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Real Wages, Working Time, and the Great Depression: What Does Micro Evidence Tell Us?

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  • Hart, Robert A.

    ()
    (University of Stirling)

  • Roberts, J. Elizabeth

    ()
    (University of Stirling)

Abstract

Based largely on industry-level aggregate statistics, the prevailing view, and one that has strongly influenced macroeconomic thought, is that real wages during the cycle containing the Great Depression are either acyclical or countercyclical. Does this finding hold-up when more micro data are employed? We examine this question based on detailed blue-collar workers’ company payroll data for a large section of the British engineering and metal working industries. We distinguish between pieceworkers and timeworkers, with pieceworkers accounting for over half the workforce. For the period 1927 to 1937, the two pay groups are broken down into 14 occupations, and 48 travel-to-work geographical districts. We estimate wage and hours cyclicality in respect of the national unemployment rate as well as the district rates. Weekly hours and real weekly earnings are found to be strongly procyclical. Real hourly earnings of pieceworkers are also significantly procyclical. The roles of standard and overtime hours are crucial to these findings.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 4977.

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Length: 46 pages
Date of creation: May 2010
Date of revision:
Publication status: published as 'Real wage cyclicality in the Great Depression: evidence from British engineering and metal working firms' in: Oxford Economic Papers, 2013, 65 (2), 197-218
Handle: RePEc:iza:izadps:dp4977

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Keywords: the Great Depression; timework; piecework; working time; real wage cyclicality;

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  1. Katharine G. Abraham & John C. Haltiwanger, 1995. "Real Wages and the Business Cycle," Journal of Economic Literature, American Economic Association, vol. 33(3), pages 1215-1264, September.
  2. Christopher A. Pissarides, 2009. "The Unemployment Volatility Puzzle: Is Wage Stickiness the Answer?," Econometrica, Econometric Society, vol. 77(5), pages 1339-1369, 09.
  3. Chirinko, Robert S, 1980. "The Real Wage Rate over the Business Cycle," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 459-61, August.
  4. Eric T. Swanson, 2007. "Real Wage Cyclicality In The Panel Study Of Income Dynamics," Scottish Journal of Political Economy, Scottish Economic Society, vol. 54(5), pages 617-647, November.
  5. Hart, Robert A., 2008. "Piece work pay and hourly pay over the cycle," Labour Economics, Elsevier, vol. 15(5), pages 1006-1022, October.
  6. Blanchflower, David G & Oswald, Andrew J, 1990. " The Wage Curve," Scandinavian Journal of Economics, Wiley Blackwell, vol. 92(2), pages 215-35.
    • David G. Blanchflower & Andrew J. Oswald, 1995. "The Wage Curve," MIT Press Books, The MIT Press, edition 1, volume 1, number 026202375x, December.
  7. Bernanke, Ben S, 1986. "Employment, Hours, and Earnings in the Depression: An Analysis of EightManufacturing Industries," American Economic Review, American Economic Association, vol. 76(1), pages 82-109, March.
  8. Seiler, Eric, 1984. "Piece Rate vs. Time Rate: The Effect of Incentives on Earnings," The Review of Economics and Statistics, MIT Press, vol. 66(3), pages 363-76, August.
  9. Walter Y. Oi, 1962. "Labor as a Quasi-Fixed Factor," Journal of Political Economy, University of Chicago Press, vol. 70, pages 538.
  10. Bils, Mark J, 1985. "Real Wages over the Business Cycle: Evidence from Panel Data," Journal of Political Economy, University of Chicago Press, vol. 93(4), pages 666-89, August.
  11. Robert B. Barsky & Gary Solon, 1989. "Real Wages Over The Business Cycle," NBER Working Papers 2888, National Bureau of Economic Research, Inc.
  12. Lazear, Edward P, 1986. "Salaries and Piece Rates," The Journal of Business, University of Chicago Press, vol. 59(3), pages 405-31, July.
  13. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August.
  14. Solon, Gary & Barsky, Robert & Parker, Jonathan A, 1994. "Measuring the Cyclicality of Real Wages: How Important Is Composition Bias?," The Quarterly Journal of Economics, MIT Press, vol. 109(1), pages 1-25, February.
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