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Standard-Rate Wage Setting, Labor Quality, and Unions

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  • Charles Brown

Abstract

"Standard rate" wage policies, under which all workers in a particular job receive the same wage, are common for blue-collar workers, especially those covered by collective bargaining agreements and those who work for large employers.This paper analyzes the impact of standard-rate wage setting.There are two important conclusions. First,a standard-rate rule which leaves the employer free to set the rate can either increase or reduce the quality of labor hired. Given empirically likely distributions of alternative wages for workers, it pushes employers toward the middle of the quality distribution. Second, union standard-rate policies allow union?ununion differences in wages for workers of a given qualityto exist even when union employers are free to alter the quality of their workforces.

Suggested Citation

  • Charles Brown, 1985. "Standard-Rate Wage Setting, Labor Quality, and Unions," NBER Working Papers 1717, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:1717 Note: LS
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    1. Jacob Mincer, 1981. "The Economics of Wage Floors," NBER Working Papers 0804, National Bureau of Economic Research, Inc.
    2. Brown, Charles & Medoff, James, 1989. "The Employer Size-Wage Effect," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1027-1059, October.
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