Wage Stagnation and the Decline of Standardized Pay Rates, 1974–1991
- American Economic Journal: Applied Economics (Forthcoming)
Using new establishment-by-occupation microdata, we show that the use of discretionary wagesetting
significantly expanded in the 1970s and 1980s. Increasingly, wages for blue-collar workers
were not standardized by job title or seniority, but instead subject to managerial discretion.
When establishments abandoned standardized pay rates, wages fell, particularly for the lowestpaid
workers in a job and for those in establishments that previously paid above market rates.
This shift away from standardized pay rates, in context of a broader decline in worker bargaining
power, accelerated the decline in real wages experienced by blue collar workers in the 1980s.
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