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distributon" question. Secular Bdhavior of the Ocmotional Vg Structure. Mst authors have argued that percentage occationl wage differential. have shown a.
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Prepared by
Labor Research Unit
University of California
c! : :- lyjarnuary
1964
iREIATIONS LIIARY
JUN Z U 1966
UNIVERSITY OF CALFORNIA
BERKEEY
c
-A.
';
Mobtlit
Richard A. Lester, "Wage Diversity
Xmplicat.ions," Re1-cie
of Economics sand Statistics, August,
::i.chard
Lester,
Rtinge Theory of Wage Differentivs," Inc';istriL:
andi8.
Review, July, 1952.
Lotiz R. Salkever,
Theory
of Wage Structure,"
Ll'or
R.e!lations Review,
(:o^r'k Kerr,
"'Ie BalkJanizAtion of Iabor Markets,' i
,:co,.irn:.
}onn. . ...a,
1951,.
fi.;.on Rottenberg,
Idusl^-r'aL .and bo^r iI..1t
Review, January,,
.fOext A. Lanpmarn,
.Labor
indus tl.t.
and Labor .Rela.tions Re-view, Ju.y, 1956.
rel`.&rvnHReder,
Theory
and Measautrent," As.sectsf ?L:':
' y
Eiconomics, National Bureau of Economic Research, :.962. :
Wf Rupert Maclaurin and Charles ,yers, "Wages and the iMovement
of
Labor," Qaarterly Journal of Economics, .February, 1943.
Sol. Swerdloff and Abraham Bluestone,
of Tool and Di'e MakeLrs,
Monthly Labor Review, December, 1952.
ac-.a
s Palmer, H. S. Parnes,
Richard C. Wilcox, Mar.y
Herman, Caro'l
hie Reluctant
Chaner,
Herbe;rt
Parnes,
to Job tanr gi.ng:
Ie E3Lfect
o::Pri iv3a
?Plans,"
Eamd others, .The
:
Chapter
i.-at *Pens-.ion Pi.ans rand Manpower Policy," Bureau of Labor Statistic X
B!ietf.en No. 1359, 1963.
:in1ent . Gegcn and Sanmuel H. Thompson,
Mobl.ity in a Iabor Su.rr..ps
Are,:'-'
Reve.P,
: .o ..?.
t ... "r
X.loy;ent and Job Mobil i-b ," Mo.n-rtthly Labor Reviw o-'i
-.'r";,1"6.
.:'n?.;1.;-: ', ''TF-ne Pa:rity Ratiro and Agrficu.1t-:ural.
o.t- ratioC:.,'i .:':. -.
Economic Journal, Jul y. 1959.
Ott-o Eckstceir nd 'ihoaias
Wilson, "The Determninatiorn of lMoney ?m iJ r
American Ind:;stry," Quarterly
:.96?2.
.'m.rold',
M. Levrinson, PostwarcMovemeint
Maaufact.'ixi,
r:3.d!.e:
ries, .Joint Econoic Com.ittee Study of limopoyient, (Crowt.h, and
Prico :rels.;
Paper
No. 21, January 30, 1960-
',:i.w!ia
Bowen, "Inter-Industry Variations in the Unemployment-Wage
Relationship," Wage Behavior in the Postwar Period,
. Dnlop,
.ard
the Wage Structure,'
._Filo
ent
and. Wag
y1948.
-.joseph
Theory of Interindustry Wage Struc-ture
"
Quarterly
JournalT of
-Arthr
Ross and Wiliim Goldner,
Affecting
the Interindcust-y. Wa;Vag
Si:;-tcture," Quarterly
of Economics, MaV,
Myers and Roger
Bowl-by,
aind y
Pirodu.ctivity,n Indu.trial
Octorber:,
Productivity
Interindustry Wage Struc-care,
Review, October,
Mahler, "Union, Nonunion Wage Differentials," American Econmic.. Rv.^.;. .
jolm E. Taher, "The Wage Pattern in the United States, 1946-57," Jnustri:-
and Labor Relations Review, October, 1961.
Fcbert Ozanne, ''Impact
Distribution,'
Qara-terly Journsal of Economics, May,
c
by Lc-wl
G-t.loway, uarterly, Jou1ma
of Economics,
1i0O
ar'; J.t Se6,al~ !"Unionis
. and Wage Movements,
/
Oct-ober.
"ie^.T
Duesenberry, 'Underlying
Factors in Postwar Inflation," in
ttee,
Staff
t on Tmp].oyeen':.,
Gro)rth
Pridfi ce Level-, 1959,
o: :L t, 1>;Dcyl; aind Meltin Rothbaum,
Comparisons
of Wage
t-/t; i ctres,"
Review, April, 1955.
!/.e].a
an- dNT i. Ar.i.old TocUes,
Chnnages
in Inter'-
under Ful Employmsent," Review of Economaic
a-.n2. S.at iLsy.ics, ,
lTeory of Occupational
c.
Economi.e Reeriew, December, 1955.
PhiLip W. Bell, "Cyclical
Variations and Trend in Occupational Wage
ertials in American Industry since
Review of Economc.s arnd
Stta-istics, November, 1951.
b.'er, "Occupational. Wage Differentials, 190-19047,"
Augu
Mdmtz,
Wage Differentials Based on
in
United States,"
Review, June,
Rolbert OzarxLe,
Century
of
in
of Economics and Statistics,
,
Caselli, "Wage Differentials, By Skill,
Manaement
Pc-t. G. Keat, "Long
Changes
in
y,
Journal of Political Economy, December,
Capron, "Drnamic Shortages
and Price Rises: The
F.ngineer.-Scientist Case," Quartrely Journal of E
1 i'-
.'o tvo Kanrinen, "Occupational
in Ma-,frctu.ringr
*-
Mont2l. y a^.bor Review, November, 1953.
'v zno iC
"Job
DifferentieJ. s in
uJ'
rernnth M, McCaffee, 'The Ear:nings Di 'ferentie. Betw.en . White
rand
Review of Economics and
s ,
i. L.
of Wages of
nlh-t'XiriA.l and Labor ?Relations Review, January. 1953.
nd H.
G. Ross,
Views on
Wage Diversity,"
end Occupational Wage Dispersicon
A
}e;joindev,"
anen
Relations
;::
,,im;.mfield, "Wage
ias in the Co-ion
Indctustry,
y
,f' Eono-nics ,r. S-taisti.cs,F.ebr.,-nry, I95.
"Soirce;.
a.c anI $'.Lary
late znDispje.rslion ''-.t',n
l
d
or
''; .,,-4.,vi, ¢' Per~tza-lmi,,af
................ P
Perlinmmt "foriree Wideiamg Ociirution&I Wage
DNffernti&s,"
of Ectxaswca an.d LMetfsutieg,
Ri.ihard
'h"Wge Diversity
Implications,"
Review of Eonoc Statisics a SaAugust. 1946.
The actual wage facts seem contrary to what conventional theory
leads one to expect PeIrfect competition
seems to be the exception,
Iem.Cnd and supply
do not
gross inequities or gross irrationality.
to varying wage
locality;
significant
wage rates is
their variation for the sam Job
of
one rate,
usually
band,
range between
highest
gesin erage Pa
2,o00 ranges (the spread
highest
plant
averages)
for
occupations (Table 1), Taking
each occupation
separately, average hou.ly earnings
the highest-paying
by
an average
of 50 per
cases,
average
accounting
for some of the
diverasity were: varying
occupational
categories
for each labor mrket;
piece
pay,
job
geographical
,a,. , e-t. ezheless,, the diversity wis great.
P-.gP
,s in Plant Averages
for C.otton
study by the
ut'haor al:.- designed
,;
BL,: .urvys...
Table 2 showS the spread in straight
time
.:ini)nx. btwee.n high an'd
low plant
occupations
15
1943 and
Table 3 gives
coefficients of average deviation,
diversity
is again apparent.
~ige
may
great
region,
may
triple
(Uhionism
was not important
Oany
plants
were organized, and
were not the high wage plants. )
3ilications. Uniformity of wage
market
It
likely
only through government
action,
collective bargaining,
employers
=- ie.,
competition
of competition.
study
account
psychological,
&aployers can apparently
point,
rates,
at which they establish
occupational wage levels,
determining
limiting
factors have yet
Lester,
Range Theory of Wage Differentials," Industr.al and
Review, July,
genuine,
in wages
explained satisfactorily by
a pressing
field.
Some of the striin findings
investigations
field:
survey
193-
of 48 labor market
that
occupation,
firms in
the same area were distributed over a
central ten-
dency, and that straighttime hourly eanings in a particular occupation
50 per
hitier
top-paying plant
i-i'rt diversity
in wage scales,
by
of average
as great in
region.
And in some cases,
range
despite
-the shift from widespread unemployment
general
scarcity in the
].940' s.
by Raynolds of starting
in 28 manufacturing
as
great
in 1948
1942
--
highest-paying plant
vas 78
lawest-vage
in 1940 and 72 per cent
in 1948
yet
the low-wage establishments suffered from
shortage
of labor.
The
widely and irrationally:
g,, ~ in one piulp an.d paper
5 per
l.r;i the ortXhern; in another firm In the same industry,
scales
to aompaire, depending as they did on possibilities
operation
of incentive systems; the highly personalized reputation
of the
seemed more irportant.
In
years of
,7sually
about 80 per
force,
Ii;,i
and out of the Job
inpulsive
Occpational Differentials. Intraplant wage structures are
interfirm
in the
:i.llaed-unskilled wage
persist;
latitude,
partiaculaly in setting
lines but is
by on-the-job training,
promotion
on a seniority
forces are largely inoperative
usually
aonmsrketb
ol Differentials..
These are of long standing,
with great
xut apparently
Conclusion A new theory =sat
.Sti.tut:itor.l
practices
aagent
the anti-competitive
factors and ipediments to
;-pelion
competitive or equilibrium
:e , a range of indeterminacy
CoupXanagements vary in labor
and can often select a position
of long-run stability
at various
;:
ints r thin the
of indeterminacy.
Salkever, "Twrd a Teory
Wgep Struct ," Idustrial
Briew, April, 13953-
be ineoonruity
e
iplications
static, long-run, full-Xlpoymnt
theory
econcmd.ts
imperfections
narket
dat,
aN theooretCal
cstructio is ftile.
proach
la eds.
thodolgl Ptobm. bxpla=ti in ter
of rauda varia-
basicaly
relationshp nst
rejected. Wqe
is constantly
chanig andm lti arate,
dyna c aalysi rather than statei equilibrim anysis.
heandl
can
-p-n-eon
fbr
persistene.
tie debate betwenM rginmalists aud antlmrginarlists
confused b drd of tr. Ibrginal analysis, if appropriate
en applied to the functional di6tribution
ino,
appro-
priate for the analys of occptiocal
inoore
Purtherare,
neessarily
parts.
However, dissatisfection with extant theory
thing
antitheoretical conception. an heardy quarrel
with a conclusion that vage rates are aet b.y vW bargainr,
they
by
"nuerous ecoo c, psychological, political,
and institutional factors,"
to
proed i not to explain
the process. Nor an much be gained
movement
ence of Occpatio _ifferentials.
An occupational structure
ris;es
plant. The
employer
some jumae
importance to the total
productive operation
task,
to risk the
loss of the more strategically
becoms urwilling
effectively at a "higher
level" job
without a
'a85e
occupational
matures,
supply
learning
important
influences on
the development
primitive ordering of job
importance
o
The comparative
o
employer,
persistent unemploy-
mat
economy, to replace
Job
occupaauts
in the relative wage level, depends on
performance
of a specialized
taskj, octput per
directly
as a function of
time on the job.
prior training,
improving
technoogy
gap explains
the willingness
of an
-itployer to pey currently employed workers more
than he would have to pay
csplacements
Learning curves are not identical for all occupations. It is
loical
the
the skill, the longer the time required
x:efore the learning
Therefore,
ve.,,
the disparity
output of the employed
worker at or
be-yond the vieing-o. f point of the learning curve,
and that expected of
onparnb]y trained replacements, should increase. Despite individual
dffertences , ad vithout
any precise computation by
employer,
oclarLotios
be explained
alone,
atwuimng
supply,
the equating
of the
utility
and disutility of monmoney factors, or
artificial marginal
aalysis@
Cha
Tme.
v3..uable nsghts
uigh ca s
but
'*here was no recognition
of he dynmic
problem.
emaloyment,
w;e' xregarded
as stable,
expecatios
wre ignored.
example, the
acquiring
by the economic environment: if
thiere is an increased demand for a skill throughout
eeonoaor, exhausting
:e
of unemployd workers, training progreaB will be supported by
S.fm
and by publi agencies,
thus altering
'.
of training
expected
investment,
with a
~olresrponing ehan.e in impact upon wage
Labor &pEly
The concept
reserve, adapted
w sridged
from Marx to explain
unemployment,
uzneLl
concept of noncompeting groups.
.hployment or a higher wage
is often insufficient to effect ovement
a firm or industry: longshoe-
ple, seem to be less mobile than carpenters. Occupations
o0t industry
c?;.^ acGross nad.urtry lines.
.Ie effect of a wage diifferential or a change
in a wage differen-
:. oL o Lhobity -3,berefore,
the nature of the appropriate
chanetd
mos. for higher-skld l groups,
parameters of the
output/time
expansiony
During a contraction, the effect of the learning curve is to widen
differentials.
activity
also exert differentia.
presaure on
demads of occupational groups With rising prices,
pressure
becomes stronger
contraction, the fear of losing Jobs is stronger for the lowest skills.
by changes
in
gener:al economic actilvty. If the reserve is tbilt
occupation
,lt:h eonsiderable cros r a ross-industry mobility, expansion
-i'crtiase ability
to
offsetting to some extent the narrovWn
governmnts and quasi-
g-;ernm.ents 'e.g., trade unions) is easily exaggerated
prominence
procedure
of trge
-xogenous
ae
by
'i the long run, governna
group
may alter the institutional
wages
require
the
propositions
CiacLk: Kerr,
Marets,
"
ad JEconoc
5pprbuniy>
Kerr explores the notion of the institutionalization of "natural" or
"f;ree choice" markets. Free markets are characterized by indistinct mnoueries,
geographMcally
and occupationally.
instit;tionalization
of such mareets
ie the effect of the establiahbent of for al and informal rules which divide
noncoepeting grups.
short run,
always been recognized barriers to *te
rnonceoaetig socio-econcmic groups; the deeire .for
security;
preferences
of employers.
t:rft union,
job
replace
many by the kow-
soverignty
over a "Job territory;" uttsidere
rights.
by
o coamminity of wrOtieri,
employers, or by goverament,
on movement from
these surces are defined as
they are written
o;rZerely imsplecit.
.Aong the great variety
rules
two general systems are discussed,
exmaft union
pr-itintg,
proprietorship on bebha
o:
ca2refut3y
occupatioJ.
:ir geo3raphical area. isployers must hIre union members; workers enter the
mrivt through
the unions. Unions may exercise preferences (on
racee
'~.Si
tia ~^.ms);- usually local
preferred to tranfers even fromI
?:ot'e'
< local, Apprenticeship prog
as are sometim.es the only means of entry
