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Comparing Real Wage Rates

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  • Ashenfelter, Orley

    ()
    (Princeton University)

Abstract

A real wage rate is a nominal wage rate divided by the price of a good and is a transparent measure of how much of the good an hour of work buys. It provides an important indicator of the living standards of workers, and also of the productivity of workers. In this paper I set out the conceptual basis for such measures, provide some historical examples, and then provide my own preliminary analysis of a decade long project designed to measure the wages of workers doing the same job in over 60 countries – workers at McDonald’s restaurants. The results demonstrate that the wage rates of workers using the same skills and doing the same jobs differ by as much as 10 to 1, and that these gaps declined over the period 2000-2007, but with much less progress since the Great Recession.

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Bibliographic Info

Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 6500.

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Length: 48 pages
Date of creation: Apr 2012
Date of revision:
Publication status: published in: American Economic Review, 2012, 102 (2), 617 - 642
Handle: RePEc:iza:izadps:dp6500

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Keywords: international comparisons; real wage rates; productivity;

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  1. Hendricks, Lutz A., 2002. "How Important is Human Capital for Development? Evidence from Immigrant Earnings," Staff General Research Papers, Iowa State University, Department of Economics 11409, Iowa State University, Department of Economics.
  2. Robert Allen & Robert C. Allen, 2007. "Wages, Prices, and Living Standards in China, Japan, and Europe, 1738-1925," Economics Series Working Papers, University of Oxford, Department of Economics 316, University of Oxford, Department of Economics.
  3. Albert Rees, 1961. "Real Wages in Manufacturing, 1890-1914," NBER Books, National Bureau of Economic Research, Inc, National Bureau of Economic Research, Inc, number rees61-1.
  4. Abbott, Michael & Ashenfelter, Orley, 1976. "Labour Supply, Commodity Demand and the Allocation of Time," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(3), pages 389-411, October.
  5. Angus Deaton, 2010. "Price indexes, inequality, and the measurement of world poverty," Working Papers, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies. 1207, Princeton University, Woodrow Wilson School of Public and International Affairs, Research Program in Development Studies..
  6. Allen, Robert C. & Bassino, Jean-Pascal & Ma, Debin & Moll-Murata, Christine & Zanden, Jan Luiten van, 2009. "Wages, prices, and living standards in China, 1738-1925: in comparison with Europe, Japan, and India," CEI Working Paper Series, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University 2009-03, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
  7. Allen, Robert C., 2011. "Global Economic History: A Very Short Introduction," OUP Catalogue, Oxford University Press, Oxford University Press, number 9780199596652, October.
  8. Robert Allen & Robert C. Allen, 2007. "How Prosperous were the Romans? Evidence from Diocletian`s Price Edict (301 AD)," Economics Series Working Papers, University of Oxford, Department of Economics 363, University of Oxford, Department of Economics.
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Cited by:
  1. Michael A. Clemens, 2013. "Why Do Programmers Earn More in Houston Than Hyderabad? Evidence from Randomized Processing of US Visas," American Economic Review, American Economic Association, American Economic Association, vol. 103(3), pages 198-202, May.

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