NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Standard-Rate Wage Setting, Labor Quality, and Unions

Charles Brown

NBER Working Paper No. 1717
Issued in October 1985
NBER Program(s):   LS

"Standard rate" wage policies, under which all workers in a particular job receive the same wage, are common for blue-collar workers, especially those covered by collective bargaining agreements and those who work for large employers.This paper analyzes the impact of standard-rate wage setting.There are two important conclusions. First,a standard-rate rule which leaves the employer free to set the rate can either increase or reduce the quality of labor hired. Given empirically likely distributions of alternative wages for workers, it pushes employers toward the middle of the quality distribution. Second, union standard-rate policies allow union?ununion differences in wages for workers of a given qualityto exist even when union employers are free to alter the quality of their workforces.

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Document Object Identifier (DOI): 10.3386/w1717

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