The paper uses newly available cross-section data
to study wage determination in the United Kingdom in
the 1980s. The results are contrasted with those from
a comparable sample from the US from 1977-1988.
1) Fear of unemployment substantially depresses pay in
both countries.
2) There is some evidence of a wage ratchet in the UK
whereby rates of pay are more flexible upwards than
downwards.
3) The unemployment elasticity of pay averages -0.1 in
the UK and apparently zero in the US.
4) Wages are almost twice as flexible in non-union and
small workplaces in the UK.
*Published:
The Economic Journal, Vol. 101, No. 406, pp.483-496, (May 1991).
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