Everyones A Winner?: Persistence in British Private Sector Wage Settlements

One important feature of labour market policy over the past 15 years has been an emphasis on promoting greater flexibility and responsiveness in wages to the fortunes of individual firms. This study analyses the patterns of persistence in British private manufacturing wage settlements using a unique longitudinal dataset of bargaining groups over the period 1979-94. We find little evidence that settlement variation in private sector manufacturing bargaining groups has widened over time. We do find that the pattern and persistence of settlements over time is consistent with the presence of autoregressive but not permanent fixed effect components. We show that this relatively small amount of turbulence is sufficient to generate evolutionary paths for wage levels, consistent with the evidence of widening inequality observed in recent years in Britain, suggesting that firm fixed effects may not account for much of the rise.