argue conflicts between flexible wage and contour hypotheses are not as serious as would first appear. While flexible wage theory grows out of the deductive framework of neoclassical economics, and the contour hypothesis is rooted in the inductive methodol-

Segmented Labor Market Theories and the Australian Experience of Equal Pay for Women

Recently, there has been an upsurge of interest in segmentation and rigidities in labor markets that are associated with relative wages, the job creation process, and access to particular jobs. Reder (1955) and Thurow (1975), for example, have emphasized relative wage rigidities and argued that employment is allocated across industries and occupations by the creation and destruction of job opportunities and not by changes in relative wages. Wages are determined largely by social custom and institutional factors, and queues of workers at each fixed wage constitute the supply curve of labor.

The sensitivity of first term navy reenlistment to changes in unemployment and relative wages

AbstractMultiple regression analysis was used to analyze newly developed twenty year time series of first term reenlistment rates for nine major Navy occupational categories. Results indicate that there are significant differences among the occupational categories in the determinants of their reenlistment behavior. More importantly, it is apparent that reenlistment rates are highly sensitive to current unemployment and especially unemployment about the time of enlistment. By comparison, relative wages (measures of military versus private sector rates of compensation) are relatively insignificant and appear powerless to control reenlistment in the context of normal fluctuations in economic activity.

Interindustry Earnings Differentials in Canada, 1945–1956

In this article the major hypotheses which have been advanced to explain the movement of interindustry earnings differentials are tested in terms of the Canadian wage structure, which has been largely ignored in the extensive literature on this subject. The author concludes that Canadian interindustry differentials have widened since 1949 and that for the entire 1945-1956 period, the most important determinants of relative wage changes among industries were the original level of earnings and changes in employment. She also examines the effect or the wage structure of unionism, productivity changes, and other factors. (Author's abstract courtesy EBSCO.)

International Trade Under Depreciated Paper. A Contribution to Theory

I. An assumed case of large foreign borrowing by a paper money country, 381. — Consequences on the rates of foreign exchange, 382. — A digression: present conditions in Germany and Europe abnormal, and little pertinent to this discussion, 384. — Effects under ordinary conditions on the prices of exported and imported goods, 386. — A transition stage; is there a bounty on exports? 388. — II. Ultimate effects, as they would be if both countries were on the gold basis, 391. — In what way, in such case, international lending may lead directly to increased exports of merchandise, 392. — But increased exports are usually the indirect consequence of gold movements, 394. — Resulting changes in relative wages and prices, 395. — No such mechanism, however, in case of depreciated paper, 396. — An analogous result, yet a different one, through the movement of goods, 397. — III. Difficulty of verifying this analysis through inductive inquiry, 400. — Partial verification of a confirmatory character not impossible, 402.