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Labour Markets with Company Wage Policies

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  • Alan Manning

Abstract

In the conventional perfectly competitive model of the labour market, wage-setting is individualistic in the sense that identical workers should receive identical wages in different firms and different workers should receive different wages in the same firm. But, in reality, wages often seem to be attached more to the job than the worker, with identical workers receiving different wages in different firms and different workers receiving the same wage in a single firm. There is what we call a Company Wage Policy. In this paper we explore the consequences of assuming that the labour market is characterised by company wage policies. We consider a number of issues; the nature of wage dispersion and unemployment, the effects of benefits, minimum wages and unions, and the incentives to acquire skills. We show that, in general, company wage policies imply labour market behaviour that is very different from the perfectly competitive model, and seems more in line with empirical evidence. Finally, we consider why company wage policies might exist.

Suggested Citation

  • Alan Manning, 1994. "Labour Markets with Company Wage Policies," CEP Discussion Papers dp0214, Centre for Economic Performance, LSE.
  • Handle: RePEc:cep:cepdps:dp0214
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    Cited by:

    1. Jonathan P. Thomas, 1999. "Fair Pay and a Wagebill Arguement for Wage Rigidity and Excessive Employment Variability," Discussion Paper Series, Department of Economics 199919, Department of Economics, University of St. Andrews.
    2. Dovern, Jonas & Meier, Carsten-Patrick, 2006. "Macroeconomic aspects of structural labor market reforms in Germany," Kiel Working Papers 1295, Kiel Institute for the World Economy (IfW).
    3. Erling Barth & Harald Dale-Olsen, 2011. "Employer Size or Skill Group Size Effect on Wages?," ILR Review, Cornell University, ILR School, vol. 64(2), pages 341-355, January.
    4. Erling Barth & Harald Dale-Olsen, 1999. "Monopsonistic Discrimination and the Gender-Wage Gap," NBER Working Papers 7197, National Bureau of Economic Research, Inc.

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