Standard-Rate Wage Setting, Labor Quality, and Unions

22 Pages Posted: 4 Jul 2004 Last revised: 13 Mar 2022

See all articles by Charles Brown

Charles Brown

University of Michigan; National Bureau of Economic Research (NBER)

Date Written: October 1985

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

Brown, Charles C., Standard-Rate Wage Setting, Labor Quality, and Unions (October 1985). NBER Working Paper No. w1717, Available at SSRN: https://ssrn.com/abstract=338788

Charles C. Brown (Contact Author)

University of Michigan ( email )

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