INTERINDUSTRY VARIATION I N S A L A R I E S : AN EMPIRICAL STUDY by TRENT WOODS APPELBE B.A..; U n i v e r s i t y of B r i t i s h Columbia, I96I A THESIS SUBMITTED I N PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n t h e Department o f Economics We a c c e p t t h i s t h e s i s as c o n f o r m i n g t o t h e r e q u i r e d THE UNIVERSITY OF B R I T I S H COLUMBIA S e p t e m b e r , 1969 standard In presenting t h i s t h e s i s i n p a r t i a l f u l f i l m e n t of the r e q u i r e m e n t s f o r an advanced degree a t t h e U n i v e r s i t y o f B r i t i s h Columbia., I a g r e e t h a t the Library available f o r r e f e r e n c e and Study. I further agree t h a t thesis permission f o r extensive copying of t h i s f o r s c h o l a r l y p u r p o s e s may be g r a n t e d b y t h e Head o f my Department pr by h i s r e p r e s e n t a t i v e s . copying or p u b l i c a t i o n not of this thesis be a l l o w e d w i t h o u t my w r i t t e n Department of ECONOMICS The U n i v e r s i t y o f B r i t i s h C o l u m b i a V a n c o u v e r 8, C a n a d a Date s h a l l make i t , f r e e l y S e p t e m b e r 22, 1969 I t i s understood f o rfinancial permission. gain that sh9.ll ABSTRACT The p u r p o s e o f t h i s s t u d y was t o e m p i r i c a l l y investigate salaries the determinants of the v a r i a t i o n i n w h i t e - c o l l a r among U n i t e d S t a t e s m a n u f a c t u r i n g and m i n i n g i n - dustries. A m o d e l was f o r m u l a t e d , h y p o t h e s i z i n g industry that salary variation i s primarily a function monopoly power, c a p i t a l - l a b o u r regression inter- of i n d u s t r y r a t i o and g r o w t h . Linear a n a l y s i s was t o be u s e d t o t e s t t h e m o d e l w i t h f r o m t h e U.S. B u r e a u o f t h e C e n s u s a n d t h e I n t e r n a l data Revenue Department. C o n c e p t u a l and s t a t i s t i c a l i n measuring the industry and variables. p r o b l e m s were Although encountered concentration b a r r i e r s t o e n t r y w e r e t o be u s e d t o g e t h e r i n m e a s u r i n g monopoly power, i n t h e f i n a l analysis that The m e a s u r e o f i n d u s t r y h a d t o be r e l i e d u p o n . i t was concentration b a s e d u p o n c h a n g e i n e m p l o y m e n t , t u r n e d o u t t o be for i t s intended i n an i n d u s t r y results indicated that t h e amount o f h a s no e f f e c t u p o n t h e l e v e l o f s a l a r i e s . P r o b l e m s o f m u l t i c o l l i n e a r i t y made I t i m p o s s i b l e capital-labour inappropriate purpose. The r e g r e s s i o n capital growth, and c a p i t a l r e q u i r e m e n t s e f f e c t s . i t o isolate the ii The e v i d e n c e f u r t h e r concentration the indicated that i s a factor i n explaining r e s u l t s were n o t d e c i s i v e industry salary rates. enough t o a l l o w any f i r m However, conclusions c o n c e r n i n g t h e e f f e c t s o f monopoly power, p a r t i c u l a r l y i n v i e w of the f a c t t h a t concentration variable. i s an i m p e r f e c t m e a s u r e o f t h i s . . T h u s , one a s s e r t i o n o f t h e h y p o t h e s i s was t e n t a t i v e l y accepted, another rejected, inconclusive. and f o r t h e t h i r d , the evidence was CONTENTS Page L I S T OF TABLES . . .' . . . iv v L I S T OF FIGURES CHAPTER I. II. III. INTRODUCTION THE MODEL . 1 '. . . 8 DATA SOURCES AND MEASUREMENT OF REGRESSION VARIABLES IV. V. 18 REGRESSION RESULTS . . . . • 36 CONCLUSIONS 50 BIBLIOGRAPHY 52 APPENDICES I. II. MATCHING OF INDUSTRY DATA DETAILED REGRESSION RESULTS iii . . . . . . . . 56 65 L I S T OP TABLES Page TABLE , I. II. Industry Variables 21 Occupational.Groupings f o r Regression Analysis III. 33 Multiple Regression Results - Coefficients of I n d u s t r y V a r i a b l e s IV. Comparison w i t h Regression 4-0 Results of Weiss' Study V. Basic Industry Data - VI. Detailed Regression VII. Regression Results 47 . 59 Results f o rUnionization iv 6? ... 69 L I S T OF FIGURES Page FIGURE I. Wage D e t e r m i n a t i o n U n d e r . M o n o p o l y a n d Competition 14 v CHAPTER I INTRODUCTION The earnings in subject of i n t e r i n d u s t r y differences o f s a l a r i e d employees has r e c e i v e d l i t t l e economic l i t e r a t u r e . mination i n the Most o f t h e r e s e a r c h o n t h e d e t e r - o f e a r n i n g s has c e n t e r e d wages o f h o u r l y p a i d w o r k e r s . some s c a t t e r e d attention attempts about t h e a n a l y s i s In addition, to explain of the t h e r e have been the v a r i a t i o n i n executive salaries. Such s t u d i e s , however, a r e o f l i m i t e d v a l u e uting t o a general analysis important that the study unionization, d i f f e r e n t .classes of the earnings t o be o f l e s s I n t e r e s t a's of s a l a r i e d employees. Converse- the existence of d i s c r e t i o n a r y p r o f i t s should exert i t s maximum I n f l u e n c e u p o n t h e e a r n i n g s less of employees. which i s given considerable a t t e n t i o n i n o f wage l e v e l s , i s l i k e l y a determinant ly, There e x i s t f a c t o r s c o n t r i b u t i n g t o the determination of earnings are unique f o r these Notably, of s a l a r y l e v e l s . i n contrib- effect f o rthe rest none f o r wage of top executives, having o f s a l a r i e d e m p l o y e e s and l i t t l e or 1 earners. ^ D i s c r e t i o n a r y p r o f i t s h a v e b e e n d e f i n e d as " t h e d i f f e r e n c e b e t w e e n a c t u a l p r o f i t s and minimum p r o f i t s demanded", O.E. W i l l i a m s o n , " M a n a g e r i a l D i s c r e t i o n a n d B u s i n e s s B e h a v i o r " , A m e r i c a n E c o n o m i c R e v i e w . V o l . 53J> No. 5 (December 1963) j> p. 1035This subject i s explored i n g r e a t e r det3.il i n Chapter I I . - 2 - T h u s , a gap e x i s t s i n t h a t t h e r e ' h a s b e e n no t h o r o u g h empirical study salary levels. earners of the i n d u s t r y c h a r a c t e r i s t i c s that I n view of the trend determine away f r o m u n i o n i z e d towards s a l a r i e d employees, knowledge i n t h i s wage area 2 becomes i n c r e a s i n g l y i m p o r t a n t . Hence, t h i s i n v e s t i g a t e t h e economic v a r i a b l e s t h a t study will influence the inter- industry salary structure. To ' a c c o m p l i s h salaried employees w i l l this, U.S. C e n s u s d a t a be m a t c h e d w i t h d a t a o f U.S. m a n u f a c t u r i n g and m i n i n g i n d u s t r y . the input f o r multiple regressions variables that The Chapter IV. be are responsible This w i l l of section provide t o determine the i n d u s t r y r e s u l t s of the regressions variation. are presented i n t r o d u c t o r y chapter d e v o t e d t o a summary o f t h e l i t e r a t u r e study on a c r o s s f o r any s a l a r y The r e m a i n d e r o f t h i s on e a r n i n g s in will relevant to this and t o t h e i m p l i c a t i o n s o f t h e f i n d i n g s o f t h e s t u d y . C h a p t e r I I e x p l a i n s t h e t h e o r e t i c a l model w h i c h t h e r e g r e s s i o n analysis the b a s i s i s to test, and C h a p t e r I I I e x a m i n e s t h e d a t a t h a t i s of the study. I n C h a p t e r V, t h e c o n c l u s i o n s are put forth. I n t h e p e r i o d f r o m 19^-7 - 19^5 w h i t e - c o l l a r w o r k e r s i n t h e U.S. ( p r o f e s s i o n a l , m a n a g e r i a l , o f f i c e a n d s a l e s w o r k e r s ) i n c r e a s e d b y 9-6 m i l l i o n w h i l e b l u e - c o l l a r w o r k e r s ( c r a f t s m e n , o p e r a t i v e s and l a b o u r e r s ) were d e c r e a s i n g b y 4 m i l l i o n . I n 1900 w h i t e - c o l l a r w o r k e r s w e r e 17.6 p e r c e n t o f t h e l a b o u r f o r c e and 44.5 p e r c e n t i n 1965. ' F i g u r e s f r o m Manpower R e p o r t o f t h e P r e s i d e n t and A R e p o r t on Manpower R e q u i r e m e n t s , R e s o u r c e s , U t i l i z a t i o n and T r a i n i n g , U n i t e d S t a t e s D e p a r t m e n t o f L a b o r , M a r c h , 1966. A. Other Studies on I n t e r a n d u s t r i e s D i f f e r e n c e s There has been c o n s i d e r a b l e i n t e r i n d u s t r y v a r i a t i o n i n wage r a t e s . research i n Earnings done o n t h e The o b j e c t i v e o f t h e s e s t u d i e s h a s b e e n t o r e l a t e wage l e v e l s t o c e r t a i n k e y i n d u s t r y variables. A study b a s e d on t h e h y p o t h e s i s determined by a f i r m s 1 D a v i d R. B r o w n . labour total " a b i l i t y t o p a y " was made b y Ability t o p a y was m e a s u r e d b y s i x v a r i a b l e s -- productivity, concentration, c o s t s , male - female r a t i o , i n employment., t h a t wage l e v e l s a r e ratio seasonal of labour stability Analysis i n d i c a t e d that a l l of these v a r i a b l e s e x c e p t g r o w t h , were s i g n i f i c a n t costs t o and g r o w t h industry in- determining wage levels. Studies by Garbarino, Allen, and G o l d n e r and Ross i n v e s t i g a t e d t h e i n d u s t r y f a c t o r s a f f e c t i n g wage c h a n g e s , than absolute wage l e v e l s . The f i n d i n g s o f t h e s e t h r e e rather studies i n d i c a t e t h a t h i g h degrees o f u n i o n i z a t i o n and c o n c e n t r a t i o n a r e D.R. B r o w n , E x p e c t e d A b i l i t y t o P a y a n d I n t e r i n d u s t r y Wage S t r u c t u r e i n M a n u f a c t u r i n g " , I n d u s t r i a l and L a b o r R e l a t i o n s R e v i e w , V o l . 16, No. 1 ( O c t o b e r , 1962), p p . 45 - 62. J.W. G a r b a r i n o , "A T h e o r y o f I n t e r i n d u s t r y Wage S t r u c t u r e V a r i a t i o n " , Q u a r t e r l y J o u r n a l o f E c o n o m i c s , V o l . 64, No. 3; ( A u g u s t , 1 9 6 5 ) , p p . 282 - 305-~ W. G o l d n e r a n d A.M. R o s s , " F o r c e s A f f e c t i n g t h e I n t e r i n d u s t r y Wage S t r u c t u r e " , Q u a r t e r l y J o u r n a l o f E c o n o m i c s , V o l . 64, No. 2 (May, 1950), p p . 254 - 289. B.T. A l l e n , """"Market C o n c e n t r a t i o n and Wage I n c r e a s e : U.S. Manufacturing, 194? - 1964", I n d u s t r i a l a n d L a b o r R e l a t i o n s R e v i e w , V o l . 21, No. 1 ( A p r i l , 1968), p p . 353 - 555. _ 4 - two major f a c t o r s results not i n promoting are of l i m i t e d effects unionization, However, these a p p l i c a b i l i t y t o t h i s -study as t h e y deal w i t h the a c t u a l l e v e l The r i s i n g wages. do o f wages. o f t h e s e two variables, concentration and u p o n wage l e v e l s , w e r e a l s o i n v e s t i g a t e d i n an 5 empirical s t u d y by Weiss. these v a r i a b l e s were s i g n i f i c a n t two Regression results indicated that i n e x p l a i n i n g wage l e v e l s f o r most o c c u p a t i o n a l g r o u p s t e s t e d b u t o n l y i n the absence of o t h e r i n d u s t r y v a r i a b l e s and p e r s o n a l c h a r a c t e r i s t i c s . When individual personal characteristics age, r a c e and the such a r e a of r e s i d e n c e were i n t r o d u c e d i n t o the r e g r e s s i o n s , significance disappeared. of the i n d u s t r y v a r i a b l e s i n most Weiss concludes concentrated i n d u s t r i e s get there i s l i t t l e a b e t t e r q u a l i t y o f w o r k e r and o r no m o n o p o l y p r o f i t be drawn, e x c e p t is a complex p r o c e s s . succeed accruing to labour. no firm conclusions can p e r h a p s t h a t t h e d e t e r m i n a t i o n o f wage l e v e l s No m o d e l w i t h one o r two simple v a r i a b l e s s t u d i e s on t h e d e t e r m i n a t i o n o f e x e c u t i v e compen- s a t i o n h a v e b e e n f e w e r i n number and more l i m i t e d popular hence i n e x p l a i n i n g wage v a r i a t i o n . The One cases t h a t i n p a y i n g h i g h e r wages, In surveying this l i t e r a t u r e , can as e d u c a t i o n , e m p i r i c a l e x e r c i s e has in scope. b e e n t o compare f i r m size -^L.W. W e i s s , " C o n c e n t r a t i o n and L a b o r E a r n i n g s " , A m e r i c a n E c o n o m i c R e v i e w , V o l . 56, No. 1 ( M a r c h , 1966), pp. 96~^~117.. - 5 - and firm profitability as v a r i a b l e s explaining the level of 6 executive, incomes. f i r m s i z e i s the The results to model. s a l a r i e s as that of t h e s e more I m p o r t a n t e x p l a n a t o r y v a r i a b l e . f i n d i n g , however, i s of l i t t l e credible indicate I t i s not interest In the surprising that i t is likely This a b s e n c e of firm size is a proxy f o r such v a r i a b l e s monopoly power, c a p i t a l - l a b o u r ratio, two, a related as profitability and c o m p e n s a t i o n of the top unionization. I n another study, the e x e c u t i v e was f o u n d t o be s i g n i f i c a n t l y and t o m o n o p o l y p o w e r , as m e a s u r e d b y positively c o n c e n t r a t i o n and related entry 7 barriers. This finding d e a l s o n l y with, the ever, the that, was executive i n each f i r m . tested modern c o r p o r a t i o n , i s b a s e d on the e x e c u t i v e s have the How- theory discre- p o w e r t o d i s t r i b u t e p r o f i t s "to e m p l o y e e s as w e l l stockholders. indicate s i n g l e top hypothesis that i n the tionary i s of l i m i t e d i n t e r e s t h e r e f o r i t that The i t may fact that be the a line findings support t h i s of t h o u g h t w o r t h as to theory pursuing. D.R. R o b e r t s , E x e c u t i v e C ompensat i o n , I l l i n o i s , F r e e P r e s s o f G l e n c o e , 1959, p. 50, 62>. J.W. McGuire, J.S.Y. C h i n , and A.O. E l b i n g , " E x e c u t i v e s , S a l e s and P r o f i t s " , A m e r i c a n E c o n o m i c R e v i e w , V o l . 52, No. 4 ( S e p t e m b e r , 1962), pp. 7 5 3 " 61. O.E. Williamson, Managerial D i s c r e t i o n B u s i n e s s B e h a v i o r " , American Economic Review, V o l . (December, 1 9 6 3 ) , pp. 1033 1057. and 53, No. 5 - 6 - B. I m p l i e a t i o n s of T h i s The c o u l d he operate p o s s i b l e i m p l i c a t i o n s f o r economic t h e o r y drawn f r o m the several. Study f i n d i n g s of the p r e s e n t I f i t i s found t h a t f i r m s possessing at g r e a t e r than c o m p e t i t i v e c o s t s , due study that are m o n o p o l y power to higher s a l a r y p a y m e n t s , t h e n c o n c l u s i o n s - c o u l d 'be d r a w n a b o u t t h e t o s o c i e t y of i m p e r f e c t of income f r o m the salaried competition. T h e r e w o u l d be T h e r e w o u l d a l s o be instance, i n h i s estimate m o n o p o l y , assumed t h a t t h e r e to the a misallocative effect, g r e a t e r t h a n t h a t commonly a t t r i b u t e d t o m o n o p o l y . for a transfer consumers of the monopoly p r o d u c t employees. Harberger, of t h e ' m i s a l l o c a t i v e c o s t e x i s t s no cost of difference i n costs g under monopoly or c o m p e t i t i o n . incur higher I f i n fact monopolistic c o s t s , t h e n the m i s a l l o c a t i o n of resources m o n o p o l y w i l l be due to even g r e a t e r t h a n Harberger c a l c u l a t e d . Such a f i n d i n g would a l s o c a s t l i g h t upon the managerial d i s c r e t i o n and behavior. I f p o t e n t i a l monopoly p r o f i t s salaries, are t h e n i t c o u l d be r e l a t i o n s h i p between s a l a r i e s power w o u l d l e n d s u p p o r t to the theory firm absorbed by of p r o f i t Failure and A.C. H a r b e r g e r , " M o n o p o l y Power and R e s o u r c e A l l o c a t i o n " , A m e r i c a n . E c o n o m i c R e v i e w , V o l . 44, No. 2 :r monopoly maximization. 8 (May, 1954), pp. 77 ~ ^7. the said that management i s e x e r c i s i n g i t s d i s c r e t i o n o v e r p r o f i t s . a significant opposing p r o f i t m a x i m i z i n g t h e o r i e s of f i r m i n the form of h i g h e r to find firms - 7 - Finally, interindustry i f evidence v a r i a t i o n i n salaries, conclusions could drawn about e x e c u t i v e If i s found of s i g n i f i c a n t q u a l i t y and m o b i l i t y s a l a r y v a r i a t i o n was between f o u n d t o be c o m p l e t e l y personal characteristics of the employees, then s a i d that the i n d u s t r i e s paying an employee of h i g h e r q u a l i t y . interindustry be' u n i f o r m v a r i a t i o n , then and m o b i l i t y high. higher be industries. accounted f o r by i t could be s a l a r i e s are g e t t i n g I f there i s no s i g n i f i c a n t e m p l o y e e q u a l i t y c a n be s a i d t o CHAPTER I I THE MODEL The h y p o t h e s i s t o he t e s t e d i s t h a t f o r g i v e n o c c u p a t i o n a l groups the i n t e r i n d u s t r y v a r i a t i o n i n s a l a r i e s is a f u n c t i o n p r i m a r i l y of three i n d u s t r y v a r i a b l e s -- monopoly p o w e r , g r o w t h , and t h e c a p i t a l - l a b o u r r a t i o . A. Monopoly Power The r e a s o n f o r b e l i e v i n g t h a t i n d u s t r i e s p o s s e s s i n g m o n o p o l y p o w e r , and h e n c e t h e p o t e n t i a l f o r m o n o p o l y pay h i g h e r tion. salaries, lies i n the theory There I s c o n s i d e r a b l e management o f t h e modern shareholders support profits, of managerial discre- f o r the view t h a t the corporation i s responsible to the f o r a minimum l e v e l t h a t l e v e l has c o n s i d e r a b l e of p r o f i t s only, and b e y o n d discretion i n dealing with The phenomenon t h a t i s r e s p o n s i b l e f o r t h i s ventional p r o f i t maximizing theory departure of f i r m behavior profits.' f r o m con- i s the ^O.E. W i l l i a m s o n , The E c o n o m i c s o f D i s c r e t i o n a r y Behavior: Managerial Objectives i n A Theory of the Firm, E n g l e w o o d C l i f f s , P r e n t i c e - H a l l , 19b~5~. C a r l K a y s en, '""The Corporation: How Much Power? What S c o p e ? " , i n The C o r p o r a t i o n i n M o d e r n S o c i e t y , E d w a r d S. Mason, e d . , C a m b r i d g e , H a r v a r d U n i v e r s i t y P r e s s , 1959W.J. B a u m o l , B u s i n e s s B e h a v i o r , V a l u e and G r o w t h , New Y o r k , M a c m i l l a n , 1959- - 8 - _ 9- separation o f o w n e r s h i p f r o m management. Over t h e l a s t d e c a d e s t h e t r e n d h a s "been away f r o m c o r p o r a t e o r more p o w e r f u l individuals. with the vast majority several o w n e r s h i p b y one Today t h e change i s a l m o s t of corporate stock total i n t h e hands o f 2 financial institutions and s m a l l investors. Both these are p r i m a r i l y i n t e r e s t e d i n maximizing t h e i r stock market d e a l i n g s . corporations. acceptable Only i f earnings level this profit.level interference profits Neither fall i s maintained, through o f managing b e l o w a c e r t a i n minimum be a r o u s e d . Provided management e n j o y s t h e of the f i r m . a b o v e t h e minimum l e v e l discretion i s i n the business canthese stockholders free operation income groups I t f o l l o w s t h a t any c a n be d e a l t w i t h at the o f management. T h u s , one o b v i o u s ivay f o r t o p management t o e x e r c i s e this d i s c r e t i o n would be t o pay t h e m s e l A r e s higher salaries. There i s r e a s o n t o b e l i e v e t h a t t h i s w o u l d i n t u r n have a positive e f f e c t upon t h e e a r n i n g s o f w h i t e - c o l l a r employees 2 F o r e v i d e n c e on t h e change f r o m p r i v a , t e o w n e r s h i p t o management c o n t r o l o f U.S. c o r p o r a t i o n s , s e e R . J . L a r n e r , "The 200 L a r g e s t N o n f i n a n e i a l C o r p o r a t i o n s " , A m e r i c a n E c o n o m i c R e v i e w , V o l . 56, No. 4, P a r t I ( S e p t e m b e r , 1966), p p . 777 - T&7. 3 ^Baumol i n d i c a t e s t h a t t h e minimum a c c e p t a b l e p r o f i t l e v e l i s determined by competitive conditions I n the c a p i t a l market. I t must p e r m i t s u f f i c i e n t l y h i g h d i v i d e d p a y m e n t s a n d reinvestment i n the f i r m t o ensure t h a t i n v e s t o r s are content to continue holding the stock. B a u m o l , op. c i t . , p. ^1. 10 - in the lower stratas. Another way would be to pay generous salaries for the purpose of purchasing employee goodwill and public approval. Firms with considerable monopoly power might be particularly conscious of the value of a good public image. It also follows that the function of management in hiring and retaining good employees is simplified through the paying of higher .salaries. The pressure to keep the salary budget down w i l l be less than in-competitive industries and hence these costs might be allowed to creep up either deliberately or through inattention. 1. Measurement of Monopoly Power For the purposes of this study, monopoly power w i l l be measured by concentration and barriers to entry. Generally the higher the concentration ratio the stronger w i l l be the recognition of mutual dependence among firms. Hence concen- tration is a good measure of the ability of firms to t a c i t l y agree to charge a monopoly price. i n f a l l i b l e measure. Obviously i t is not an Other industry variables such as the homogeneity of the product, the price leadership situation, ^H.A. Simon, "The Compensation of Executives," Sociometry, Vol.- 20, No. 4 (December, 1957),.pp. 32 - 35. ^The theory of managerial discretion is concerned with the ability of the firm to reap monopoly profits, rather than the action of doing so. Management may pass on discretionary profits .to the consumer as well as to the employees, hence less than the profit maximizing price would be charged. The objective of such strategy might be to maximize sales or else to purchase public approval. - 11 - the s t a t e o f i n t e r - f i r m c o m m u n i c a t i o n s and t h e t h r e a t o f new entrants, the a l lwill industry. have an e f f e c t upon t h e p r i c i n g p o l i c y o f Of t h e s e , t h e t h r e a t o f e n t r y I s t h e o n l y v a r i a b l e that lends In itself Joe B a i n ' s t o measurement. a u t h o r i t a t i v e w o r k on t h i s subject, 6 b a r r i e r s to entry are c l a s s i f i e d i n t o four types. product differentiation, a d v a n t a g e s .and c a p i t a l economies of s c a l e , requirements. b a r r i e r , which i n c l u d e s such patent least absolute The a b s o l u t e cost cost e s t a b l i s h e d f i r m a d v a n t a g e s as c o n t r o l and m o n o p o l i z a t i o n important These are of resource s u p p l i e s , i s the o f t h e f o u r and p r o b a b l y t h e most d i f f i c u l t t o 7 measure. Hence, a n a t t e m p t other three types attempt will of-barriers, be o n l y p a r t i a l l y explained i n detail Harvard will be made o n l y t o m e a s u r e t h e although as i t t u r n s o u t , t h i s successful. This w i l l be i n Chapter I I I . ^ J . S . B a i n , B a r r i e r s t o New C o m p e t i t i o n , C a m b r i d g e , U n i v e r s i t y P r e s s , , 1963, pp. 167 - 169. 7 Ibid., p. 149. B. I n d u s t r y Growth I n d u s t r y growth i s thought higher salaries f o r two r e a s o n s . higher p r o f i t s . industry, supply until t o he a d e t e r m i n a n t Firstly, g r o w t h u s u a l l y means When demand i s r i s i n g f o r t h e p r o d u c t e n t r y o f new f i r m s i s n e v e r i n s t a n t a n e o u s . i s t o a g r e a t e r or l e s s e r degree i n e l a s t i c . supply catches their ability salaries ees second reason t h a t growth r e s u l t s p e r f e c t l y mobile, determining the growth i n d u s t r y w i l l higher salaries w i l l Manage- on h i g h e r profits. i n higher Thus, t h e p r i c e have t o pay h i g h e r Of more i m p o r t a n c e in be t h e l a g i n s u p p l y o f , t o demand f o r , w o r k e r s t r a i n e d growth i n d u s t r y . until normal To t h e e x t e n t t h a t w o r k e r s a r e n o t s a l a r i e s t o e n t i c e t h e m t o move. up i nthe f o l l o w s f r o m t h e i n c r e a s e d d e r i v e d demand f o r e m p l o y - i n the growth i n d u s t r y . relative Thus, t o charge higher p r i c e s . i n t h e same way i t does w i t h m o n o p o l y The Hence, higher than ment h a s t h e d i s c r e t i o n t o e x p e n d t h e s e p r o f i t s salaries o f an up w i t h demand, t h e f i r m s p r o d u c i n g growth I n d u s t r y are i n a p o s i t i o n t o reap p r o f i t s through of i n the s k i l l s of the of the workers w i l l be b i d s u p p l y c a t c h e s up w i t h demand. Industry growth w i l l employment o v e r a ten-year be m e a s u r e d b y c h a n g e i n period. • - 13 - C. C a p i t a l Labour Ratio Those i n d u s t r i e s w i t h a h i g h c a p i t a l l a b o u r be expected t o pay h i g h e r wages and s a l a r i e s ratio s a l a r i e s because t h e pressure down w i l l be w e a k e r . may t o keep Payroll costs w i l l be o f l e s s c o n c e r n t o management c o m p a r e d t o c o s t s o f s e c u r i n g capital or of purchasing e q u i p m e n t t h a n t h e y w o u l d be i n a more labour .intensive industry. intensive w i l l disruptions probable Those f i r m s t h a t are. c a p i t a l be more c o n c e r n e d w i t h a v o i d i n g i n e f f i c i e n c y o r due t o e m p l o y e e d i s s a t i s f a c t i o n . t h a t s a l a r y p a y m e n t s will This variable w i l l Hence, i t i s be more g e n e r o u s . be m e a s u r e d b y t h e r a t i o of t o t a l a s s e t s t o number o f e m p l o y e e s . D. Conflicting It Theory may be t r u e t h a t , b e c a u s e o f t h e i r l a r g e f i r m s w i t h monopoly power i n t h e p r o d u c t size, market a l s o possess 8 monopsonistic power i n p u r c h a s i n g labour. In this situation, n e o c l a s s i c a l theory would lead t o the c o n c l u s i o n that tic f i r m s pay lower, marginal of l a b o u r n o t h i g h e r , wages. revenue product i n determining monopolis- The f i r m e q u a t e s t h e of labour t o the marginal t h e q u a n t i t y t o employ. f a c t o r cost For the 8 J o a n R o b i n s o n , among o t h e r s , b e l i e v e d t h a t monopsony power m i g h t o f t e n e x i s t a t t h e l e v e l o f t h e f i r m . See J o a n R o b i n s o n , The E c o n o m i c s o f I m p e r f e c t C o m p e t i t i o n , L o n d o n , M a c m i l l a n , 1961, p. 296. ' — 14 - monopolist-monopsonist both - these u n d e r c o m p e t i t i o n ; h e n c e he w i l l values w i l l be l e s s p a y l o w e r wages. than This i s shown i n F i g u r e 1 w h e r e , u n d e r c o m p e t i t i o n , a q u a n t i t y OC o f l a b o u r i s e m p l o y e d a t a wage o f OD. The m o n o p o l i s t employs o n l y OM u n i t s o f l a b o u r a t wage OP. Price of Labour , MFC Q Supply C M •Q uan "ki"ky o r > Labour FIGURE 1 Wage D e t e r m i n a t i o n and C o m p e t i t i o n Under Monopoly T h i s p r e d i c t i o n o f L o w e r wages u n d e r m o n o p o l y i s b a s e d upon t h e e x i s t e n c e o f an upward s i p p i n g s u p p l y curve to the firm. This i n t u r n depends m a i n l y upon t h e a s s u m p t i o n of c o n s i d e r a b l e i m m o b i l i t y of l a b o u r . among w h i t e - c o l l a r w o r k e r s , to ensure e l a s t i c of labour It islikely a sizeable proportion, supply curves, w i l l be mobile. that, sufficient - 15 - •Neoclassical theory also of p r o f i t m a x i m i z a t i o n . chapter, depends upon t h e a s s u m p t i o n I t has been a l l e g e d that i n general the behavior diverges from s t r i c t earlier i n this of m o n o p o l i s t i c f i r m s p r o f i t maximization. Under these c o n d i t i o n s t h e d e t e r m i n a t i o n o f wages and s a l a r i e s c a n n o t be completely explained by marginal p r o d u c t i v i t y Probably a more s e r i o u s t h r e a t t o t h i s proposed model o f s a l a r y mobility of workers. The e x t e n t workers. study's determination i s the question of v a r i a t i o n w i l l be i n v e r s e l y of w h i t e - c o l l a r theory. of i n t e r i n d u s t r y salary r e l a t e d t o t h e degree of m o b i l i t y A s u f f i c i e n t l y h i g h degree of m o b i l i t y may c a u s e t h e s a l a r y v a r i a t i o n t o be statistically insignificant. E. Unionization No s t u d y o f t h e d e t e r m i n a t i o n o f e a r n i n g s the v a r i a b l e its effect of u n i o n i z a t i o n . Is d i f f i c u l t Salaried significant extent. However, f o r s a l a r i e d can ignore employees, t o assess. employees a r e n o t themselves One s t u d y unionization Q of w h i t e - c o l l a r potential. This figure on t h e s u b j e c t unionized to a estimates w o r k e r s a t a b o u t 11 p e r c e n t o f Is roughly confirmed b y a more thorough q A d o l f S t u r m t h a l , W h i t e - C o l l a r Trade Unions: Contemporary Developments i n I n d u s t r i a l S o c i e t i e s , Urbana, U n i v e r s i t y of- I l l i n o i s Pres"s^ 1966^ p] 3387 v - 16 - study that estimates unionization figures f o rthe w h i t e - c o l l a r groups t h a t are analyzed i n t h i s 18 p e r c e n t f o r C l e r i c a l Professional, Technical for Sales Workers. purposes of t h i s 1 0 study. The f i g u r e s a r e : and K i n d r e d W o r k e r s , 9 p e r c e n t f o r and K i n d r e d W o r k e r s , a n d 12 p e r c e n t These f i g u r e s a r e n e g l i g i b l e , f o r t h e study, because the m a j o r i t y of these unionized w h i t e - c o l l a r workers are not i n manufacturing i n d u s t r i e s . of them a r e I n t h e r e t a i l are m u s i c i a n s , railway trade or telephone industry, c l e r k s or post o f f i c e workers. Most or they None o f t h e s e o c c u p a t i o n s o r i n d u s t r i e s a r e w i t h i n t h e scope of t h i s study. The here. p r o b l e m o f u n i o n i z a t i o n , however, does n o t end I t i s possible t h a t t h e degree o f u n i o n i z a t i o n o f wage e a r n e r s i n an i n d u s t r y may a f f e c t t h e s a l a r y l e v e l s o f t h e w h i t e - c o l l a r workers. Unfortunately, neither theory nor e m p i r i c a l w o r k h a s much t o s a y a b o u t t h i s p r o b l e m . on t h e i m p o r t a n c e o f t h i s Conclusions r e l a t i o n s h i p c a n o n l y be t e n t a t i v e l y d r a w n f r o m w h a t i s known a b o u t t h e e f f e c t o f u n i o n i z a t i o n upon i n t e r i n d u s t r y wage l e v e l s . One o f t h e most c o m p l e t e s t u d i e s on u n i o n i s m and wages i n d i c a t e s t h a t u n i o n i s m i s n o t a m a j o r f a c t o r I n e x p l a i n i n g t h e i n t e r i n d u s t r y wage s t r u c t u r e . I t i s s t a t e d t h a t most o f B. S o l o m o n and R.K. B u r n s , " U n i o n i z a t i o n o f W h i t e C o l l a r Employees: Extent., P o t e n t i a l and I m p l i c a t i o n s " , J o u r n a l o f B u s i n e s s , V o l . 36, No. 2., ( A p r i l , 1963) , pp. 151. - 17 - the wage d i s p e r s i o n other f a c t o r s . interindustry wage s t r u c t u r e , of n e g l i g i b l e s a l a r i e s among I t c a n b e assumed t h a t be e v e n l e s s . Influence of unionism w i l l be a f a c t o r must he a c c o u n t e d f o r by- I f u n i o n i s m has o n l y a m i n o r e f f e c t upon t h e 1 1 upon s a l a r i e s w i l l the among i n d u s t r i e s i t s effect T h u s , a l t h o u g h some t e s t s o f be a t t e m p t e d , i t i s assumed t o importance i n the determination of industries. H . G . L e w i s , U n i o n i s m and R e l a t i v e Wages i n t h e United States. C h i c a g o , U n i v e r s i t y o f C h i c a g o P r e s s , ±9b~3, 11 ^ o i i '—'—-— CHAPTER I I I DATA SOURCES AND MEASUREMENT OF REGRESSION VARIABLES A. General D e s c r i p t i o n of Data Figures personal f o r salary, occupation, characteristics are reported i n d u s t r y and v a r i o u s f o r 180,000 i n d i v i d u a l s i n t h e l / l O O O s a m p l e o f t h e i 9 6 0 U.S. C e n s u s o f P o p u l a t i o n . This data relevant i s a v a i l a b l e o n m a g n e t i c t a p e and when m a t c h e d w i t h t h e industry v a r i a b l e s , provides The turing the study and m i n i n g covers a cross industries, the regression input. s e c t i o n o f 6 3 U.S. m a n u f a c 2 a l l unregulated. i n d u s t r y v a r i a b l e s i s drawn from t h r e e g r o w t h and c o n c e n t r a t i o n a r e t a k e n article. but 1 This The d a t a f o r sources. Figures f o r from the appendix of Weiss' appendix i s not p r i n t e d w i t h t h e j o u r n a l may b e o b t a i n e d from t h e author. 3 article, A d v e r t i s i n g s a l e s and 4 assets d a t a come f r o m U.S. income t a x data.. Finally, figures "'"Bureau o f t h e C e n s u s , U.S. C e n s u s o f P o p u l a t i o n and Housing: i 9 6 0 l / l O O O and l/lOOOO, Two N a t i o n a l S a m p l e s o f t h e Population of the United States. 2 See •5 See Table I f o r a l i s t of these industries. F o o t n o t e i n W e i s s , _op. c i t . , p. I n t e r n a l Revenue S e r v i c e , S t a t i s t i c s 1959-1960, pp. 58 - 60. - 18 - 101. o f Income f o r number o f e m p l o y e e s a n d number o f e s t a b l i s h m e n t s f r o m t h e 1 9 5 8 U.S. It years and o f M i n i n g . i n that f o r w h i c h t h e v a r i o u s d a t a i s r e p o r t e d do n o t exactly D the The f i g u r e s f r o m t h e p o p u l a t i o n c e n s u s a r e f o r 1 9 5 9 ; while those remaining i s evident that there taken i s a discrepancy coincide. c e n s u s a r e f r o m 1 9 5 8 . The from the m a n u f a c t u r i n g i n d u s t r y f i g u r e s are r e p o r t e d f o r the periods ending then, Censuses o f M a n u f a c t u r i n g are accounting between J u l y 1959 and June i 9 6 0 . the average r e p o r t i n g p e r i o d f o r these Presumably figures i s the year 1959- . Another minor d i s c r e p a n c y e x i s t s because f i g u r e s are f o r 1959; w h i l e a l l other data f o r the refers t oA p r i l i960, the time first individuals a t w h i c h t h e c e n s u s was t a k e n . Thus, i f an i n d i v i d u a l changed o c c u p a t i o n or the salary f o u r months o f i 9 6 0 , or industry i n 1959, t h e d a t a would be i n e r r o r . A more s e r i o u s p r o b l e m w i t h t h e data, i s t h a t some f i g u r e s are reported f o r a d e t a i l e d but others are a v a i l a b l e industry classification, o n l y f o r a major i n d u s t r y breakdown. T h i s problem a r i s e s because the p o p u l a t i o n census industries not according t o a unique three d i g i t correspond t o the Standard Industrial classifies c o d e t h a t does Classification 5 ^Bureau o f the Census, U n i t e d S t a t e s Census o f Manufacturers: 1 9 5 8 , Volume I . B u r e a u o f t h e Census, U n i t e d S t a t e s C e n s u s o f M i n e r a l I n d u s t r i e s : 1 9 5 8 , Volume I . - c o d i n g u s e d "by t h e comparable source attempt other sources. of earnings industries. other to on t h e t h r e e d i g i t b a s i s . I shows t h e r e s u l t s s e e n t h a t c o n c e n t r a t i o n and f o r a l l 63 S i n c e t h e r e e x i s t s no d a t a , t h e r e i s no c h o i c e b u t t o match i n d u s t r y f i g u r e s Table be 20 of t h i s matching. growth f i g u r e s are However, f o r t h e other I t can- available variables, f i g u r e s f o r t h e m a j o r i n d u s t r y g r o u p s must be u s e d f o r t h e more d e t a i l e d c l a s s i f i c a t i o n s . industry c l a s s i f i c a t i o n While seem u n r e a s o n a b l e , be m e a n i n g f u l . for instance, to attribute a d v e r t i s i n g - s a l e s .or 0340113,1-13,13our r a t i o s t o the individual textile Further detail variables B. I t does the for a l l textiles industries. on t h e d e v e l o p m e n t o f t h e i n d u s t r y i s given i n Appendix I. D e t a i l e d ' D e s c r i p t i o n of V a r i a b l e s F o l l o w i n g i s a d e t a i l e d account and inconsistency i n o b v i o u s l y d e t r a c t s from the q u a l i t y the data, the v a r i a b l e s should s t i l l not this content regressions. o f . t h e measurement o f e a c h o f t h e v a r i a b l e s t o be u s e d i n t h e of TABLE I INDUSTRY VARIABLES IND 126 136 146 156 NAME Metal Mining Coal Mining C r u d e P e t . & N a t . Gas Non-Metalic Mining L u m b e r a n d Wood 206 207 208 209 Sawmills, Planing M i l l s , M i s c . Wood P r o d u c t s F u r n i t u r e and F i x t u r e s 237 238 239 Millwork 0.0003 0.0009 0.'0020 0.0038 45.53 n . o 4 22.85 20.18 '1886. 284. 386. 323. 102 74 98 117 o.oo4o o.oo4o o.oo4o 0.0122 10.29 10.29 10.29 7.05 120 168 108 82 0. 0. 0. 0. 0. ADV 58 29 32 27 102 44 112 114 38 15 21 15 59 32 29 . 39 • $'000 $'000 i4i, i4i, i4i. 24l, Products Glass and Glass Products Cement, C o n c r e t e , Gypsum a n d P l a s t e r S t r u c t u r a l Clay Products P o t t e r y and R e l a t e d P r o d u c t s Misc. Non-Metalic Minerals Primary CAP/REQS GROWTH Products S t o n e . C l a y and G l a s s 216 217 218 219 236 CAP-LAB CONC 48 . . 155 0070 0070 0070 0070 0070 73 73 73 73 73- 580, 580, 580, 580, 580, 23-97 23.97 23-97 4077. 4077. 4077. 15. 15. 15. 15. •15. Metal Industries B l a s t Furnaces, S t e e l Works, E t c , O t h e r P r i m a r y I r o n and S t e e l Primary, Non-Ferrous Metals 56 49 53 94 io4 139 0.oo44 o.oo44 0.oo44 ro TABLE IND NAME Fabricated Metal 246 247 248 Except CAP-LAB ' CAP/REQS, CONC GROWTH ADV 38 39 36 111 135 l 8 l O.OO89 0.0089 O.OO89 11.15 11.13 11.13 78 163 131 0.0105 0.0105 0.0105 14.94 14.94 14.94 675. 675. 675. $'000 $'000 Products C u t l e r y , Hand T o o l s , H a r d w a r e F a b r i c a t e d S t r u c t u r a l Metal Prods. Misc. Fab. Metal Products Machinery (Continued) ' 475. 475. 475. Electrical 256 257 258 Farm M a c h i n e r y O f f i c e , C o m p u t i n g & A c c t g . Mach. Misc. Machinery 44 72 39 259 Electrical 51 " 176 0.0173 12.74 1767. 267 Motor V e h i c l e s and Eqpt. 72 100 0.0081 78.67 7254. 258 144 120 0.0028 0.0028 0.0028 9.69 9.69 • 9.69 2242. 2242. 2242, 51 77 45 222 137 85 . 0.0226 0.0226 0.0226 15.33 15.33 15.33 30 103 Machinery T r a n s p o r t a t i o n Equipment Except 268 269 276- 286 287 289 296 Auto A i r c r a f t and P a r t s S h i p and Boat B u i l d i n g and R e p a i r R a i l r o a d and Misc. Transp. Eqpt. Instruments and R e l a t e d Mfgrs. 52 45 • 52 . Products P r o f e s s i o n a l Eqpt. and S u p p l i e s • P h o t o g r a p h i c Eqpt. and S u p p l i e s Watches/Clocks, Etc. "Miscellaneous . o.oi84 • 7.91 ' ! 1289. 1289. 1289. 317. TABLE IND NAME Food and K i n d r e d ontinued) CONC GROWTH 28 56 34 119 154 Meat P r o d u c t s Dairy Products Canning and P r e s e r v i n g Grain M i l l Products Bakery Products Confectionery & Related Products Beverages M i s c . Food P r e p a r a t i o n s 26 34 49 329 Tobacco 68 346 347 348 349 356 Products 359 367 K)0(f' 0.0192 0.0192 0.0192 0.0192 0.0192 0.0192 0.0488 0.0192 12.07 12.07 12.07 12.07 12.07 12.07 25.45 12.07 499 93 0.0547 39-14 6560 18 44 47 274l 108 0.0062 0.0062 0.0062 0.0062 0.0062 9.90 9.90 9.90 9.90 9.90 1163 1163 1163 1163 1163 11 26- 110 135 0.0098 0.0098 3.82 3.82 154 154 45 27 4l 128 143 1 0 6 -• o.oo84 o.oo84 • o.oo84 17.96 17.96 17.96 1893 1893 1893 49 j?6 137 123 • 134 101 105 126 • 499 499 499 499 499 944 499 Surfaces 87 66 67 98 . • Textiles A p p a r e l and A c c e s s o r i e s Misc. Fab. T e x t i l e s Paper and A l l i e d 386 387 389 8 Products Knitting Mills D y i n g and F i n i s h i n g F l o o r Coverings- Except Hard Y a r n , T h r e a d and F a b r i c Misc. T e x t i l e s Fabricated ^OOQ Products 306 307 308 309 316 317 318 319 Textile Mill ADV Products P u l p , P a p e r , and P a p e r b o a r d Paperboard Containers M i s c . Paper and P u l p P r o d u c t s TABLE I ( C o n t i n u e d IND NAME Printing 396 398 Newspapers P r i n t i n g & P u b l i s h i n g E x c . Newsp. and A l l i e d and Coal 436 437 438 52 26 130 135 0.0076 0.0076 9.43 9-43 230. 230, 74 44 25 42 109 196 117 134 0.0379 0.0379 0.0379 0.0379 33.19 33.19 33.19 33.19 2052, 2052, 2052, 2052. 47 50 98 136 o.oo46 o.oo46 • 221.85 221.85 24719. 24719. 51 21 114 205 0.0164 0.0164 i 4 . i l i4.ii 1100, 1100, 20 28 21 69 97 90 0.0112 0.0112 0.0112 5.28 5.28 5.28 $'000 . $'000 and L e a t h e r ' • ' Products Rubber Products Misc. P l a s t i c Products Leather ADV Products Petroleum Refining Misc. Pet. & Coal Products Rubber and P l a s t i c s 426 429 CAP/REQS. GROWTH Products Synthetic Fibres Drugs and M e d i c i n e s P a i n t s , V a r n i s h and R e l a t e d P r o d u c t s M i s c . C h e m i c a l s and R e l a t e d P r o d u c t s Petroleum 4l6 419 CAP-LAB C0NC and P u b l i s h i n g Chemicals 406 407 408 409 . Products Leather Tanning, E t c . F o o t w e a r Except Rubber Leather Products Except Footwear • 407. 407. 407. - 25 - 1. Salary For e a c h i n d i v i d u a l w o r k e r , p r i v a t e wage and " s a l a r y income, i n c l u d i n g bonuses, i s r e p o r t e d i s t o be t h e d e p e n d e n t v a r i a b l e i n the I n d i v i d u a l s were s e l e c t e d in Persons w i t h their' salary f o rthe regression of e r r o r s a n y s e l f employment i n c o m e income c o u l d This regressions. s u c h a way as t o m i n i m i z e t h e p o s s i b i l i t y data. as by the census. w e r e sample i n the rejected be d i s t o r t e d i n t w o ways. It m i g h t be l o w i f t h e y a r e w o r k i n g a t t h e i r s a l a r i e d employment on a casual inflated or part-time basis. Conversely, i t m i g h t be i f t h e y were e m p l o y i n g t h e m s e l v e s i n a s a l a r i e d position. S t i g l e r has p o i n t e d corporations out t h a t p r o f i t s of c l o s e l y may o f t e n be w i t h d r a w n i n t h e f o r m o f held executives' salaries. T h o s e i n d i v i d u a l s who h a d n o t w o r k e d a t l e a s t 50 weeks i n 1959 w e r e a l s o r e j e c t e d . It is likely who c h a n g e d o c c u p a t i o n o r I n d u s t r y voluntarily period that many i n d i v i d u a l s i n 1959 w o u l d h a v e b e e n o r i n v o l u n t a r i l y unemployed f o r a t l e a s t a b r i e f of time. Hence, b y r e j e c t i n g s u c h p e r s o n s , d a t a errors o f t h i s t y p e w i l l be r e d u c e d . G.J. S t i g l e r , C a p i t a l and R a t e s o f R e t u r n i n Manufacturing Industries. Princeton, Princeton University 1963, pp. 125"'- 127. Press - 26 - 2. Concentration The f i g u r e s u s e d a r e 1958 ratios calculated scaled up f o r t h o s e p r o d u c t s s e l l i n g product markets. national I t was or regional on t h e a v e r a g e , concentration national ratios for f o r t h o s e s o l d on concentration r a t i o s were local scaled factors. Product D i f f e r e n t i a t i o n T h i s b a r r i e r t o new several i n local r a t i o s f o r . p r o d u c t s s o l d on Hence t h e a p p l i c a b l e 3. The r a t i o s h a v e b e e n on r e g i o n a l m a r k e t s and 2.67 up b y t h e s e concentration found, by W e i s s , t h a t m a r k e t s w e r e I.98 t i m e s t h e n a t i o n a l markets. firm on p r o d u c t s h i p m e n t s . concentration those sold four entrants c a n be a t t r i b u t e d t o s o u r c e s , n o t a b l y c u s t o m e r s e r v i c e , p r o d u c t d e s i g n and advertising intensity. However, i n d u s t r i e s , B a i n found that i n h i s study of twenty a d v e r t i s i n g " i s c o n s i s t e n t l y the. 7 most i m p o r t a n t f a c t o r I n e s t a b l i s h i n g p r o d u c t d i f f e r e n t i a t i o n . Therefore, that i t i s t h e r a t i o of a d v e r t i s i n g expenditure to sales i s u s e d as a m e a s u r e o f p r o d u c t d i f f e r e n t i a t i o n . It s h o u l d be n o t e d t h a t w h i l e advertising i s important i n e s t a b l i s h i n g p r o d u c t d i f f e r e n t i a t i o n , and hence monopoly power, t h e r e i s a l s o a r e l a t i o n s h i p i n t h e o p p o s i t e d i r e c t i o n . F i r m s p o s s e s s i n g m o n o p o l y power c a n , i n many c a s e s , be to s p e n d more on a d v e r t i s i n g e f f o r t t h a n c o m p e t i t i v e The g r e a t e r i s t h e p r o d u c t d i f f e r e n t i a t i o n and ^ B a i n , _op. c i t . , pp. 122 - 24. expected firms. concentration - 27 - i n an i n d u s t r y , t h e more e a c h f i r m w i l l a d v e r t i s i n g expenditure, other firms. Also, competition, due t o the oligopolists a d v e r t i s i n g and of as t h e r e other are sales be to gain from less "spillover" u n c e r t a i n t i e s of to price often hypothesized to prefer i n c r e a s i n g e x p e n d i t u r e s as a form competition. 4. Economies of Scale Considerable e f f o r t was measuring the conclusion r e a c h e d was that plant, i f the new entrant, situation, choices. He. c a n the Secure i n the advantage, the over i s not. i s faced o r he can i n d o i n g so l o w e r t h e e s t a b l i s h e d f i r m s can sized market. with two or firm, at enter producing selling price. i s a t a, d i s - charge a p r i c e greater They p o s s e s s a degree of than monopoly supply. T h e r e i s no concept i s s t r a i g h t f o r w a r d , measurement a g r e e m e n t on c r i t e r i a f o r c h o o s i n g o r minimum e f f i c i e n t addition, data. optimal knowledge t h a t p o t e n t i a l c o m p e t i t i o n While t h i s optimal i n e s t a b l i s h i n g an p o t e n t i a l entrant minimum a t t a i n a b l e c o s t . control this s c a l e become a s i g n i f i c a n t b a r r i e r operate a sub-optimal s i z e d plant o u t p u t and final a v a i l a b l e t e c h n i q u e s and t h a n minimum a t t a i n a b l e c o s t s , optimal of The o r f i r m , must s e c u r e a s i z e a b l e p o r t i o n o f t h e In t h i s higher problem a m e a n i n g f u l measure of derived with Economies of l a r g e to entry a p p l i e d t o the economies of s c a l e b a r r i e r t o e n t r y . v a r i a b l e c a n n o t be the will stand i t is virtually s i z e of p l a n t impossible or f i r m . to design the In a measure that - 28 - takes account of the shape o f t h e i s a serious shortcoming industry cost curves. f o r knowledge of t h e r a t e of d e c l i n e o f u n i t c o s t as minimum e f f i c i e n t essential Finally, i n e v a l u a t i n g the size i s approached i s importance of the scale harrier. the p r o b l e m i s f u r t h e r c o m p l i c a t e d by diseconomies This of l a r g e s c a l e . the concept T h i s c a n p r e s u m a b l y be of avoided at t h e p l a n t l e v e l by d u p l i c a t i n g o p t i m a l s i z e d p l a n t s . However, i n t h e .case, o f f i r m s , diseconomies do exist. i t i s quite conceivable E m p i r i c a l evidence to c l a r i f y that this problem i s n o n - e x i s t e n t . ^ D e s p i t e t h e s e p r o b l e m s , t h e r e have been attempts m e a s u r e t h e b a r r i e r s t o e n t r y due t o economies of scale. Presumably, because of the q u e s t i o n of diseconomies firms, these scale. this Two attempts have c o n c e n t r a t e d of these measures to of l a r g e on p l a n t e c o n o m i e s investigated i n detail w e r e of for study. The t h e U.S. plants first, by. B a i n , t a k e s Census of M a n u f a c t u r i n g advantage of t h e f a c t gives i n d u s t r y data, that grouping i n t o s i z e c l a s s e s , s i z e b e i n g m e a s u r e d by number o f Q employees. H i s measure i s a r r i v e d at by expressing the added of t h e average s i z e d p l a n t .in the l a r g e s t a percentage of i n d u s t r y v a l u e added.- measure i s t h a t the c h o i c e of t h e g The size class weakness of o p t i m a l o r minimum See B a i n , _op. c i t . , pp. 6l q .See B a i n , _op. c i t . , pp. 69, - 62. _ 75. value as this efficient - 29 - plant size i s essentially arbitrary. T h i s v a l u e was c a l c u l a t e d f o r t h e i n d u s t r i e s i n this s t u d y , h u t t h e r e s u l t s a p p e a r e d t o he m e a n i n g l e s s a s a m e a s u r e of the- economies o f s c a l e h a r r i e r . For instance, the calcula- t i o n s g i v e a s l i g h t l y h i g h e r measure of economies o f s c a l e t o the major i n d u s t r y group t e x t i l e s ' , t h a n t o t r a n s p o r t a t i o n e q u i p m e n t^. 10 In the largest ments p r o d u c i n g size class, t e x t i l e s had t e n e s t a b l i s h - a v a l u e added o f $236,5^5,000 w i t h I n d u s t r y v a l u e added o f $4,857,638,000. of s c a l e measure corresponding o f .0049. T h i s gave a n economy F o r t r a n s p o r t a t i o n equipment t h e f i g u r e s w e r e .134 e s t a b l i s h m e n t s $9,244,433,000 v a l u e added c o m p a r e d i n d u s t r y f o r a measure total o f .0045. producing t o $15,283,694,000 f o r t h e Textiles i s the textbook e x a m p l e o f a c o m p e t i t i v e , e a s e o f e n t r y i n d u s t r y and t r a n s p o r t a t i o n equipment automobiles, i s dominated by I n d u s t r i e s m a n u f a c t u r i n g a i r p l a n e s and s h i p s i n w h i c h economies o f s c a l e i n production, are of great importance. is C l e a r l y , Bain's measure o f no v a l u e f o r t h e i n d u s t r y d a t a c l a s s i f i c a t i o n s u s e d i n this study. The o t h e r measure o f economies o f s c a l e g i v e n c o n s i d e r a t i o n was t h a t u s e d i n a r e c e n t s t u d y on t h e s o u r c e s o f "^See U.S. C e n s u s p. 2 - 3. of Manufacturing 1958, V o l . 1, - 30 - m o n o p o l y power. " plant T h i s measure i s d e r i v e d by s i z e among t h e largest plants o f i n d u s t r y o u t p u t and t a k i n g the a c c o u n t i n g f o r 50 d i v i d i n g by t o t a l average per output i n the cent relevant market. T h i s measure s u f f e r s from a l l the comings l i s t e d firms.. above. I t s choice apparently I t ignores p o s s i b l e economies of o f a minimum e f f i c i e n t p l a n t arbitrary. I t does n o t of d e c l i n e of u n i t c o s t s as p l a n t not data, i m p o s s i b i l i t y -no size economies of s c a l e b a r r i e r c o u l d not and the amount o f c a p i t a l with a plant t o be may difficulty -- I t was concluded e f f e c t i v e l y be that measured C a p i t a l Requirements capital e n t r y g e n e r a l l y f o l l o w s from the i s the of the abandoned. Measurement of t h e It rate increases. made. the 5. size is of c a l c u l a t i n g the measure w i t h a v a i l a b l e a t t e m p t a t c a l c u l a t i o n was i d e a was large attempt t o measure the I n v i e i v o f t h e s e s h o r t c o m i n g s and if t h e o r e t i c a l short- requirements b a r r i e r to economies of s c a l e measure. required to enter o r f i r m o f minimum e f f i c i e n t a b a r r i e r . t o entry charge higher on t h e the size. grounds t h a t the industry This capital i n t e r e s t rates to p o t e n t i a l entrants compared t o e s t a b l i s h e d f i r m s . i s said I t Is thought that market as as t h e amount ^ S . Comanor and T.A. W i l s o n , " A d v e r t i s i n g M a r k e t S t r u c t u r e and P e r f o r m a n c e " , The R e v i e w o f E c o n o m i c s and S t a t i s t i c s , V o l . 44, No. 4, "(November, I 9 6 7 ) , pp. 423 - 440. - 31 of c a p i t a l gets l a r g e r , t h i s - difficulty or e x t r a c o s t of obtain- 12 ing capital for entry increases. Without a value f o r the economies of s c a l e v a r i a b l e , p r e c i s e measurement i s d i f f i c u l t . of the capital c a l c u l a t e d by required However, an to enter w i t h dividing total assets approximation a single plant by the was number o f p l a n t s in 13 the industry. of the ' capital from the This required it required should to enter be t o b u i l d and 6. C a p i t a l - Labour This 1950 absolute industry. It suffers discussed i t measures the o p e r a t e an measure economies amount of average s i z e d p l a n t , relative capital Ratio i s m e a s u r e d by dividing total industry assets by employees. Growth The by an a m e a n i n g f u l a p p r o x i m a t i o n of the among i n d u s t r i e s . number o f an previously H o w e v e r , as barriers 7. meant t o be shortcomings of the of s c a l e measures. capital i s not measure u s e d i s i 9 6 0 industry i n d u s t r y employment divided employment. 12 B a i n , _op. c i t . , pp. 145, 146. ] 3 The U.S. C e n s u s o f M a n u f a c t u r i n g g i v e s i n d u s t r y data, on e s t a b l i s h m e n t s r a t h e r t h a n p l a n t s . An e s t a b l i s h m e n t i s a p r o d u c i n g l o c a t i o n and t h e r e f o r e a m u l t i - p l a n t s i t e shows up as o n l y one e s t a b l i s h m e n t . I t i s n o t a v i t a l d i s t i n c t i o n and i n t h i s , a s ' i n most s t u d i e s , t h e two t e r m s a r e u s e d more o r less interchangeably. - 32 - 8. Occupation and T h e s e a r e two ing salary levels. v a r i a t i o n due is Sex o f t h e most i m p o r t a n t f a c t o r s determin- I t i s desirable to eliminate salary t o t h e s e two v a r i a b l e s when r e g r e s s i o n a n a l y s i s a p p l i e d t o the model. This i s accomplished by g r o u p i n g the r e g r e s s i o n o b s e r v a t i o n s i n t o s a m p l e s t h a t a r e homogeneous w i t h r e s p e c t t o o c c u p a t i o n and Occupations sex. t o be t e s t e d w e r e s e l e c t e d f r o m t h e f o u r w h i t e - c o l l a r groups i n the p o p u l a t i o n census. The groups P r o f e s s i o n a l T e c h n i c a l and K i n d r e d W o r k e r s , M a n a g e r s , and P r o p r i e t o r s Except Sales Workers. An Farm, C l e r i c a l Officials and K i n d r e d W o r k e r s o c c u p a t i o n c o u l d be and selected for testing o n l y i f i t w o u l d p r o v i d e a sample w i t h i n d i v i d u a l s o v e r a r e a s o n a b l e number o f t h e m a n u f a c t u r i n g i n d u s t r i e s t o be t e s t e d . are and Thus, a m a j o r i t y of t h e mining occupations s u c h as a r c h i t e c t s , d e n t i s t s , bank t e l l e r s c o u l d n o t be u s e d . A l s o , only occupations t h a t would provide sufficient c o u l d be civil observations f o r meaningful chosen. and distributed insurance regression analysis T h u s , many o c c u p a t i o n s s u c h as e n g i n e e r s and economists, s t a t i s t i c i a n s c o u l d n o t be t e s t e d as would have been l e s s t h a n t e n o b s e r v a t i o n s i n the f i n a l This process o f s e l e c t i o n and o c c u p a t i o n s shown i n T a b l e draftsmen, mechanical proprietors, e l i m i n a t i o n y i e l d e d the II. Four agents, of t h e s e there sample. fifteen occupations, e n g i n e e r s , managers, o f f i c i a l s and t y p i s t s c o r r e s p o n d t o g r o u p s t e s t e d and i n Weiss' TABLE - I I OCCUPATIONAL GROUPINGS FOR REGRESSION ANALYSIS OCCUPATION NAME SEX NO. OBSERVATIONS Accountants Male 100 Chemists Male 53 Draftsmen Male llil- Industrial Engineers Male 58 Mechanical Engineers Male 110 Male 25 Engineers- (NEC)* Male 33 P e r s o n n e l and L a b o r R e l a t i o n s Workers Male 22 Professional, Technical and K i n d r e d W o r k e r s (NEC) Male 56 Managers, O f f i c i a l s and P r o p r i e t o r s Male 532 Bookkeepers Female 99 Secretaries Female 239 St enographer s Female 50 Typists Female 58 Sales Engineers Salesmen and S a l e s c l e r k s (NEC) Male 322 1871 *NEC means N o t E l s e w h e r e Classified - study. S i n c e he was most i n t e r e s t e d i n t h e d e t e r m i n a t i o n o f wages, r a t h e r t h a n his - 3h study s a l a r i e s , most o f t h e o c c u p a t i o n s came f r o m t h e l a b o u r i n g g r o u p s . For each o c c u p a t i o n a l group e i t h e r a l l males o r a l l f e m a l e s were s e l e c t e d f o r t h e r e g r e s s i o n sample. p a t i o n s were almost c o m p l e t e l y other, s o i t was d e c i d e d cost l i t t l e tions Most occu- homogeneous i n one s e x o r t h e t o make t h e m c o m p l e t e l y so. This i n t h e way o f s a m p l e s i z e a n d e l i m i n a t e d due t o a n i m p o r t a n t 9. tested i n and unwanted distor- variable. Pe r s o n a l C h a r a c t e r i s11c s For each i n d i v i d u a l employee, s i x p e r s o n a l character- i s t i c s w e r e r u n as i n d e p e n d e n t v a r i a b l e s i n t h e r e g r e s s i o n s , i n a n a t t e m p t t o a c c o u n t f o r some o f t h e s a l a r y v a r i a t i o n . The c h a r a c t e r i s t i c s are education, rural residence, size of place age, southern of residence residence, and r a c e . Educa- t i o n i s measured by t h e h i g h e s t grade o f s c h o o l o r year o f u n i v e r s i t y completed, but there i snot a unique value v a r i a b l e f o r each grade and y e a r . There i s a v a l u e of t h e of three f o r t h o s e whose h i g h e s t g r a d e c o m p l e t e d was o n e , t w o , t h r e e o r four, six, years a value o f f o u r f o r t h o s e whose h i g h e s t a n d s o on up t o t w e l v e of college. a, v a l u e f o r t h o s e who f i n i s h e d f i v e Southern residence o f one i f t h e i n d i v i d u a l otherwise. RuraT r e s i d e n c e 14 W e i s s , op. c i t . , g r a d e was f i v e o r o r more i s a dummy . v a r i a b l e w i t h r e s i d e d i n t h e south, zero i s a dummy v a r i a b l e w i t h a v a l u e p p . .102 - 10 J>. - 35 - o f one i f t h e i n d i v i d u a l o u t s i d e a. S t a n d a r d wise. r e s i d e d o u t s i d e an u r b a n i z e d Metropolitan Statistical S i z e of place i s a v a r i a b l e w i t h a value one f o r a r u r a l f a r m t o t w e l v e more. Area, i s white zero other- ranging from f o r a p l a c e o f one m i l l i o n o r R a c e i s a dummy v a r i a b l e w i t h a v a l u e individual area, o r o f one i f t h e and does n o t 'have a S p a n i s h surname, zero otherwise. 10. Unionization T h i s measure percentage i s taken from Weiss' I t i s the o f e m p l o y e e s i n e s t a b l i s h m e n t s w h e r e more t h a n the production workers are covered agreements. study. by c o l l e c t i v e half bargaining CHAPTER I V REGRESSION RESULTS M u l t i p l e r e g r e s s i o n a n a l y s i s was u s e d t o t e s t t h e hypothesized r e l a t i o n s h i p between s a l a r i e s and i n d u s t r y m o n o p o l y p o w e r , c a p i t a l - l a b o u r r a t i o and g r o w t h . Regression i n p u t was c r e a t e d b y m a t c h i n g i n d u s t r y data from the v a r i o u s sources w i t h the data f o r i n d i v i d u a l s from t h e p o p u l a t i o n census. values o f t h e v a r i a b l e s f o r t h e i n d u s t r y - i n w h i c h he was employed. The r e s u l t i n g d a t a r e c o r d c o n t a i n i n g s a l a r y , characteristics observation. 1871 E a c h p e r s o n was a s s i g n e d t h e such and i n d u s t r y p a r a m e t e r s I s a r e g r e s s i o n From t h e o r i g i n a l census sample o f 1 8 6 , 0 0 0 records, o b s e r v a t i o n s w e r e s e l e c t e d o v e r .15 o c c u p a t i o n s . constitutes a small, very Chapter personal select sample. This As e x p l a i n e d i n I I I , t o be s e l e c t e d an i n d i v i d u a l had t o s a t i s f y t h e c o n d i t i o n s o f b e i n g e m p l o y e d I n one o f t h e 6 3 i n d u s t r i e s i n Table I , h a v i n g w o r k e d 5 0 - 5 2 weeks i n 1 9 5 9 , employment i n c o m e , a s w e l l a s b e i n g o c c up a t I o n - s e x h a v i n g no s e l f - i n one o f t h e d e s i g n a t e d g r oups„ Two b a s i c s e t s o f l i n e a r r e g r e s s i o n s were r u n , w i t h o n l y t h e i n d u s t r y v a r i a b l e s and t h e o t h e r w i t h characteristics added. The two r e g r e s s i o n e q u a t i o n s - 36 - one personal were: - 37 - '1) S = b . + b C + b^AS + b_,CR + b,,CL + b G o 1 2 5 4 J? "r 5 (2) S = b + b.,C + b„AS + b C R + b,,CL + b G + o 1 2 3 4 5 x 1 n r v c b^-A + b, E + b R S + b„RR + b-, „SP + b -,R o ( o 9 10 -11 7 where: Q n S = Salary C = Concentration AS = A d v e r t i s i n g - S a l e s Ratio CR ~ C a p i t a l R e q u i r e m e n t s CL = C a p i t a l - L a b o u r R a t i o • ' G - Growth E = Education A = Age RS = Dummy w i t h v a l u e 1 i f r e s i d e n c e i n s o u t h RR = Dummy w i t h v a l u e 1 i f r u r a l residence SP = S i z e o f p l a c e o f r e s i d e n c e R = Dummy w i t h v a l u e 1 i f r a c e According t o the reasoning i s white o f t h e model i n Chapter I I , the f i v e i n d u s t r y v a r i a b l e s s h o u l d a l l have p o s i t i v e cients. Growth, t h e c a p i t a l - l a b o u r r a t i o and t h e t h r e e power v a r i a b l e s , coeffimonopoly c o n c e n t r a t i o n , a d v e r t i s i n g / s a l e s and c a p i t a l requirements, area l l hypothesized t o have a p o s i t i v e effect i n the determination of industry salaries. No p r e d i c t i o n s w e r e made a s r e g a r d s t h e c o e f f i c i e n t s •of t h e o t h e r v a r i a b l e s a s t h e y w e r e i n s e r t e d equations i n the regression o n l y t o a c c o u n t f o r some o f t h e v a r i a t i o n i n salaries. However, i t w o u l d be e x p e c t e d tion, and age, s i z e those of place of residence o f t h e two r e s i d e n c e The that the c o e f f i c i e n t s o f educa- a n d r a c e w o u l d be p o s i t i v e dummy v a r i a b l e s n e g a t i v e . f i r s t problem e n c o u n t e r e d upon r u n n i n g t h e r e g r e s s i o n s was t h e d i s c o v e r y o f a c r i t i c a l l y h i g h degree of c o l l i n e a r i t y between t h e c a p i t a l ' r e q u i r e m e n t s and c a p i t a l labour variables. F o r 12 o f t h e 15 o c c u p a t i o n s , correlation coefficient than In .9- of these arbitrarily decided high standard degree. e r r o r s , i t was requirements variable No o t h e r p r o b l e m s o f m u l t i c o l l i n e a r i t y encountered. The s e c o n d d i s c o v e r y made f r o m t h e i n i t i a l r e g r e s s i o n r u n s was t h a t t h e r e was v e r y l i t t l e cients greater but not t o t h i s t o drop t h e c a p i t a l from the r e g r e s s i o n runs. were t w o v a r i a b l e s was C o l l i n e a r i t y was e x p e c t e d order t o avoid extremely the simple difference i n the c o e f f i - of t h e v a r i a b l e s between equations only important (.1) and ( 2 ) . The d i f f e r e n c e b e t w e e n t h e two s e t s o f r e g r e s s i o n s was i n t h e amount o f v a r i a t i o n a c c o u n t e d f o r . With equation ( l ) 2 the values personal of R were c o n s i s t e n t l y l e s s t h a n but with the c h a r a c t e r j . s t i e s added i t ranged between .1 This r e s u l t was e x p e c t e d . o c c u p a t i o n a l groups s a l a r i e s w i l l personal .1, and .5. In thew h i t e - c o l l a r vary g r e a t l y according t o c h a r a c t e r i s t i c s , - p a r t i c u l a r l y experience and e d u c a t i o n . W i t h much o f t h i s v a r i a t i o n a c c o u n t e d f o r b y t h e age a n d y e a r s in s c h o o l v a r i a b l e s , t h e r e g r e s s i o n r e s u l t s become more m e a n i n g - ful. - 39 - Along w i t h the c a p i t a l requirements v a r i a b l e , and size neither o f p l a c e w e r e d r o p p e d f r o m t h e r e g r e s s i o n r u n s as o f t h e m a c c o u n t e d f o r any o f t h e v a r i a t i o n Thus, t h e independent v a r i a b l e s capital-labour ratio, r e s i d e n c e and r u r a l capital the of advertising/sales growth, education, age, southern of t h e m u l t i p l e r e g r e s s i o n s are summarized a r e shown. r e s u l t s w o u l d n o t be s u b s t a n t i a l l y one o r t w o a s t e r i s k s of the P a r a l l e l r u n s w e r e made w i t h requirements i n p l a c e of c a p i t a l - l a b o u r two-tailed ratio, F o r each o c c u p a t i o n only the c o e f f i c i e n t s variables significant salary. residence. The r e s u l t s i n Table I I I . In i n the remainder of the r e g r e s s i o n runs were c o n c e n t r a t i o n , industry race indicates t o check different. The that presence that the c o e f f i c i e n t i s a t t h e f i v e p e r c e n t o r one p e r c e n t l e v e l on a T-test. regression results all the variables 2 and values of R . 1 Table VI I n Appendix I I presents in full these d e t a i l showing the c o e f f i c i e n t s along with standard errors, F- of probabilities A c c o r d i n g t o t h e model i n Chapter I I , t h e s i g n s of the coefficients the results i n T a b l e I I I s h o u l d a l l be p o s i t i v e . do n o t o f f e r u n a m b i g u o u s s u p p o r t f o r t h e h y p o t h e s i s . The s i g n s a r e m i x e d and f e w o f t h e c o e f f i c i e n t s Careful Clearly, analysis of the c o e f f i c i e n t s are s i g n i f i c a n t . f o r each v a r i a b l e is ' n e c e s s a r y i n o r d e r t o f o r m u l a t e any c o n c l u s i o n s . "'"See A p p e n d i x I I f o r a n e x p l a n a t i o n o f t h e t e s t . TABLE I I I MULTIPLE REGRESSION RESULTS - COEFFICIENTS OF INDUSTRY V A R I A B L E S SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL V A R I A B L E S Ac c o u n t a n t s Chemists 100 - l.8o 53 + 7.91 114 Draftsmen ADVERTISING ' CAPITAL) ' (REQ. ) CAPITAL LABOUR - 10470. - .04 - + + .17* - 978.2 4.20 6.49 + 18.56* - 3.36 .18 + .42 - 3.93 - 4.84 + 58 + 15.74 - 99260.* + .35 + 18.76 Eng. 110 + 19.24 + + .05 + 2.62 Engineers 25 + 87.12 -129500. -2.13 Mechanical 18330. 26330. GROWTH - + 24.69* I n d u s t r i a l Eng. Sales CONCENTRATION NUMBER OBSER. OCCUPATION -120. -29.0 Engineers (NEC) 33 +117.72 -130100. - .38 .- 95.51 -21.19 Personnel and L a o o u r R e l a t i o n s 22 + 30.83 + 82480. - .03 - 3.55 - 2.48 Profess., Tech. & K i n d r e d Workers 56 + 4.58 + 27050. - -57 - 2. 23 - 4.20 Managers, Officials & Proprietors 532 - 10.47 + 17780. + .03 - 1.39 - 4.oo Bookkeepers 99 - 1.91 - 5812. - .02 - 2.19 + 5.71 Secretaries 239 + 21.35** - 5552. + .04* + 4.99* + .88 - 11220. - .03 - 3.5^ + 1.42 Stenographers 50 + Typists 58 + 29.55* + 2105. - .04 - 3.89 - 2.25 322 - 57.77* - 9563. + .12 + 10.63 - 5.7 S a l e s m e n and S a l e s c l e r k s 14.34 ( R e g r e s s i o n s were r u n w i t h C a p i t a l R e q u i r e m e n t s i n p l a c e o f C a p i t a l L a b o u r - o n l y t h e one c o e f f i c i e n t i s shown a s t h e r e was a n e g l i g i b l e c h a n g e I n t h e o t h e r c o e f f i c i e n t s . ) - 41 - 1. Cone e n t r a t i o n T h i s i s t h e one v a r i a b l e f o r t h e model. that offers strong support The c o e f f i c i e n t o f c o n c e n t r a t i o n i s p o s i t i v e 11 o u t o f 15 t i m e s a n d t h r e e o f t h e s e t i m e s i t i s s i g n i f i c a n t . •A b i n o m i a l t e s t was a p p l i e d having at l e a s t t o measure t h e p r o b a b i l i t y o f 11 s a m p l e c o e f f i c i e n t s o f t h e same s i g n . i f t h e coefficient o f c o n c e n t r a t i o n was i n f a c t probability o f .5 f o r e i t h e r the probability coefficients that a positive i s .119. be r e j e c t e d coefficient o r 11 n e g a t i v e However, on a p p l y i n g a o n e - t a i l e d t o .059.- The n u l l test, hypothesis at t h e six. p e r cent l e v e l o f s i g n i f i c a n c e . unfortunate r e s u l t of a s i g n i f i c a n t , negative i n t h e S a l e s m e n and S a l e s c l e r k s sample c a n p o s s i b l y e x p l a i n e d by the c o m p o s i t i o n of t h i s o c c u p a t i o n a l group. Salesmen w i l l generally salesclerks. Y e t t h i s d i f f e r e n t i a l , i s u n l i k e l y t o be by sign, i s , a s s u m i n g t h e c o e f f i c i e n t o f c o n c e n t r a t i o n c a n n o t be The be Assuming a or a negative o f h a v i n g a t l e a s t 11 p o s i t i v e negative, t h i s probability f a l l s can zero. age o r e d u c a t i o n . I t i s possible concentrated industries clerks earn considerably higher s a l a r i e s that the firms than explained i n t h e more employ a g r e a t e r p r o p o r t i o n o f s a l e s - t o salesmen, hence t h e i n v e r s e r e l a t i o n s h i p between c o n c e n t r a t i o n and s a l a r i e s . Taking t h i s factor results into consideration, of the binomial t e s t , the regression s a i d t o o f f e r support f o r the hypothesis that along with the results c a n be industry c o n c e n t r a t i o n has a p o s i t i v e • 2. e f f e c t upon s a l a r i e s . Advertising The r e s u l t s f o r t h i s v a r i a b l e Advertising/sales intensity results that i s a s i m p l e , e f f e c t i v e measure of However, t h e r e a r e e i g h t must be 3. advertising negative c o e f f i c i e n t s i n and one o f them i s s i g n i f i c a n t . product d i f f e r e n t i a t i o n i s a f a c t o r rates poor. and s h o u l d be a g o o d p r o x y f o r t h e p r o d u c t d i f f e r e n t i a - tion barrier. the are s u r p r i s i n g l y The hypothesis i n explaining salary rejected. C ap 11 a l R e q u 1 r e m e n t s Although t h i s variable positive sign, Is twice s i g n i f i c a n t with a i t has a n e g a t i v e s i g n n i n e out of f i f t e e n times. The n u l l h y p o t h e s i s o f no r e l a t i o n s h i p capital r e q u i r e m e n t s b a r r i e r t o e n t r y and s a l a r i e s c a n n o t be rejected. However, i n v i e w o f t h e l a c k measuring t h i s v a r i a b l e , from these r e g r e s s i o n 4. capital requirements. of p r e c i s i o n i n no f i r m c o n c l u s i o n s c a n be drawn results. C a p i t a l - L a b our The r e s u l t s between the Ratio f o r this variable w e r e t h e same as f o r Again, the c o n f l i c t i n g p o s i t i v e negative c o e f f i c i e n t s prevent r e j e c t i o n and of the n u l l h y p o t h e s i s . Due t o t h e e x t r e m e l y h i g h d e g r e e o f c o l l i n e a r i t y .between t h e s e t w o v a r i a b l e s , be s e p a r a t e d o u t . A l l that their individual effects c a n be s a i d i s that cannot i t appears - 43 - t h a t t h e amount o f c a p i t a l e f f e c t upon 5• salaries. Growth These r e s u l t s With i n a n i n d u s t r y does n o t h a v e an are strongly contrary t o the hypothesi 12 o u t o f 15 n e g a t i v e coefficients, an h y p o t h e s i s growth has a n e g a t i v e e f f e c t upon s a l a r i e s c o u l d he that accepted. T h i s i s c o n t r a d i c t o r y t o most t h e o r y , h u t t h e e x p l a n a t i o n f o r these perverse results probably l i e s i n t h e method o f measure- ment o f t h e v a r i a b l e . Change i n employment was u s e d a s a m e a s u r e o f g r o w t h mainly because these the d e t a i l e d considered f i g u r e s w e r e t h e o n l y ones a v a i l a b l e I n d u s t r y breakdown. a poor measure. for I n r e t r o s p e c t , i t must be Itfails t o take i n t o account t h e i n t r o d u c t i o n of labour saving i n n o v a t i o n s , thus u n d e r s t a t i n g t h e g r o w t h r a t e f o r t h e more p r o g r e s s i v e industries. T h i s w e a k n e s s c a n be i l l u s t r a t e d through comparison w i t h a s i m i l a r g r o w t h m e a s u r e b a s e d on v a l u e added. industries, Machines, and Office, Dairy Products, Computing and A c c o u n t i n g t h e g r o w t h r a t e s c a l c u l a t e d on ment/1950 employment a r e 1 5 3 a n d 154 i n Table I. b a s e d o n 1958 respectively, However, t h e g r o w t h f o r t h e s e value added/194? v a l u e i960 F o r two employa s shown two I n d u s t r i e s a d d e d a r e 193 a n d 14?. 2 V a l u e added f i g u r e s a r e t a k e n f r o m B u r e a u o f t h e Census, U n i t e d S t a t e s Census o f M a n u f a c t u r e r s : 1947 a n d I958. _ 44 - As a g r o w t h m e a s u r e , v a l u e added may he d i s t o r t e d b y p r i c e c h a n g e s , b u t i t w o u l d more a c c u r a t e l y r e f l e c t relative change in demand, w h i c h i s t h e r e l e v a n t f a c t o r . Not o n l y i s c h a n g e i n employment a. weak m e a s u r e o f g r o w t h , b u t t h e r e i s r e a s o n t o t h i n k t h a t i t m i g h t be related to salaries. w o u l d be more i n t e n t increase industries paying higher on a c h i e v i n g g r o w t h w i t h a i n employment. substituting measured Those inversely salaries minimal T h e r e w o u l d be g r e a t e r e m p h a s i s other factors of p r o d u c t i o n f o r labour. Growth b y i n c r e a s e i n employment w o u l d t e n d t o be l e s s f o r the higher paying industries. T h u s , n o t o n l y i s change i n employment a n Inaccurate m e a s u r e o f g r o w t h , b u t i t m i g h t w e l l be b i a s e d t o w a r d s a higher r a t e of growth f o r lower paying o f t h i s measurement p r o b l e m , l i t t l e effect In l i g h t c a n be c o n c l u d e d about the rates. Unionization Regressions were r u n t o d e t e r m i n e what e f f e c t degree of u n i o n i z a t i o n of p r o d u c t i o n w o r k e r s has upon The results unionism f o r these of .50 showing industries. of i n d u s t r y growth upon s a l a r y 6. on showed, as e x p e c t e d , are h i g h l y c o l l i n e a r . occupations. salaries. t h a t c o n c e n t r a t i o n and The correlation two v a r i a b l e s r a n g e d f r o m .20 f o r t h e 15 the coefficients t o .79 w i t h a median - 45 - When u n i o n i s m suggest t h a t was r u n a l o n e I t i sa significant However, when u n i o n i s m against salary, results explanatory v a r i a b l e . was r u n w i t h c o n c e n t r a t i o n i n t h e same m u l t i p l e r e g r e s s i o n , o n l y 8 o u t o f 15 o f i t s c o e f f i c i e n t s w e r e p o s i t i v e a n d none o f them significant. This problem of c o l l i n e a r i t y between c o n c e n t r a t i o n and unionism h a s h a m p e r e d most r e s e a r c h efforts to isolate 4 the e f f e c t s of these-variables. The one r e s e a r c h e r who wa„s a p p a r e n t l y unconcerned w i t h t h i s p r o b l e m o f m u l t I c o l l i n e a r i t y was W e i s s , concentration, unionism and t h e p r o d u c t He i n c l u d e d of t h e two i n h i s 5 multiple regressions. If i sunlikely, however, t h a t t h e e f f e c t s o f u n i o n i z a t i o n and c o n c e n t r a t i o n c a n be d e t e r m i n e d multiple regression analysis. recourse t o the a p r i o r i Conclusions reasoning through must be r e a c h e d by- I n Chapter I I . There a r e s t r o n g r e a s o n s f o r b e l i e v i n g t h a t m o n o p o l y power a n d h e n c e concentration w i l l ever there be i m p o r t a n t i slittle theory i n explaining salaries/ or evidence t o support How- the belief t h a t t h e degree of u n i o n i z a t i o n of p r o d u c t i o n workers will See T a b l e V I I , A p p e n d i x I I , f o r r e s u l t s . United ^See H.G. L e w i s , U n i o n i s m a n d R e l a t i v e Wages i n 'the S t a l e s , The U n i v e r s i t y o f C h i c a g o P r e s s , C h i c a g o ^ 1963, "'Weiss, op. c i t . , p. '98. - 46' - significantly Therefore, affect of w h i t e - c o l l a r i t seems l o g i c a l t o a t t r i b u t e , most o f t h e v a r i a t i o n two the salaries i n salaries that t o concentration, i s explained by these variables. 7. Comparison With Weiss It i s of i n t e r e s t t o compare t h e r e s u l t s to those of Weiss, since the data and t o a c e r t a i n a p p r o a c h , o f t h e two s t u d i e s a r e s i m i l a r . concentrated for four on h o u r l y p a i d wage e a r n e r s , salaried occupations that p r o p r i e t o r s (NEC) a n d t y p i s t s . for concentration, t h e main v a r i a b l e i n common, a r e shown i n T a b l e I V . of t h i s study- extent the Although Weiss he d i d r u n r e g r e s s i o n s are covered by t h i s They a r e d r a f t s m e n , m e c h a n i c a l e n g i n e e r s , and employees. managers, Regression study. officials coefficients t h a t t h e two s t u d i e s have TABLE I V COMPARISON WITH REGRESSION RESULTS OF WEISS' STUDY SALARY RELATED TO CONCENTRATION ALONE AND TO CONCENTRATION ALONG WITH OTHER INDUSTRY AND PERSONAL VARIABLES - ONLY C O E F F I C I E N T S FOR CONCENTRATION SHOWN WEISS' OCCUPATION No. Oh s r , Me an Salary STUDY T H I S STUDY C one. A l one Cone. W i t h Other Variables No. Ob s r . Mean Salary Cone. Alone Cone. W i t h Other Variables Draftsmen 150 5763 44.36* (13O0) 5.773 (72.08) 114 6389 24.21* (10.72) 24.6Q* (12.33) Mechanical Engineers 126 8998 24. 32 (26.73) .5249 (152.7) 110 1 LOil O.l s J• 20,43 (30.40) 19.24 (31.83) Managers . Officials, & Proprietors 693 IO980 31.03 (24.05) 11. 23 532 11840 -12.98 (26.81) -10.47 (28.99) Typists 126' 2693 13.78 (10.52) 58 3256 25.41* (9.69) 29.55* (11.23) ; 116.40) -13.14 (78.66) • i n d i c a t e s s i g n i f i c a n c e a t t h e 5% l e v e l . S t a n d a r d e r r o r s a r e shown I n b r a c k e t s i m m e d i a t e l y b e l o w t h e c o e f f i c i e n t s . ' - 48 - The d i f f e r e n c e i n sample s i z e s between t h e two s t u d i e s i s l a r g e l y a c c o u n t e d f o r b y t h e f a c t t h a t e m p l o y e e s who d i d not work a t l e a s t but 5 0 weeks i n 1 9 5 9 w e r e d r o p p e d f r o m t h i s not from Weiss'. are lower. typists, This Apparently e x p l a i n s why W e i s s ' mean f o r draftsmen, the i n c l u s i o n of these study, salaries mechanical engineers and employees d i d not b i a s t h e sample f o r o r a g a i n s t c o n c e n t r a t i o n . Looking at the c o e f f i c i e n t s f o r c o n c e n t r a t i o n when i t was t h e o n l y I n d u s t r y v a r i a b l e i n the regression, the results o f t h e two s t u d i e s a r e a l m o s t identical. For the managerial noticeably different. This occupation group, t h e r e s u l t s are discrepancy may b e due t o t h e f a c t •that a l l i n d i v i d u a l s w i t h any s e l f - e m p l o y m e n t income were dropped by t h i s study. Many o f t h e s e excluded p e r s o n s were employed by s m a l l f i r m s i n u n c o n e e n t r a t e d i n d u s t r i e s received l i t t l e observations favour o r no s a l a r y The i n c l u s i o n o f t h e s e i n the r e g r e s s i o n s would b i a s the r e s u l t s i n of a stronger centration. problem. income. and relationship I t i s not c l e a r between s a l a r i e s and con- e x a c t l y how W e i s s h a n d l e d I f he d i d n o t d r o p a l l e m p l o y e e s w i t h i n c o m e , t h e n h i s r e s u l t s w o u l d be d i f f e r e n t , this self-employment and perhaps biased. The r e s u l t s f o r t h e two s t u d i e s a r e d e c i d e d l y d i f f e r e n t , when t h e c o n c e n t r a t i o n i s r u n w i t h a l l o t h e r variables. Part of t h i s d i f f e r e n c e i s probably t h a t t h e t w o s t u d i e s i n c l u d e d somewhat d i f f e r e n t due t o t h e f a c t i n d u s t r y and _ 49 - personal variables. Most of t h e d i f f e r e n c e , however, i s l i k e l y - due t o t h e f a c t t h a t W e i s s i n c l u d e d t h e t h r e e variables, together collinear c o n c e n t r a t i o n , u n i o n i z a t i o n and t h e i r i n t h e same r e g r e s s i o n e q u a t i o n . by the very h i g h standard This product i s confirmed error f o r concentration. CHAPTER V CONCLUSIONS The that model t h a t t h i s study interindustry salary variation significant ratio, s e t out t o t e s t p r e d i c t s i s determinated, to a e x t e n t , -by i n d u s t r y m o n o p o l y p o w e r , c a p i t a l - l a b o u r and g r o w t h . The r e s u l t s of t h e l i n e a r regression a n a l y s i s do. n o t l e a d t o a s i m p l e c o n c l u s i o n of acceptance or r e j e c t i o n o f t h e model. they Rather, acceptance of c e r t a i n aspects and suggest t e n t a t i v e of t h e model, r e j e c t i o n of others f o r some o f t h e h y p o t h e s e s t h e e v i d e n c e i s s i m p l y i n - conclusive. This for f a i l u r e t o e s t a b l i s h conclusive evidence, o r a g a i n s t t h e m o d e l , c a n be b l a m e d l a r g e l y measurement. While the earnings data c o n s i s t e n t l y accurate and concentration meaningful. Economies o f s c a l e c o u l d n o t be measured, c a p i t a l were o n l y r o u g h l y a p p r o x i m a t e d and w h i l e - 50 - requirements a d v e r t i s i n g was e a s i l y m e a s u r e d , i t s u f f e r e d , as d i d t h e o t h e r s , aggregation. employees difficulties. Of t h e m o n o p o l y p o w e r m e a s u r e s , o n l y c a n be c o n s i d e r e d on p r o b l e m s o f on i n d i v i d u a l was g o o d , t h e I n d u s t r y v a r i a b l e s c a u s e d either from - The capital-labour aggregate basis with and r a t i o had t o be i t was m e a s u r e d on highly available c h a n g e i n employment was T h i s b e i n g the b e h a v i o u r of the growth D e s p i t e the clusions can indicates be that d e g r e e of collinear h a v e t o be the as indicate that j u d g e d a weak m e a s u r e o f growth was regression results. amount o f c a p i t a l i n an The same c a n industry be the effect rates. The evidence has no the the h i g h enough t o Regression proportion the of suggest t h i s strongest conclusion industry c h a r a c t e r i s t i c s i s a c o m p l e x one. results a, p o s i t i v e unanimous, positive relationship. that can be drawn r e l a t i o n s h i p between s a l a r i e s The i s u n d o u b t e d l y d e t e r m i n e d by interrelated variables. Much e f f o r t w o u l d be successfully test d e v e l o p and important c o n t r i b u t i o n s t u d y of and interindustry a large number required a complete model, but t o the will concentration r e s u l t s were n e i t h e r study i s that an The said for performance of the from the structure con- of monopoly power c a s e i n most s t u d i e s . Perhaps the the intensity. s i g n i f i c a n t , but c o e f f i c i e n t s was salary l e a r n e d from I n d u s t r y c o n c e n t r a t i o n does e x e r t e f f e c t upon s a l a r y strongly basis, measurement p r o b l e m s , t e n t a t i v e c o n c l u s i o n s on i s the a detailed variable. based upon the variable, industry drawn f r o m the advertising Any on case, l i t t l e e f f e c t upon s a l a r y l e v e l s . be an c a p i t a l requirements. i n demand. nor - i n addition, G r o w t h was but 51 to i t would economics. of BIBLIOGRAPHY A. Bain, BOOKS J.S. B a r r i e r s t o New C o m p e t i t i o n . U n i v e r s i t y P r e s s , 1956• ' Baumol, W i l l i a m J . New Y o r k , Cambridge, Harvard B u s i n e s s B e h a v i o r , "Value and G r o w t h . Macmillan, 1959» Bowen, W.G. Wage B e h a v i o r i n t h e P o s t w a r P e r i o d : A n Empirical Analysis. Princeton, Princeton University • Press, Galbraith, i960. J.K. 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"The 200 L a r g e s t N o n f i n a n e i a l C o r p o r a t i o n s . " A m e r i c a n E c o n o m i c R e v i e w , V o l . 56, No. 4 XSeptemher 196F)7~pp. 777 - 787. M c G u i r e , J.W., C h i u , J.S.Y. and E l b i n g , A.O. "Executives' Incomes, S a l e s and P r o f i t s . " A m e r i c a n Economic R e v i e w , V o l . 52, No. 4 ( S e p t e m b e r 1962") , pp. 753 - 761. S i m o n , H.A. "The C o m p e n s a t i o n o f E x e c u t i v e s . " Sociometry, V o l . 20, No. 4 (December 1957), pp. 32 - 35S h w a r t z m a n , D. " M o n o p o l y and Wages." C a n a d i a n J o u r n a l o f E c o n o m i c s a n d P o l i t i c a l S c i e n c e , V o l . 26, No] 3 "(August I 9 6 0 ) , pp. 428 - 438. S o l o m o n , B. a n d B u r n s , R.K. " U n i o n i z a t i o n of W h i t e - C o l l a r Employees: E x t e n t , P o t e n t i a l and I m p l i c a t i o n s . " J o u r n a l o f B u s i n e s s , V o l . 36, No. 2 " ( A p r i l 1963), pp."141 - lb~5~. W e i s s , L.W. " C o n c e n t r a t i o n and L a b o r E a r n i n g s . " American E c o n o m i c R e v i e w , V o l . 56, No. '1 ( M a r c h 1960") , pp. 96 - 117. W i l l i a m s o n , O.E. " M a n a g e r i a l D i s c r e t i o n and B u s i n e s s Behavior." A m e r i c a n E c o n o m i c R e v i e w , V o l . 53, No. 5 (December ±9b~5T, pp. .1033 - 1057". Y o r d o n , W.J. " A n o t h e r L o o k a t M o n o p o l y and Wages." C a n a d i a n J o u r n a l o f Economics and P o l i t i c a l S c i e n c e , V o l . 27, No. 3 ( A u g u s t 1961), pp. 373 - 379- C. U.S. GOVERNMENT PUBLICATIONS Bureau o f t h e Census, U n i t e d . ' 1947. Vol. I. S t a t e s Census of Manufacturers: Bureau of t h e Census, U n i t e d 1958. Vol. I. States of Manufacturers: Census B u r e a u . o f t h e Census, U n i t e d S t a t e s Census Industries: 195~87 V o l . I . of Mineral B u r e a u o f t h e C e n s u s , U.S. C e n s u s e s o f P o p u l a t i o n a n d H o u s i n g i960. 1 / I 0 0 " 0 ~ a n d 1 / 1 0 0 0 0 , Two N a t i o n a l S a m p l e s o f ~ the P o p u l a t i o n of t h e United S t a t e s , D e s c r i p t i o n and D o c u m e n t a t i o n . I n t e r n a l Revenue S e r v i c e , S t a t i s t i c s June i 9 6 0 . o f Income: July 1959 - APPENDIX I MATCHING OF As indicated s t u d y comes f r o m t h r e e 1. INDUSTRY DATA i n Chapter sources: S t a t i s t i c s o f Income, 1959 I n t e r n a l Revenue S e r v i c e , U.S. source I I I , industry data f o r t h i s - I960, p u b l i s h e d b y Treasury p r o v i d e s d a t a on i n d u s t r y s a l e s , 2. U.S. Census of M a n u f a c t u r e r s : of M i n e r a l I n d u s t r i e s : t h e C e n s u s , U.S. establishments 3. 1958, advertising. '1958, and U.S. " C o n c e n t r a t i o n and L a b o r E a r n i n g s " b y L.W. appendix of t h i s concentration. 96 - 117. c o n c e n t r a t i o n d a t a were T a b l e The original sources In The and g r o w t h d a t a o r i g i n a l l y came f r o m t h e i960 p o p u l a t i o n c e n s u s e s . Manufacturing pp. here. Weiss a r t i c l e provided f i g u r e s f o r growth The Census F i g u r e s f o r number o f number o f e m p l o y e e s a r e t a k e n f r o m t h e A m e r i c a n E c o n o m i c R e v i e w , M a r c h 1966, and a s s e t s and This b o t h p u b l i s h e d by t h e B u r e a u o f D e p a r t m e n t o f Commerce. and Department. the 1950 for IV of C o n c e n t r a t i o n R a t i o s i n I n d u s t r i e s , P a r t I (Senate - 56 - Judiciary, 1962) 'and - U.S. Census of M i n e r a l The d e v e l o p e d as 57 - i n d u s t r y v a r i a b l e s t o be follows. A total o f 6j5 i n d u s t r i e s were s e l e c t e d f o r the according t o the population on Statistics of the They were concentration s t u d y s i n c e he a v a i l a b l e only The on o f Incorne does n o t a detailed industry level. Statistics population census. f i g u r e s were a s s i g n e d reported report the each group t h e s e detailed industry Census of M a n u f a c t u r e r s r e p o r t s minor f o u r - d i g i t b a s i s . employment f i g u r e s f r o m t h i s c h o s e n on t h e same b a s i s as t h e assets as figures the major groups aggregate classifications. industry data and However, the s o u r c e must d a t a from the on be Statistics ome. The major i n d u s t r y c l a s s i f i c a t i o n s f o r the and m a n u f a c t u r i n g censuses correspond e x a c t l y , but two cases f o r which the Kindred the required establishment differ. them Major i n d u s t r y f i g u r e s from For t o the the a major i n d u s t r y b a s i s and Inc classified r e m a i n d e r of a major t w o - d i g i t of mining f i g u r e s were o f Income w e r e m a t c h e d b y name t o t h e The s t u d y were m a n u f a c t u r i n g and study. t h r e e - d i g i t code. i n d u s t r y d a t a was the G r o w t h and from Weiss' t o the used i n the t h r e e - d i g i t i n d u s t r y code u t i l i z e d by census. taken d i r e c t l y according 1958. Industries: These are Statistics o f Income i n Transportation P r o d u c t s where Motor V e h i c l e s Beverages are reported separately by the there are classification E q u i p m e n t and and population Equipment Statistics Food and and o f ' I n c orne. S i n c e i t i s d e s i r e d t o h a v e as d e t a i l e d •as i s p o s s i b l e , t h i s classification an i n d u s t r y i s used. breakdown Figures f o r B e v e r a g e s a r e d e v e l o p e d f r o m t h e Census of M a n u f a c t u r e r s by f o r t h e 208X f o u r - d i g i t summing f i g u r e s are Malt Liquors (20-82), M a l t industries. These ( 2 0 8 3 ) , Wine and B r a n d y (2084), D i s t i l l e d L i q u o r e x c e p t B r a n d y (2085), b o t t l e d a n d c a n n e d soft drinks (2086) and f l a v o r i n g s (2087). I n o r d e r t o match t h e F o o d and K i n d r e d ' P r o d u c t s f i g u r e s t o t h o s e f r o m t h e Statistics o f Income, t h e s e B e v e r a g e s f i g u r e s w e r e subtracted f r o m F o o d and K i n d r e d ' P r o d u c t s ( 2 0 ) . Similarly, the f i g u r e s f o r Motor V e h i c l e s and E q u i p m e n t w e r e d e v e l o p e d b y summing t h o s e f o r T r u c k and Bus Bodies Parts (37-13), T r u c k T r a i l e r s (3717). (3715), and M o t o r V e h i c l e s and These t o t a l s were s u b t r a c t e d from t h o s e f o r T r a n s p o r t a t i o n Equipment (37) t o o b t a i n t h e p r o p e r f i g u r e s f o r matching. The r e s u l t s of t h i s i n d u s t r y . m a t c h i n g a r e shown i n T a b l e V and t h e c a l c u l a t e d v a r i a b l e s . i n d u s t r y d a t a was i n Table I. e n t e r e d on p u n c h e d c a r d s s o as t o be i n a form f o r computer i n p u t . I t was t h e n matched w i t h t h e p o p u l a t i o n census data which i s stored individual This on m a g n e t i c t a p e . employee s e l e c t e d f r o m t h e p o p u l a t i o n - c e n s u s Each was assigned the industry v a r i a b l e s corresponding t o the threedigit i n d u s t r y i n w h i c h he was employed. The r e s u l t i n g a g a i n on m a g n e t i c t a p e , c o n s t i t u t e d an o b s e r v a t i o n f o r regression analysis. record, TABLE V BASIC INDUSTRY DATA I NT) UNIONIZATION NAME Acc^rpo O D $' 000 126 136 146. 156 Metal Mining Coal Mining C r u d e P e t . & N a t . Gas Non-Metalic Mining Lumber, and Wood 206 207 208 209 218 219 23o an-jaa • ADVERTISING $'000 ' $ 000 NO. EST. NO. EMF. ! 94 99 13 30 4211305 2324810 7146456 2356819 1791980 1884238 4450769 1769976 518 1716 9086 6769 2233 8178 18501 7306 92501 210519 312800 116812 50 5333283 7193236 28558 37789 518302 43 47 50 5333283 5333283 2449833 7193236 7193236 4945371 28558 28558 60459 37789 37789 10160 518302 518302 347599 95 8713029 10581391 74279 15022 554042 69 65 60 85 • 8713029 8713029 8713029 8713029 10581391 10581391 10581391 10581391 74279 74279 74279 74279 15022 15022 15022 15022 554042 554042 554042 554042 Products Logging Sawmills, Planing M i l l s , Millwork M i s c . Wood P r o d u c t s F u r n i t u r e and F i x t u r e s S t o n e , C l a y and G l a s s 216 217 q f l T p q ° Products G l a s s and G l a s s P r o d u c t s Cement, C o n c r e t e , Gypsum and P l a s t e r S t r u c t u r a l Clay Products P o t t e r y and R e l a t e d P r o d u c t s Misc. Non-Metalic Minerals TABLE V IND NAME Primary Metal 237 238 239 248 B l a s t F u r n a c e s , S t e e l Works, etc. Other Primary Iron & S t e e l Primary, Non-Ferrous Metals SALES ADVERTISING NO. EMP. $'000 $' 000 $'000 99 75 83 26282013 26282013 26282013 27194223 27194223 27194223 118575 118575 118575 6446 6446 6446 1096359 1096359 1096359 60 11772597 18712082 167205 24782 1057986 73 73 11772597 11772597 18712082 18712082 167205 167205 24782 24782 1057986 1057986 Products C u t l e r y , Hand T o o l s , H a r d w a r e Fabricated S t r u c t u r a l Metal Products • Misc. Fab. Metal Products Machinery NO. EST. ASSET'S Industries Fabricated Metal 246 247 UNIONIZATION (Continued) Except Electrical 256 257 258 Farm M a c h i n e r y O f f i c e , C o m p u t i n g & A c c t g Mach. Misc. Machinery 90 42 69 20137931 20137931 20137931 24938517 24938517 24938517 262160 262160 262160 29839 29839 29839 1348245 1348245 1348245 259 Electrical 73 '14300144 22500260 389261 8091 1122284 267 Motor V e h i c l e s 98 16561217 24273354 196745 2283 210519 Machinery and E q u i p m e n t TABLE V I NT) i^I0ILT NAME IZATION T r a n s p o r t a t i o n Eqpt Except 268 269 276 and R e l a t e d ASSETS SALES ADVERTISING $'000 $'000 $'000 ' 9694529 9694529 9694529 16465594 16465594 16465594 46287 46287 46287 4324 4324 4324 100571 100571 100571 3526 3526 3526 296558 296558 296558 14273 57143 36061 36061 36061 36061 1492617 1492617 1492617 1492617 Products P r o f e s s i o n a l Eqpt and S u p p l i e s P h o t o g r a p h i c Eqpt and S u p p l i e s Watches, C l o c k s , E t c . " 53 43 90 4545251 4545251 4545251 6200826 6200826 6200826 296 M i s c e l l a n e o u s Mfgrs 55 4518551 7249222 139904 139994139994 133726 83 6l 69 ' 74 18010406 18010406 l8010406 l8oio4o6 50112468 50112468 50112468 50112468 963744 963744 963744 963744 306 307 308 309 NO. EMP. 82 70 50 286 287 289 Food and K i n d r e d NO. EST. Auto A i r c r a f t and P a r t s Ship & Boat B u i l d i n g & R e p a i r R a i l r o a d & Misc. Transp. Eqpt Instruments (Continued) 2 Products " Meat P r o d u c t s Dairy Products Canning and P r e s e r v i n g Grain M i l l Products ABLE V INT) NAME UNIONIZATION $' 000 $'000 $'000 NO. EST. NO. EMP. 1492617 1492617 1492617 5248563 8215474 401319 5558 206197 60 3306120 4817872 263388 504 84467 31 50 8929065 8929065 14196673 14196673 88344 88344 7675 7675 901677 901677 62 . 24 39 8929065 8929065 8929065 14196673 14196673 14196673 88344 '88344 88344 7675 7675 7675 901677 901677 901677 64 32 • 4507669 4507669 1184383411843834 115827 115827 29297 29297 1180517 1180517 90 62 71 9977017 9977017 9977017 11579374 11579374 11579374 97458 97458 97453 5271 5271 5271 555398 555398 . 555398 318 Beverages 70 329 Tobacco Products 349 356 Knitting Mills Dying and F i n i s h i n g F l o o r Coverings Except Hard Surfaces Y a r n , T h r e a d and F a b r i c Misc. Textiles 359 367 A p p a r e l and A c c e s s o r i e s Misc. Fan. T e x t i l e s Paper and A l l i e d 386 387 389 ADVERTISING 36061 36061 36061 50 51 72 346 3^7 348 SALES 963744 963744 963744 B a k e r y Product's C o n f e c t i o n e r y & R e l a t e d Prodticts M i s c . Food P r e p a r a t i o n s Textile Mill ASSETS 18010406 50112468 i8oio4o6 • 50112468 i8oio4o6 50112468 316 317 319 Products (Continued) Products Pulp, Paper & Paperboard Paperboard Containers Misc. Paper & Pulp Products TABLE V IND Printing 396 39° 406 407 408 409 Except C h e m i c a l s and A l l i e d Products Synthetic Fibres Drugs and M e d i c i n e s P a i n t s , V a r n i s h and R e l a t e d Products M i s c . C h e m i c a l s and R e l a t e d Products and C o a l ADVERTISING £'000 $ 000 $'000 90 8146482 12238036 92601 35368 864101 56 8146482 12238036 92601 35368 864101 75 33 23202242 23202242 26065022' 26065022 986856 986856 11309 11309 699166 699166 67 23202242 26065022 986856 11309 699166 70 23202242 26065022 986856 11309 699166 90 39748483 39748483 36004854 36004854 164859 164859 1608 1608 179166 179166 81 50 4906503 4906503 7737607 7737607 127152 127152 4462 4462 349050 349050 1 NO. EST NO. EMP. Products 416 • P e t r o l e u m R e f i n i n g 419 Misc. Pet. & Coal Products Rubber and P l a s t i c s 426 42°/ SALES and P u b l i s h i n g Newspapers Printing & Publishing Newspapers Petroleum ASSETS UNIONIZATION NAME (Continued) Products Rubber P r o d u c t s Misc. P l a s t i c Products OA TABLE V IND NAME L e a t h e r and L e a t h e r 436 437 438 IZATION (Continued) ASSETS $'000 $'000 $'000 1843319 1843319 1843319 3907359 3907359 3907359 43585 43585 43585 Products Leather Tanning, e t c . Footwear Except Rubber L e a t h e r Products Exc. Footwear 67 48 48 4534 4534 4534 349050 349050 349050 APPENDIX I I DETAILED REGRESSION RESULTS T a b l e V I shows i n d e t a i l •regressions. the results of the m u l t i p l e F o r e a c h o c c u p a t i o n t h e number o f o b s e r v a t i o n s , t h e mean s a l a r y , the constant term and t h e c o e f f i c i e n t s of t h e f o u r i n d u s t r y v a r i a b l e s and f o u r p e r s o n a l v a r i a b l e s a r e shown. In brackets shown t h e s t a n d a r d immediately below each c o e f f i c i e n t i s e r r o r of the c o e f f i c i e n t . below t h i s i s t h e F~ p r o b a b i l i t y , calculated by d i v i d i n g and calculated, statistic t h e c o e f f i c i e n t by i t s s t a n d a r d squaring the resulting obtaining a value where F i s a Immediately term. error This i s the p r o b a b i l i t y of F g r e a t e r than of o r e q u a l t o t h e one given that the c o e f f i c i e n t i s actually At t h e f a r r i g h t hand s i d e o f t h e t a b l e , zero. the value 2 of R , t h e c o e f f i c i e n t of m u l t i p l e determination, i s given and u n d e r n e a t h t h a t i s t h e s t a n d a r d As e x p l a i n e d i n Chapter IV, t h e h i g h ' c o l l i n e a r i t y between t h e c a p i t a l requirements - 65- e r r o r of t h e estimate. and c a p i t a l l a b o u r v a r i a b l e s - 66 necessitated runs. t h e d r o p p i n g o f one o f t h e m f r o m t h e r e g r e s s i o n Thus, t h e c a p i t a l i n Table V I . r e q u i r e m e n t s v a r i a b l e does n o t appear Regressions run with t h i s v a r i a b l e i n place of c a p i t a l - l a b o u r produced almost i d e n t i c a l r e s u l t s . Table V I I gives the regression made w i t h t h e u n i o n i z a t i o n v a r i a b l e . r e s u l t s f o r t h e runs The c o e f f i c i e n t s a r e shown f o r u n i o n i z a t i o n when i t was t h e o n l y run. are industry Then c o e f f i c i e n t s f o r u n i o n i z a t i o n and concentration shown when b o t h w e r e r u n i n t h e same r e g r e s s i o n . presence o f one o r t w o a s t e r i s k s I n d i c a t e s 5 ^ o r l°/o l e v e l on a, 2 - t a i l e d T - t e s t . variable The significance at the TABLE VI MULTIPLE REGRESSION RESULTS SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL VARIABLES CONCENTRATION ADVERTISING + 977.4 (2126.1) - 1.80 (15.33) (.8733) - 10470. (19610.) (.6013) 1,3, 7503 - 2097. (3081.) + 7.91 (32.27) (.7945) Draftsmen 114, 6389 + 576.8 (1807.) Industrial Engineers 58, 8145 Mechanical Engineers RSQ 4.20 (3.65) (.1513) - 6.49 (5.04) (.1980) + 317.4 (469.5) (.5079) ^ 93.0 (17.58) (.0000) + 362.0 (154.7) (.0204) - + 978.2 (21630.) (.9165) 18.56 (7.77) (.0203) - 3.36 (11.29) (.7602) +1060. (648.2) (.1023) ^ 57.33 (29.29) (.0538) + 630.4 (168.7) (.0006) - 698.8 (722.9) (.3413) .4360 (1991.) + 24.69 (12.33) (.0452) + 18330. (20510.) (.3773) .4221 (5.29) (.8957) - 3.93 (4.30) (.3664) - 145.3 (410.2) (.7222) i- 90.53 (15.75) (.0000) 1- 203.1 (136.9) (.1376) - 92.34 (354.4) (.7840) .3244 (1476.) + 50.29 (3756.) + 15.74 (41.43) (.7039) - 99260. (43040.) (.0241) <- 18.76 (30.56) (.5494) - 4.84 (10.15) (.6402) - 984.8 (1397.) ( .4910) +103.1 (33.52) (.0035) + 479.1 (309.8) (.1245) - 973.4 (990.5) (.3325) .2969 (2781.) 110, 9494 - 1063. (3988.) + 19.24 (31.83) (.5543) + 26330. (54360.) (.6345) + 2.62 (11.75) (.8083) • .491 (8.53) ( .9089) + 354.7 (1078.8) (.7392) +102.57 (42.60) (.0171) ^ 523.0 (280.2) (.0616) -2180. (1272.) (.0858) .1107 (3972.) Sales Engineers 25, 11950 -15750. (26100.) + 87.12 (292.5) (.7619) -129500. (164000.) (.4466) -120.8 (176.5) (.5100) -29.03 (54.31) (.5944) -2561. (3546.) (.4867) +491.4 (242.7) (.0574) +1232. (1746.) (.4967) +1600. (6398.) (.7927) .3877 (6949.) Engineers (NEC) 33, 9520 -15540. (9715.8) +117.7 (87.4) (.1879) -130100. (104300.) (.2223) - 95.51 (95.06) (.3267) -21.19 (21.90) (.3451) -2589. (3442.) (.4652) +381.7 (112.1) (.0024) +1216. (625.2) (.0609) -5104. (3212.) (.1215) .4577 (5310.) Accountants (Std. Err.) (F Prob) 100, 7208 Chemists AGE RURAL SOUTH CONSTANT CAP/LAB EDUCATION GROWTH N,M OCCUPATION 61.1 (459.7) ( .8640) .2854 (1846.) TABLE VI MULTIPLE REGRESSION RESULTS SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL VARIABLES EDUCATION RURAL RSQ + 93.0 (17.58) (.0000) + 362.0 (154.7) (.0204) • 61.1 (459.7) (.8G40) .2854 (1846.) +1060. (648.2) (.1023) + 57.33 (29.29) (.0538) + 630.4 (168.7) (.0006) - 698.8 (722.9) (.3413) .4360 (1991.) - 3.93 (4.30) (.3664) - 145.3 (410.2) (.7222) + 90.53 (15.75) (.0000) + 203.1 (136.9) (.1376) - 92.34 (354.4) (.7840) .3244 (1476.) + 18.76 (30.56) (.5494) - 4.84 (10.15) (.6402) - 984.8 (1397.) (.4910) +103.1 (33.52) (.0035) + 479.1 (309.8) (.1245) - 973.4 (990.5) ( .3325) .2969 (2781.) + 26330. (54360.) ( .6345) + 2.62 (11.75) (.8083) - .491 (8.53) ( .9089) + 354.7 (1078.8) (.7392) +102.57 (42.00) (.0171) + 523.0 (280.2) (.0616) -2180. (1272.) (.0858) .1107 (3972.) + 87.12 (292.5) (.7619) -129500. (164000.) ( .4466) -120.8 (176.5) (.5100) -29.03 (54.31) (.5944) -2561. (3546.) ( .4867) +491.4 (242.7) (.0574) +1232. (1746.) (.4967) +1600. (6398.) (.7927) .3877 (6949.) +117.7 (87.4) (.1879) -130100. (104300.) (.2223) - 95.51 (95.06) ( .3267) -21.19 (21.90) (.3451) -2569. (3442.) (.4652) +381.7 (112.1) (.0024) +1216. (625.2) (.0609) -5104. (3212.) (.1215) .4577 (5310.) CONCENTRATION ADVERTISING CAP/LAB GROWTH SOUTH 4.20 (3.65) (.1513) - 6.49 (5.04) (.1980) + 317.4 (469.5) (.5079) + 978.2 (21630.) (.9165) 18.56 (7.77) (.0203) - 3.36 (11.29) (.7602) + 24.69 (12.33) (.0452) + 18330. (20510.) (.3773) .4221 (5.29) (.8957) + 50.29 (3756.) • 15.74 (41.43) (.7039) - 99260. (43040.) (.0241) 110, 9494 - 1063. (3988.) + 19.24 (31.83) (.5543) Sales Engineers 25, 11950 -15750. (26100.) Engineers (NEC) 33, 9520 -15540. (9715.8) N,M CONSTANT Accountants (Std. Err.) (F Prob) 100, 7208 + 977.4 (2126.1) - 1.80 (15.33) (.8733) - 10470. (19610.) (.6013) Chemists 53, 7503 - 2097. (3081.) + 7.91 (32.27) (.7945) Draftsmen 114, 6389 + 576.8 (1807.) Industrial Engineers 58, 8145 Mechanical Engineers OCCUPATION AGE - 69 - TABLE V I I REGRESSION RESULTS FOR UNIONIZATION OCCUPATION UNIONIZATION ALONE Accountants -10.97 Chemists Draftsman UNIONIZATION CONCENTRATION 9.09 + +13.82" • 31 - +24.03* + 20.02 + 15.17 - . 23 1.16 Industrial Engineers +30.14 + 13.45 - 15.37 Mechanical Engineers +17.10 + 20.08 + Engineers -61.65 - 99.31 +243.3 E n g i n e e r s (NEC) +66.23 - 25.06 + 80.18 P e r s o n n e l and Labour R e l a t i o n s Workers -29.48 -105.9 +180.22 P r o f . , Tech. and K i n d r e d W o r k e r s (NEC) - 3.98 -. 5.36 + 14.74 •Managers, O f f i c i a l s and P r o p r i e t o r s + 9-99 + 16.20 - 19.1c Bookkeepers + 2.50 + .91 + Secretaries +12.35** + .04 + 23.04** Stenographers + - 4.39 + 21.83 Typists +30.39** + 29.28 + 11.75 Salesmen and S a l e s c l e r k s - + 14.17 - 71.25** Sales 1.92 4.08 2.28 6.68
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Interindustry variation in salaries : an empirical study Appelbe, Trent Woods 1969
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Title | Interindustry variation in salaries : an empirical study |
Creator |
Appelbe, Trent Woods |
Publisher | University of British Columbia |
Date Issued | 1969 |
Description | The purpose of this study was to empirically investigate the determinants of the variation in white-collar salaries among United States manufacturing and mining industries. A model was formulated, hypothesizing that inter-industry salary variation is primarily a function of industry monopoly power, capital-labour ratio and growth. Linear regression analysis was to be used to test the model with data from the U.S. Bureau of the Census and the Internal Revenue Department. Conceptual and statistical problems were encountered in measuring the industry variables. Although concentration and barriers to entry were to be used together in measuring monopoly power, in the final analysis it was concentration that had to be relied upon. The measure of industry growth, based upon change in employment, turned out to be inappropriate for its intended purpose. The regression results indicated that the amount of capital in an industry has no effect upon the level of salaries. Problems of multicollinearity made it impossible to isolate the capital-labour and capital requirements effects. The evidence further indicated that industry concentration is a factor in explaining salary rates. However, the results were not decisive enough to allow any firm conclusions concerning the effects of monopoly power, particularly in view of the fact that concentration is an imperfect measure of this variable. . . Thus, one assertion of the hypothesis was tentatively accepted, another rejected, and for the third, the evidence was inconclusive. |
Subject |
Wages. |
Genre |
Thesis/Dissertation |
Type |
Text |
Language | eng |
Date Available | 2011-05-18 |
Provider | Vancouver : University of British Columbia Library |
Rights | For non-commercial purposes only, such as research, private study and education. Additional conditions apply, see Terms of Use https://open.library.ubc.ca/terms_of_use. |
IsShownAt | 10.14288/1.0102022 |
URI | http://hdl.handle.net/2429/34681 |
Degree |
Master of Arts - MA |
Program |
Economics |
Affiliation |
Arts, Faculty of Vancouver School of Economics |
Degree Grantor | University of British Columbia |
Campus |
UBCV |
Scholarly Level | Graduate |
AggregatedSourceRepository | DSpace |
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