Nominal Wage Rigidity and Industry Characteristics in the Downturns of 1893, 1929, and 1981
Author(s)
Hanes, Christopher
Abstract
I have found that employers in industries paying relatively high wages were more likely to hold wage rates fixed in the months after the downturns of 1893 and 1929, and to maintain relatively high rates of wage inflation in the downturn of 1981. In the two downturns for which I observe fixed capital per employee (1893 and 1981), employers in relatively capital-intensive industries held wages or wage inflation rates relatively rigid. In the two downturns for which I observe product-market concentration ratios (1929 and 1981), wages were more rigid in more concentrated industries. In the downturns of 1893 and 1981 wages appear to have been relatively rigid in industries marked by high profit per employee, but only in the absence of controls for capital intensity. Employers in industries with large numbers of employees per establishment do not appear to have held wages relatively rigid in any of the downturns. Indeed, in the downturn of 1893 employers in industries with large establishments appear to have been more likely to cut wages, other things equal. On the whole, my results suggest that across industries relative rigidity in nominal wage rates has been associated with high earnings, capital intensity, and product-market concentration, but not with establishment size or profit per worker except to the degree those variables have been correlated with capital-intensity or product-market concentration. Because these patterns held in 1893 and 1929 as well as in the postwar period, they must reflect something more fundamental than the presence of union wage contracts.
