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UBC Theses and Dissertations

Interindustry variation in salaries : an empirical study 1969

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INTERINDUSTRY VARIATION IN SALARIES: 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, I 9 6 I A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS i n the Department of Economics We ac 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 s t a n d a r d THE UNIVERSITY OF BRITISH COLUMBIA September, 1969 I n p r e s e n t i n g 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 t h e r e q u i r e m e n t s f o r an advanced degree a t the U n i v e r s i t y of B r i t i s h Columbia., I agree t h a t t h e L i b r a r y s h a l l make i t , f r e e l y a v a i l a b l e f o r r e f e r e n c e and Study. I f u r t h e r agree t h a t p e r m i s s i o n f o r e x t e n s i v e c o p y i n g of t h i s t h e s i s f o r s c h o l a r l y purposes may be g r a n t e d by the Head of my Department pr by h i s r e p r e s e n t a t i v e s . I t i s u n d e r s t o o d t h a t c o p y i n g or p u b l i c a t i o n o f t h i s t h e s i s f o r f i n a n c i a l g a i n s h 9 . l l not be a l l o w e d w i t h o u t my w r i t t e n p e r m i s s i o n . Department of ECONOMICS The U n i v e r s i t y of B r i t i s h C o l u m b i a Vancouver 8, Canada Date September 22, 1969 ABSTRACT The purpose of t h i s s t u d y was t o e m p i r i c a l l y i n v e s t i g a t e t h e d e t e r m i n a n t s of t h e v a r i a t i o n i n w h i t e - c o l l a r s a l a r i e s 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 - d u s t r i e s . A model was f o r m u l a t e d , h y p o t h e s i z i n g t h a t i n t e r - i n d u s t r y s a l a r y v a r i a t i o n i s p r i m a r i l y a f u n c t i o n of i n d u s t r y monopoly power, c a p i t a l - l a b o u r r a t i o and growth. L i n e a r r e g r e s s i o n a n a l y s i s was t o be used t o t e s t t h e model w i t h d a t a f rom t h e U.S. Bureau of t h e Census and t h e I n t e r n a l Revenue Department. C o n c e p t u a l and s t a t i s t i c a l problems were e n c o u n t e r e d i n m e a s u r i n g the i n d u s t r y v a r i a b l e s . A l t h o u g h c o n c e n t r a t i o n and b a r r i e r s t o e n t r y were t o be used 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 a n a l y s i s i t was c o n c e n t r a t i o n t h a t had t o be r e l i e d upon. The measure of i n d u s t r y growth, based upon change i n employment, t u r n e d out t o be i n a p p r o p r i a t e f o r i t s i n t e n d e d purpose. The r e g r e s s i o n r e s u l t s i n d i c a t e d t h a t t h e amount o f c a p i t a l i n an i n d u s t r y has no e f f e c t upon t h e l e v e l of s a l a r i e s . Problems of 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 t o i s o l a t e t h e c a p i t a l - l a b o u r 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 i i The e v i d e n c e f u r t h e r i n d i c a t e d t h a t i n d u s t r y c o n c e n t r a t i o n i s a f a c t o r i n e x p l a i n i n g s a l a r y r a t e s . However, th e r e s u l t s were not d e c i s i v e enough t o a l l o w any f i r m c o n c l u s i o n s c o n c e r n i n g the e f f e c t s of monopoly power, p a r t i c u l a r l y i n view of t h e f a c t t h a t c o n c e n t r a t i o n i s an i m p e r f e c t measure of t h i s v a r i a b l e . . . Thus, one a s s e r t i o n of the h y p o t h e s i s was t e n t a t i v e l y a c c e p t e d , a n o t h e r r e j e c t e d , and f o r t h e t h i r d , t h e e v i d e n c e was i n c o n c l u s i v e . CONTENTS Page LIST OF TABLES . . .' . . . i v LIST OF FIGURES v CHAPTER I . INTRODUCTION . 1 I I . THE MODEL ' . . . 8 I I I . DATA SOURCES AND MEASUREMENT OF REGRESSION VARIABLES 18 IV. REGRESSION RESULTS . . . . • 36 V. CONCLUSIONS 50 BIBLIOGRAPHY 52 APPENDICES I . MATCHING OF INDUSTRY DATA . . . . . . . . 56 I I . DETAILED REGRESSION RESULTS 65 i i i LIST OP TABLES Page TABLE , I . I n d u s t r y V a r i a b l e s 21 I I . O c c u p a t i o n a l . G r o u p i n g s f o r R e g r e s s i o n A n a l y s i s 33 I I I . M u l t i p l e R e g r e s s i o n R e s u l t s - C o e f f i c i e n t s of I n d u s t r y V a r i a b l e s 4-0 IV. Comparison w i t h R e g r e s s i o n R e s u l t s o f Weiss' Study 47 V. B a s i c I n d u s t r y D a t a . 59 - V I . D e t a i l e d R e g r e s s i o n R e s u l t s 6? V I I . R e g r e s s i o n R e s u l t s f o r U n i o n i z a t i o n . . . 69 i v LIST OF FIGURES Page FIGURE I . Wage D e t e r m i n a t i o n Under.Monopoly and C o m p e t i t i o n 14 v CHAPTER I INTRODUCTION The s u b j e c t of i n t e r i n d u s t r y d i f f e r e n c e s i n the e a r n i n g s 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 a t t e n t i o n i n economic l i t e r a t u r e . Most of t h e r e s e a r c h on the d e t e r - m i n a t i o n of e a r n i n g s has c e n t e r e d about t h e a n a l y s i s of t h e wages o f h o u r l y p a i d w o r k e r s . I n a d d i t i o n , t h e r e have been some s c a t t e r e d attempts t o e x p l a i n t h e v a r i a t i o n i n e x e c u t i v e s a l a r i e s . Such s t u d i e s , however, are of l i m i t e d v a l u e i n c o n t r i b - u t i n g t o a g e n e r a l a n a l y s i s of s a l a r y l e v e l s . There e x i s t i m p o r t a n t f a c t o r s c o n t r i b u t i n g t o t h e d e t e r m i n a t i o n of e a r n i n g s t h a t are unique f o r t h e s e d i f f e r e n t . c l a s s e s of employees. N o t a b l y , u n i o n i z a t i o n , w h i c h i s g i v e n c o n s i d e r a b l e a t t e n t i o n i n the s t u d y of wage l e v e l s , i s l i k e l y t o be of l e s s I n t e r e s t a's a d e t e r m i n a n t of t h e e a r n i n g s of s a l a r i e d employees. Converse- l y , t h e e x i s t e n c e of d i s c r e t i o n a r y p r o f i t s s h o u l d e x e r t i t s maximum I n f l u e n c e upon the e a r n i n g s of t o p e x e c u t i v e s , h a v i n g l e s s e f f e c t f o r t h e r e s t of s a l a r i e d employees and l i t t l e or 1 none f o r wage e a r n e r s . ^ D i s c r e t i o n a r y p r o f i t s have been d e f i n e d as "the d i f f e r e n c e between 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 and B u s i n e s s B e h a v i o r " , A m e r i c a n Economic Review. V o l . 53J> No. 5 (December 1963) j> p. 1035- T h i s s u b j e c t i s e x p l o r e d i n g r e a t e r d e t 3 . i l i n Cha p t e r I I . - 2 - Thus, a gap e x i s t s i n t h a t t h e r e ' h a s been no t h o r o u g h e m p i r i c a l s t u d y of t h e i n d u s t r y c h a r a c t e r i s t i c s t h a t determine s a l a r y l e v e l s . I n view of the t r e n d away f r o m u n i o n i z e d wage e a r n e r s towards s a l a r i e d employees, knowledge i n t h i s a r e a 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 s t u d y w i l l 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 i n f l u e n c e t h e i n t e r - i n d u s t r y s a l a r y s t r u c t u r e . To 'accomplish t h i s , U.S. Census d a t a on e a r n i n g s of s a l a r i e d employees w i l l be matched w i t h d a t a on a c r o s s s e c t i o n of 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 . T h i s w i l l p r o v i d e t h e i n p u t f o r m u l t i p l e r e g r e s s i o n s t o d e t e r m i n e the i n d u s t r y v a r i a b l e s t h a t are r e s p o n s i b l e f o r any s a l a r y v a r i a t i o n . The r e s u l t s of t h e r e g r e s s i o n s are p r e s e n t e d i n Cha p t e r IV. The remainder of t h i s i n t r o d u c t o r y c h a p t e r w i l l be d e v o t e d t o a summary of the l i t e r a t u r e r e l e v a n t t o t h i s s t u d y and t o t h e i m p l i c a t i o n s of t h e f i n d i n g s of the stu 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 the r e g r e s s i o n a n a l y s i s i s t o t e s t , and Chapter I I I examines t h e d a t a t h a t i s th e b a s i s of t h e s t u d y . I n Ch a p t e r V, t h e c o n c l u s i o n s are put f o r t h . I n the p e r i o d from 19^-7 - 19^5 w h i t e - c o l l a r workers i n t he 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 and s a l e s w o r k e rs) i n c r e a s e d by 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 by 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 were 17.6 p e r cen t of t h e l a b o u r f o r c e and 44.5 p e r cen t i n 1965. ' F i g u r e s from Manpower Report of t h e P r e s i d e n t and A Report on Manpower Requirements, 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 Department of Labor, March, 1966. A. Other S t u d i e s 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 i n E a r n i n g s There has been c o n s i d e r a b l e r e s e a r c h done on 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 wage r a t e s . The o b j e c t i v e of t h e s e s t u d i e s has been t o r e l a t e wage l e v e l s t o c e r t a i n key i n d u s t r y v a r i a b l e s . A s t u d y based on the h y p o t h e s i s t h a t wage l e v e l s are de t e r m i n e d by a f i r m 1 s " a b i l i t y t o pay" was made by D a v i d R. Brown. A b i l i t y t o pay was measured by s i x v a r i a b l e s -- l a b o u r p r o d u c t i v i t y , c o n c e n t r a t i o n , r a t i o of l a b o u r c o s t s t o t o t a l c o s t s , male - female r a t i o , s e a s o n a l s t a b i l i t y and growth i n employment., A n a l y s i s i n d i c a t e d t h a t a l l of t h e s e i n d u s t r y v a r i a b l e s e x cept growth, were s i g n i f i c a n t i n - d e t e r m i n i n g wage l e v e l s . S t u d i e s by G a r b a r i n o , A l l e n , and Go 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 changes, r a t h e r t h a n a b s o l u t e wage l e v e l s . The f i n d i n g s of t h e s e t h r e e s t u d i e s i n d i c a t e t h a t h i g h degrees of 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 are D.R. Brown, E x p e c t e d A b i l i t y t o Pay and 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 Labor R e l a t i o n s Review, V o l . 16, No. 1 (October, 1962), pp. 45 - 62. J.W. G a r b a r i n o , "A Theory of 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 of Economics, V o l . 64, No. 3; (August, 1965) , pp. 282 - 305-~ W. G o l d n e r and A.M. Ross, " F o r c e s A f f e c t i n g the 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 of Economics, V o l . 64, No. 2 (May, 1950), pp. 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. M a n u f a c t u r i n g , 194? - 1964", I n d u s t r i a l and La b o r R e l a t i o n s Review, V o l . 21, No. 1 ( A p r i l , 1968), pp. 353 - 555. _ 4 - two major f a c t o r s i n p r o m o t i n g r i s i n g wages. However, t h e s e r e s u l t s are of l i m i t e d 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 do not d e a l w i t h t h e a c t u a l l e v e l of wages. The e f f e c t s of t h e s e two v a r i a b l e s , c o n c e n t r a t i o n and u n i o n i z a t i o n , upon wage l e v e l s , were a l s o i n v e s t i g a t e d i n an 5 e m p i r i c a l s t u d y by Weiss. R e g r e s s i o n r e s u l t s i n d i c a t e d t h a t t h e s e two v a r i a b l e s were s i g n i f i c a n t 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 groups 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 i n d i v i d u a l p e r s o n a l c h a r a c t e r i s t i c s such as e d u c a t i o n , age, r a c e and 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 , t h e s i g n i f i c a n c e of t h e i n d u s t r y v a r i a b l e s i n most cases d i s a p p e a r e d . Weiss c o n c l u d e s t h a t i n p a y i n g h i g h e r wages, c o n c e n t r a t e d i n d u s t r i e s get a b e t t e r q u a l i t y of worker and hence t h e r e i s l i t t l e or no monopoly p r o f i t a c c r u i n g t o l a b o u r . I n s u r v e y i n g t h i s l i t e r a t u r e , no f i r m c o n c l u s i o n s can be drawn, except perhaps t h a t t h e d e t e r m i n a t i o n of wage l e v e l s i s a complex p r o c e s s . No model w i t h one or two s i m p l e v a r i a b l e s can succeed i n e x p l a i n i n g wage v a r i a t i o n . The s t u d i e s on t h e d e t e r m i n a t i o n of e x e c u t i v e compen- s a t i o n have been fewer i n number and more l i m i t e d i n scope. One p o p u l a r e m p i r i c a l e x e r c i s e has been t o compare f i r m s i z e -̂ L.W. Weiss, " 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 Economic Review, V o l . 56, No. 1 (March, 1966), pp. 96~^~117.. - 5 - and f i r m p r o f i t a b i l i t y as v a r i a b l e s e x p l a i n i n g the l e v e l o f 6 e x e c u t i v e , incomes. The r e s u l t s i n d i c a t e t h a t of t h e s e two, f i r m s i z e i s t h e more Important e x p l a n a t o r y v a r i a b l e . T h i s f i n d i n g , however, i s of l i t t l e i n t e r e s t I n t h e absence of a c r e d i b l e model. I t i s not s u r p r i s i n g t h a t f i r m s i z e i s r e l a t e d t o s a l a r i e s as i t i s l i k e l y a p r o x y f o r such v a r i a b l e s as monopoly power, c a p i t a l - l a b o u r r a t i o , p r o f i t a b i l i t y and u n i o n i z a t i o n . I n a n o t h e r s t u d y , the compensation of the t o p 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 p o s i t i v e l y r e l a t e d t o monopoly power, as measured by c o n c e n t r a t i o n and e n t r y 7 b a r r i e r s . T h i s f i n d i n g i s of l i m i t e d i n t e r e s t here f o r i t d e a l s o n l y with, the s i n g l e top e x e c u t i v e i n each f i r m . How- ev e r , t h e h y p o t h e s i s t h a t was t e s t e d i s based on the t h e o r y t h a t , i n t h e modern c o r p o r a t i o n , e x e c u t i v e s have the d i s c r e - t i o n a r y power t o d i s t r i b u t e p r o f i t s "to employees as w e l l as t o s t o c k h o l d e r s . The f a c t t h a t t h e f i n d i n g s s u p p o r t t h i s t h e o r y i n d i c a t e t h a t i t may be a l i n e of thought w o r t h p u r s u i n g . 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 of Glencoe, 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 Economic Review, V o l . 52, No. 4 (September, 1962), pp. 7 5 3 " 61. 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 and B u s i n e s s B e h a v i o r " , A m e r i c a n Economic Review, V o l . 53 , No. 5 (December, 1963) , pp. 1033 - 1057. - 6 - B. I m p l i e a t i o n s of T h i s Study The 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 t h a t c o u l d he drawn from th e f i n d i n g s of t h e p r e s e n t s t u d y are s e v e r a l . I f i t i s found t h a t f i r m s p o s s e s s i n g monopoly power o p e r a t e a t g r e a t e r t h a n c o m p e t i t i v e c o s t s , due t o h i g h e r s a l a r y payments, t h e n c o n c l u s i o n s - c o u l d 'be drawn about the c o s t t o s o c i e t y of i m p e r f e c t c o m p e t i t i o n . There would be a t r a n s f e r of income from th e consumers of t h e monopoly p r o d u c t t o t h e s a l a r i e d employees. There would a l s o be a m i s a l l o c a t i v e e f f e c t , 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 monopoly. H a r b e r g e r , f o r i n s t a n c e , i n h i s e s t i m a t e of t h e ' m i s a l l o c a t i v e c o s t of monopoly, assumed t h a t t h e r e e x i s t s no d i f f e r e n c e i n c o s t s g under monopoly or c o m p e t i t i o n . I f i n f a c t m o n o p o l i s t i c f i r m s i n c u r h i g h e r c o s t s , t h e n t h e m i s a l l o c a t i o n of r e s o u r c e s due t o monopoly w i l l be even g r e a t e r t h a n H a r b e r g e r 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 o p p o s i n g m a n a g e r i a l d i s c r e t i o n and 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 b e h a v i o r . I f p o t e n t i a l monopoly p r o f i t s are absorbed by the f i r m i n t h e f orm of h i g h e r s a l a r i e s , t h e n i t c o u l d be s a i d t h a t 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 over p r o f i t s . F a i l u r e t o f i n d a s i g n i f i c a n t r e l a t i o n s h i p between s a l a r i e s and monopoly power would l e n d s u p p o r t t o t h e t h e o r y o f p r o f i t m a x i m i z a t i o n . 8 A.C. H a r b e r g e r , "Monopoly Power and Resource A l l o c a t i o n " , American. Economic Review, V o l . 44, No. 2 (May, 1954), pp. 77 ~:r^7. - 7 - F i n a l l y , i f e v i d e n c e i s found of s i g n i f i c a n t 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 , c o n c l u s i o n s c o u l d be drawn about e x e c u t i v e q u a l i t y and m o b i l i t y between i n d u s t r i e s . I f s a l a r y v a r i a t i o n was found t o be c o m p l e t e l y a c c o u n t e d f o r by p e r s o n a l c h a r a c t e r i s t i c s of the employees, t h e n i t c o u l d be s a i d t h a t the i n d u s t r i e s p a y i n g h i g h e r s a l a r i e s are g e t t i n g an employee of h i g h e r q u a l i t y . I f t h e r e i s no s i g n i f i c a n t i n t e r i n d u s t r y v a r i a t i o n , t h e n employee q u a l i t y can be s a i d t o be' u n i f o r m and m o b i l i t y h i g h . 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 t h 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 s a l a r i e s i s a f u n c t i o n p r i m a r i l y of t h r e e i n d u s t r y v a r i a b l e s -- monopoly power, growth, and t h e c a p i t a l - l a b our 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 monopoly power, and hence t h e p o t e n t i a l f o r monopoly p r o f i t s , pay h i g h e r s a l a r i e s , l i e s i n the t h e o r y of m a n a g e r i a l d i s c r e - t i o n . There I s c o n s i d e r a b l e s u p p o r t f o r t h e view t h a t the management of t h e modern c o r p o r a t i o n i s r e s p o n s i b l e t o t h e s h a r e h o l d e r s f o r a minimum l e v e l of p r o f i t s o n l y , and beyond t h a t l e v e l has c o n s i d e r a b l e d i s c r e t i o n i n d e a l i n g w i t h p r o f i t s . ' 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 d e p a r t u r e from con- v e n t i o n a l p r o f i t m a x i m i z i n g t h e o r y o f f i r m b e h a v i o r i s t h e ^O.E. W i l l i a m s o n , The Economics of D i s c r e t i o n a r y B e h a v i o r : M a n a g e r i a l O b j e c t i v e s i n A Theory o f t h e F i r m , Englewood C l i f f s , P r e n t i c e - H a l l , 19b~5~. C a r l Kays en, '""The C o r p o r a t i o n : How Much Power? What Scope?", i n The C o r p o r a t i o n i n Modern S o c i e t y , Edward S. Mason, ed., Cambridge, H a r v a r d - U n i v e r s i t y P r e s s , 1959- W.J. Baumol, B u s i n e s s B e h a v i o r , V a l u e and Growth, New Y o r k , M a c m i l l a n , 1959- - 8 - _ 9 - s e p a r a t i o n of ownership from management. Over t h e l a s t s e v e r a l decades the t r e n d has "been away from c o r p o r a t e ownership by one or more p o w e r f u l i n d i v i d u a l s . Today t h e change i s almost t o t a l w i t h the v a s t m a j o r i t y of c o r p o r a t e s t o c k i n t h e hands of 2 f i n a n c i a l i n s t i t u t i o n s and s m a l l i n v e s t o r s . B o t h t h e s e groups are p r i m a r i l y i n t e r e s t e d i n m a x i m i z i n g t h e i r income t h r o u g h s t o c k market d e a l i n g s . N e i t h e r i s i n t h e b u s i n e s s of managing c o r p o r a t i o n s . Only i f e a r n i n g s f a l l below a c e r t a i n minimum a c c e p t a b l e l e v e l can t h e s e s t o c k h o l d e r s be aroused. P r o v i d e d t h i s p r o f i t . l e v e l i s m a i n t a i n e d , management e n j o y s the i n t e r f e r e n c e f r e e o p e r a t i o n of the f i r m . I t f o l l o w s t h a t any p r o f i t s above the minimum l e v e l can be d e a l t w i t h at t h e d i s c r e t i o n of management. Thus, one obvio u s ivay f o r top management t o e x e r c i s e t h i s 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 h i g h e r s a l a r i e s . 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 ould i n t u r n have a p o s i t i v e e f f e c t upon the e a r n i n g s of 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 th e change f r o m p r i v a , t e ownership t o management c o n t r o l of U.S. c o r p o r a t i o n s , see 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 Economic Review, V o l . 56, No. 4, P a r t I (September, 1966), pp. 777 - T&7. 3 ^Baumol i n d i c a t e s t h a t the minimum a c c e p t a b l e p r o f i t l e v e l i s d e t e r m i n e d by c o m p e t i t i v e c o n d i t i o n s I n th e 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 payments and r e i n v e s t m e n t i n the f i r m t o ensure t h a t i n v e s t o r s are c o n t e n t t o c o n t i n u e h o l d i n g t h e s t o c k . Baumol, 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 wil l be measured by concentration and barriers to entry. Generally the higher the concentration ratio the stronger wil l be the recognition of mutual dependence among firms. Hence concen- tration is a good measure of the ability of firms to tacitly agree to charge a monopoly price. Obviously i t is not an infallible measure. 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 discre- tionary 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 - t h e s t a t e of i n t e r - f i r m communications and t h e t h r e a t of new e n t r a n t s , a l l w i l l have an e f f e c t upon the p r i c i n g p o l i c y of t h e i n d u s t r y . Of t h e s e , t h e t h r e a t of e n t r y I s the o n l y v a r i a b l e t h a t l e n d s i t s e l f t o measurement. I n Joe B a i n ' s a u t h o r i t a t i v e work on t h i s s u b j e c t , 6 b a r r i e r s t o e n t r y are c l a s s i f i e d i n t o f o u r t y p e s . These are p r o d u c t d i f f e r e n t i a t i o n , economies of s c a l e , a b s o l u t e c o s t advantages .and c a p i t a l r e q u i r e m e n t s . The a b s o l u t e c o s t b a r r i e r , w h i c h i n c l u d e s such e s t a b l i s h e d f i r m advantages as p a t e n t c o n t r o l and m o n o p o l i z a t i o n of r e s o u r c e s u p p l i e s , i s the l e a s t i m p o r t a n t of 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, an attempt w i l l be made o n l y t o measure the o t h e r t h r e e t y p e s o f - b a r r i e r s , a l t h o u g h as i t t u r n s out, t h i s attempt w i l l be o n l y p a r t i a l l y s u c c e s s f u l . T h i s w i l l be e x p l a i n e d i n d e t a i l i n C h a p t e r 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 , Cambridge, H a r v a r d U n i v e r s i t y P r e s s , , 1963, pp. 167 - 169. 7 I b i d . , p. 1 4 9 . B. I n d u s t r y Growth I n d u s t r y growth i s thought t o he a d e t e r m i n a n t of h i g h e r s a l a r i e s f o r two r e a s o n s . F i r s t l y , g rowth u s u a l l y means h i g h e r p r o f i t s . When demand i s r i s i n g f o r t h e p r o d u c t of an i n d u s t r y , e n t r y of 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 . Hence, s u p p l y 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 . Thus, u n t i l s u p p l y c a t c h e s up w i t h demand, t h e f i r m s p r o d u c i n g i n the growth I n d u s t r y are i n a p o s i t i o n t o reap h i g h e r t h a n normal p r o f i t s t h r o u g h t h e i r a b i l i t y t o charge h i g h e r p r i c e s . Manage- ment has t h e d i s c r e t i o n t o expend t h e s e p r o f i t s on h i g h e r s a l a r i e s i n the same way i t does w i t h monopoly p r o f i t s . The second r e a s o n t h a t growth r e s u l t s i n h i g h e r s a l a r i e s f o l l o w s from t h e i n c r e a s e d d e r i v e d demand f o r employ- ees i n t h e growth i n d u s t r y . To the e x t e n t t h a t w o r k e r s are not p e r f e c t l y m o b i l e , t h e growth i n d u s t r y w i l l have t o pay h i g h e r s a l a r i e s t o e n t i c e them t o move. Of more im p o r t a n c e i n d e t e r m i n i n g h i g h e r s a l a r i e s w i l l be t h e l a g i n s u p p l y o f , r e l a t i v e t o demand f o r , w o r k e r s t r a i n e d i n t h e s k i l l s of the growth i n d u s t r y . Thus, t h e p r i c e of t h e w o r k e r s w i l l be b i d up u n t i l s u p p l y c a t c h e s up w i t h demand. I n d u s t r y growth w i l l be measured by change i n employment over a t e n - y e a r p e r i o d . • - 13 - C. C a p i t a l Labour R a t i o 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 r a t i o may be e x p e c t e d t o pay h i g h e r s a l a r i e s because t h e p r e s s u r e t o keep wages and s a l a r i e s down w i l l be weaker. P a y r o l l c o s t s w i l l be of l e s s c o n c e r n t o management compared t o c o s t s o f s e c u r i n g c a p i t a l o r of p u r c h a s i n g equipment t h a n t h e y would be i n a more l a b o u r . i n t e n s i v e i n d u s t r y . Those f i r m s t h a t are. c a p i t a l i n t e n s i v e w i l l be more concerned w i t h a v o i d i n g i n e f f i c i e n c y or d i s r u p t i o n s due t o employee d i s s a t i s f a c t i o n . Hence, i t i s p r o b a b l e t h a t s a l a r y payments will be more generous. T h i s v a r i a b l e w i l l be measured by t h e r a t i o of t o t a l a s s e t s t o number of employees. D. C o n f l i c t i n g Theory I t may be t r u e t h a t , because of t h e i r l a r g e s i z e , f i r m s w i t h monopoly power i n the p r o d u c t market a l s o p o s s e s s 8 m o n o p s o n i s t i c power i n p u r c h a s i n g l a b o u r . I n t h i s s i t u a t i o n , n e o c l a s s i c a l t h e o r y would l e a d t o t h e c o n c l u s i o n t h a t monopolis- t i c f i r m s pay l o w e r , not h i g h e r , wages. The f i r m equates t h e m a r g i n a l revenue p r o d u c t of l a b o u r t o t h e m a r g i n a l f a c t o r c o s t of l a b o u r i n d e t e r m i n i n g t h e q u a n t i t y t o employ. F o r t h e 8 Joan 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 might o f t e n e x i s t a t the l e v e l of t h e f i r m . See Joan R o b i n s o n , The Economics of I m p e r f e c t C o m p e t i t i o n , London, M a c m i l l a n , 1961, p. 296. ' — - 1 4 - m o n o p o l i s t - m o n o p s o n i s t b o t h t h e s e v a l u e s w i l l be l e s s t h a n under c o m p e t i t i o n ; hence he w i l l pay l o w e r wages. T h i s i s shown i n F i g u r e 1 where, under 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 employed at a wage of OD. The m o n o p o l i s t employs o n l y OM u n i t s of l a b o u r a t wage OP. P r i c e of Labour , MFC S u p p l y Q M C • Q u a n"ki"ky o r > Labour FIGURE 1 Wage D e t e r m i n a t i o n Under Monopoly and C o m p e t i t i o n T h i s p r e d i c t i o n of Lower wages under monopoly i s based 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 c u r v e o f l a b o u r t o t h e f i r m . T h i s 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 o f l a b o u r . I t i s l i k e l y t h a t , among w h i t e - c o l l a r w o r k e r s , a s i z e a b l e p r o p o r t i o n , s u f f i c i e n t t o ensure e l a s t i c s u p p l y c u r v e s , w i l l be m o b i l e . - 15 - • N e o c l a s s i c a l t h e o r y a l s o depends upon t h e a s s u m p t i o n of p r o f i t m a x i m i z a t i o n . I t has been a l l e g e d e a r l i e r i n t h i s c h a p t e r , t h a t i n g e n e r a l the b e h a v i o r of m o n o p o l i s t i c f i r m s d i v e r g e s f rom s t r i c t p r o f i t m a x i m i z a t i o n . Under t h e s e 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 of wages and s a l a r i e s cannot be c o m p l e t e l y e x p l a i n e d by m a r g i n a l p r o d u c t i v i t y t h e o r y . P r o b a b l y a more s e r i o u s t h r e a t t o t h i s s t u d y ' s p r o p o s e d model of s a l a r y d e t e r m i n a t i o n i s t h e q u e s t i o n of m o b i l i t y of w o r k e r s . The e x t e n t of i n t e r i n d u s t r y s a l a r y v a r i a t i o n w i l l be i n v e r s e l y r e l a t e d t o t h e degree of m o b i l i t y of w h i t e - c o l l a r w o r k e r s . 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 cause t h e s a l a r y v a r i a t i o n t o be s t a t i s t i c a l l y i n s i g n i f i c a n t . E. U n i o n i z a t i o n No s t u d y of t h e d e t e r m i n a t i o n of e a r n i n g s can i g n o r e the v a r i a b l e of u n i o n i z a t i o n . However, f o r s a l a r i e d employees, i t s e f f e c t I s d i f f i c u l t t o a s s e s s . S a l a r i e d employees are not t h e m s e l v e s u n i o n i z e d t o a s i g n i f i c a n t e x t e n t . One s t u d y on the s u b j e c t e s t i m a t e s u n i o n i z a t i o n of w h i t e - c o l l a r w o r k ers a t about 11 p e r cen t of Q p o t e n t i a l . T h i s f i g u r e I s r o u g h l y c o n f i r m e d by a more t h o r o u g h q v 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 - 16 - s t u d y t h a t e s t i m a t e s u n i o n i z a t i o n f i g u r e s f o r t h e w h i t e - c o l l a r groups t h a t are a n a l y z e d i n t h i s s t u d y . The f i g u r e s are: 18 p e r c e n t f o r C l e r i c a l and K i n d r e d Workers, 9 p e r cen t f o r 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 Workers, and 12 p e r cen t f o r S a l e s W o r k e r s . 1 0 These f i g u r e s a re n e g l i g i b l e , f o r t h e purp o s e s o f t h i s s t u d y , because t h e m a j o r i t y of t h e s e u n i o n i z e d w h i t e - c o l l a r w o r k e r s are not i n m a n u f a c t u r i n g i n d u s t r i e s . Most of them are I n the r e t a i l t r a d e or t e l e p h o n e i n d u s t r y , or t h e y are m u s i c i a n s , r a i l w a y c l e r k s or p o s t o f f i c e w o r k e r s . None of t h e s e o c c u p a t i o n s or i n d u s t r i e s are w i t h i n the scope of t h i s s t u d y . The p r o blem of u n i o n i z a t i o n , however, does not end he r e . I t i s p o s s i b l e t h a t t h e degree o f u n i o n i z a t i o n of 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 the s a l a r y l e v e l s of the w h i t e - c o l l a r w o r k e r s . U n f o r t u n a t e l y , n e i t h e r t h e o r y n or e m p i r i c a l work has much t o say about t h i s problem. C o n c l u s i o n s on t h e im p o r t a n c e of t h i s r e l a t i o n s h i p can o n l y be t e n t a t i v e l y drawn from what i s known about t h e e f f e c t of 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 of t h e most complete 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 not a major 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 of B. Solomon and R.K. B u r n s , " U n i o n i z a t i o n of White- 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 - t h e wage d i s p e r s i o n among i n d u s t r i e s must he a c c o u n t e d f o r by- o t h e r f a c t o r s . 1 1 I f u n i o n i s m has o n l y a minor e f f e c t upon 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 can be assumed t h a t i t s e f f e c t upon s a l a r i e s w i l l be even l e s s . Thus, a l t h o u g h some t e s t s of the I n f l u e n c e of u n i o n i s m w i l l be attempted, i t i s assumed t o be a f a c t o r of n e g l i g i b l e i mportance i n t h e d e t e r m i n a t i o n of s a l a r i e s among i n d u s t r i e s . 1 1H.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 the U n i t e d S t a t e s . C h i c a g o , U n i v e r s i t y of C h i c a g o P r e s s , ±9b~3, ^ o i i ' — ' — - — CHAPTER I I I DATA SOURCES AND MEASUREMENT OF REGRESSION VARIABLES A. G e n e r a l D e s c r i p t i o n of Data F i g u r e s f o r s a l a r y , o c c u p a t i o n , i n d u s t r y and v a r i o u s p e r s o n a l c h a r a c t e r i s t i c s are r e p o r t e d f o r 1 8 0 , 0 0 0 i n d i v i d u a l s i n t h e l/lOOO sample of the i 9 6 0 U.S. Census of P o p u l a t i o n . 1 T h i s d a t a i s a v a i l a b l e on magnetic tape and when matched w i t h the r e l e v a n t i n d u s t r y v a r i a b l e s , p r o v i d e s t h e r e g r e s s i o n i n p u t . The s t u d y c o v e r s a c r o s s s e c t i o n of 63 U.S. manufac- 2 t u r i n g and m i n i n g i n d u s t r i e s , a l l u n r e g u l a t e d . The d a t a f o r the 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 s o u r c e s . F i g u r e s f o r growth and c o n c e n t r a t i o n are t a k e n from the appendix of Weiss' a r t i c l e . T h i s 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 a r t i c l e , 3 but may be o b t a i n e d from t h e au t h o r . A d v e r t i s i n g s a l e s and 4 a s s e t s d a t a come from U.S. income t a x data.. F i n a l l y , f i g u r e s "'"Bureau of the Census, U.S. Census of P o p u l a t i o n and Housing: i 9 6 0 l/lOOO and l/lOOOO, Two N a t i o n a l Samples of the P o p u l a t i o n of the U n i t e d S t a t e s . 2 See T a b l e I f o r a l i s t of t h e s e i n d u s t r i e s . •5 See F o o t n o t e i n Weiss, _op. c i t . , p. 1 0 1 . 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 of Income 1 9 5 9 - 1 9 6 0 , pp. 58 - 6 0 . - 18 - f o r number of employees and number of e s t a b l i s h m e n t s are t a k e n from t h e 1958 U.S. Censuses of M a n u f a c t u r i n g and of M i n i n g . D I t i s e v i d e n t t h a t t h e r e i s a d i s c r e p a n c y i n t h a t the y e a r s f o r w h i c h the v a r i o u s d a t a i s r e p o r t e d do not e x a c t l y c o i n c i d e . The f i g u r e s from t h e p o p u l a t i o n census are f o r 1 9 5 9 ; w h i l e t h o s e from the m a n u f a c t u r i n g census are from 1 9 5 8 . The r e m a i n 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 t h e a c c o u n t i n g p e r i o d s e n d i n g between J u l y 1959 and June i 9 6 0 . Presumably t h e n , t h e average r e p o r t i n g p e r i o d f o r t h e s e f i g u r e s i s t h e ye a r 1959- . A n o t h e r minor d i s c r e p a n c y e x i s t s because s a l a r y f i g u r e s are f o r 1 9 5 9 ; w h i l e a l l o t h e r d a t a f o r t h e i n d i v i d u a l s r e f e r s t o A p r i l i 9 6 0 , t h e time a t w h i c h the census 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 i n d u s t r y i n 1 9 5 9 , or t h e f i r s t f o u r months o f i 9 6 0 , 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 the data, i s t h a t some f i g u r e s a r e r e p o r t e d f o r a d e t a i l e d i n d u s t r y c l a s s i f i c a t i o n , but o t h e r s are a v a i l a b l e o n l y f o r a major i n d u s t r y breakdown. T h i s p r oblem a r i s e s because t h e p o p u l a t i o n census c l a s s i f i e s i n d u s t r i e s a c c o r d i n g t o a unique t h r e e d i g i t code t h a t does not c o r r e s p o n d t o t h e S t a n d a r d I n d u s t r i a l C l a s s i f i c a t i o n 5 ^Bureau of the Census, U n i t e d S t a t e s Census of M a n u f a c t u r e r s : 1 9 5 8 , Volume I . Bureau of th e Census, U n i t e d S t a t e s Census of M i n e r a l I n d u s t r i e s : 1 9 5 8 , Volume I . - 20 c o d i n g used "by the o t h e r s o u r c e s . S i n c e t h e r e e x i s t s no o t h e r comparable sou r c e of e a r n i n g s d a t a , t h e r e i s no c h o i c e but t o attempt t o match i n d u s t r y f i g u r e s on t h e t h r e e d i g i t b a s i s . T a b l e I shows t h e r e s u l t s of t h i s m a t c h i n g . I t can- be seen t h a t c o n c e n t r a t i o n and growth f i g u r e s are a v a i l a b l e f o r a l l 63 i n d u s t r i e s . However, f o r t h e o t h e r v a r i a b l e s , f i g u r e s f o r t h e major i n d u s t r y groups must be used 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 . W h i l e t h i s i n c o n s i s t e n c y i n i n d u s t r y c l a s s i f i c a t i o n o b v i o u s l y d e t r a c t s from t h e q u a l i t y of t h e d a t a , the v a r i a b l e s s h o u l d s t i l l be m e a n i n g f u l . I t does not seem u n r e a s o n a b l e , f o r i n s t a n c e , t o a t t r i b u t e t h e 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 f o r a l l t e x t i l e s t o t h e i n d i v i d u a l t e x t i l e i n d u s t r i e s . F u r t h e r d e t a i l on the development of t h e i n d u s t r y v a r i a b l e s i s g i v e n i n Appendix I . B. 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 o f . t h e measurement and c o n t e n t of each of t h e v a r i a b l e s t o be used i n t h e r e g r e s s i o n s . TABLE I INDUSTRY VARIABLES IND NAME 126 M e t a l M i n i n g 136 C o a l M i n i n g 146 Crude P e t . & Nat. Gas 156 N o n - M e t a l i c M i n i n g CONC 58 29 32 27 GROWTH 102 44 112 114 ADV 0 . 0 0 0 3 0 . 0 0 0 9 0 . '0020 0 . 0 0 3 8 CAP-LAB $ ' 0 0 0 4 5 . 5 3 n . o 4 2 2 . 8 5 2 0 . 1 8 CAP/REQS $ ' 0 0 0 ' 1 8 8 6 . 2 8 4 . 3 8 6 . 3 2 3 . Lumber and Wood P r o d u c t s 206 207 208 209 S a w m i l l s , P l a n i n g M i l l s , M i l l w o r k 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 38 15 21 15 102 74 98 117 o . o o 4 o o . o o 4 o o . o o 4 o 0 . 0 1 2 2 1 0 . 2 9 1 0 . 2 9 1 0 . 2 9 7 . 0 5 i 4 i , i 4 i , i 4 i . 2 4 l , ro S t o n e . C l a y and G l a s s P r o d u c t s 216 G l a s s and G l a s s P r o d u c t s 59 120 0 . 0070 1 5 . 73 217 Cement, C o n c r e t e , Gypsum and P l a s t e r 32 168 0 . 0070 1 5 . 73 218 S t r u c t u r a l C l a y P r o d u c t s 29 . . 108 0 . 0070 1 5 . 73 219 P o t t e r y and R e l a t e d P r o d u c t s 39 • 82 0 . 0070 1 5 . 73 236 M i s c . N o n - M e t a l i c M i n e r a l s 48 . 155 0 . 0070 •15 . 73- 580 , 580 , 580 , 580 , 580 , 237 238 239 P r i m a r y M e t a l I n d u s t r i e s B l a s t F u r n a c e s , S t e e l Works, E t c , Oth e r P r i m a r y I r o n and S t e e l P r i m a r y , Non-Ferrous M e t a l s 56 49 53 94 i o 4 139 0 . o o 4 4 o . o o 4 4 0 . o o 4 4 2 3 - 9 7 2 3 . 9 7 2 3 - 9 7 4 0 7 7 . 4 0 7 7 . 4 0 7 7 . TABLE IND NAME F a b r i c a t e d M e t a l P r o d u c t s 246 C u t l e r y , Hand T o o l s , Hardware 247 F a b r i c a t e d S t r u c t u r a l M e t a l P r o d s . 248 M i s c . Fab. M e t a l P r o d u c t s M a c h i n e r y Except E l e c t r i c a l 256 Farm M a c h i n e r y 257 O f f i c e , Computing & A c c t g . Mach. 258 M i s c . M a c h i n e r y 259 E l e c t r i c a l M a c h i n e r y 267 Motor V e h i c l e s and Eqpt. T r a n s p o r t a t i o n Equipment E x c e p t Auto 268 A i r c r a f t and P a r t s 269 S h i p and Boat B u i l d i n g and R e p a i r 276- R a i l r o a d and M i s c . Transp. Eqpt. I n s t r u m e n t s and R e l a t e d P r o d u c t s 286 P r o f e s s i o n a l Eqpt. and S u p p l i e s 287 • P h o t o g r a p h i c Eqpt. and S u p p l i e s 289 W a t c h e s / C l o c k s , E t c . " - 296 M i s c e l l a n e o u s M f g r s . ( C o n t i n u e d ) CONC GROWTH ADV CAP-LAB ' CAP/REQS, $ ' 0 0 0 $ ' 0 0 0 38 111 O .OO89 1 1 . 1 5 475 . 39 135 0 . 0 0 8 9 1 1 . 1 3 ' 4 7 5 . 36 l 8 l O .OO89 1 1 . 1 3 475 . 44 . 78 0 . 0 1 0 5 1 4 . 9 4 675 . 72 163 0 . 0 1 0 5 1 4 . 9 4 675 . 39 131 0 . 0 1 0 5 1 4 . 9 4 675 . 51 " 176 0 . 0 1 7 3 1 2 . 7 4 1 7 6 7 . 72 100 0 . 0 0 8 1 7 8 . 6 7 7254 . 52 . 258 0 . 0 0 2 8 9 . 6 9 2242. 45 • 144 0 . 0 0 2 8 9 . 6 9 2242. 52 120 0 . 0 0 2 8 • 9 . 6 9 2242, 51 222 . 0 . 0 2 2 6 1 5 . 3 3 1 2 8 9 . 77 137 0 . 0 2 2 6 1 5 . 3 3 ' 1 2 8 9 . 45 85 0 . 0 2 2 6 1 5 . 3 3 ! 1 2 8 9 . 30 103 o .oi84 • 7 . 9 1 317 . TABLE IND NAME Food and K i n d r e d P r o d u c t s 306 Meat P r o d u c t s 307 D a i r y P r o d u c t s 308 C a n n i n g and P r e s e r v i n g 309 G r a i n M i l l P r o d u c t s 316 B a k e r y P r o d u c t s 317 C o n f e c t i o n e r y & R e l a t e d P r o d u c t s 318 Beverages 319 M i s c . Food P r e p a r a t i o n s 329 Tobacco P r o d u c t s T e x t i l e M i l l P r o d u c t s 346 K n i t t i n g M i l l s 347 D y i n g and F i n i s h i n g 348 F l o o r Coverings- E x c e p t Hard S u r f a c e s 349 Y a r n , Thread and F a b r i c 356 M i s c . T e x t i l e s F a b r i c a t e d T e x t i l e s 359 A p p a r e l and A c c e s s o r i e s 367 M i s c . Fab. T e x t i l e s Paper and A l l i e d P r o d u c t s 386 P u l p , Paper, and Paperboard 387 P a p e r b o a r d C o n t a i n e r s 389 M i s c . Paper and Pul p P r o d u c t s o n t i n u e d ) CONC GROWTH ADV ^ O O Q 8 K ) 0(f' 28 119 0 . 0 1 9 2 1 2 . 0 7 499 56 154 0 . 0 1 9 2 1 2 . 0 7 499 34 137 0 . 0 1 9 2 1 2 . 0 7 499 49 1 2 3 • 0 . 0 1 9 2 1 2 . 0 7 499 j?6 134 0 . 0 1 9 2 1 2 . 0 7 499 26 101 0 . 0 1 9 2 1 2 . 0 7 499 34 105 0 . 0 4 8 8 2 5 . 4 5 944 49 126 • 0 . 0 1 9 2 1 2 . 0 7 499 68 93 0 . 0 5 4 7 3 9 - 1 4 6560 18 108 0 . 0 0 6 2 9 . 9 0 1 1 6 3 44 87 0 . 0 0 6 2 • 9 . 9 0 1 1 6 3 47 66 . 0 . 0 0 6 2 9 . 9 0 1163 27- 67 0 . 0 0 6 2 9 . 9 0 1163 4 l 98 0 . 0 0 6 2 9 . 9 0 1163 11 110 0 . 0 0 9 8 3 . 8 2 154 26- 135 0 . 0 0 9 8 3 . 8 2 154 45 128 o.oo84 1 7 . 9 6 1893 27 143 o.oo84 • 1 7 . 9 6 1893 4 l 106 -• o.oo84 1 7 . 9 6 1893 TABLE I ( C o n t i n u e d IND NAME . C0NC P r i n t i n g and P u b l i s h i n g 396 Newspapers 52 398 P r i n t i n g & P u b l i s h i n g Exc. Newsp. 26 C h e m i c a l s and A l l i e d P r o d u c t s 406 S y n t h e t i c F i b r e s 74 407 Drugs and M e d i c i n e s 44 408 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 25 409 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 42 P e t r o l e u m and Coal P r o d u c t s 4 l 6 P e t r o l e u m R e f i n i n g 47 419 M i s c . P e t . & Co a l P r o d u c t s 50 Rubber and P l a s t i c s P r o d u c t s 426 Rubber P r o d u c t s 51 429 M i s c . P l a s t i c P r o d u c t s 21 L e a t h e r and L e a t h e r P r o d u c t s 436 L e a t h e r Tanning, E t c . 20 4 3 7 Footwear Except Rubber 28 438 L e a t h e r P r o d u c t s E x c e p t Footwear 21 GROWTH ADV CAP-LAB CAP/REQS. $ ' 0 0 0 . $ ' 0 0 0 130 0 . 0 0 7 6 9 . 4 3 230 . 135 0 . 0 0 7 6 9 - 4 3 230 , 109 ' 0 . 0 3 7 9 3 3 . 1 9 2052 , 196 • 0 . 0 3 7 9 3 3 . 1 9 2052 , 117 0 . 0 3 7 9 ' 3 3 . 1 9 2052 , 134 0 . 0 3 7 9 3 3 . 1 9 2052 . 98 o.oo46 2 2 1 . 8 5 24719 . 136 o.oo46 • 2 2 1 . 8 5 24719 . 114 0 . 0 1 6 4 i 4 . i l 1100 , 205 0 . 0 1 6 4 i 4 . i i 1100 , 69 0 . 0 1 1 2 5 . 2 8 4 0 7 . 97 0 . 0 1 1 2 5 . 2 8 • 4 0 7 . 90 0 . 0 1 1 2 5 . 2 8 4 0 7 . - 25 - 1. S a l a r y F o r each i n d i v i d u a l worker, 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 by the census. T h i s i s t o be t h e dependent v a r i a b l e i n t h e r e g r e s s i o n s . I n d i v i d u a l 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 i n such a way as t o m i n i m i z e the p o s s i b i l i t y of e r r o r s i n t h e d a t a . Persons w i t h any s e l f employment income w e r e r e j e c t e d as t h e i r ' s a l a r y income c o u l d be d i s t o r t e d i n two ways. I t might be low i f t h e y are w o r k i n g at t h e i r s a l a r i e d employment on a c a s u a l or p a r t - t i m e b a s i s . C o n v e r s e l y , i t might be i n f l a t e d i f t h e y were employing t h e m s e l v e s i n a s a l a r i e d p o s i t i o n . S t i g l e r has p o i n t e d out t h a t p r o f i t s of c l o s e l y h e l d c o r p o r a t i o n s may o f t e n be wi t h d r a w n i n t h e form of e x e c u t i v e s ' s a l a r i e s . Those i n d i v i d u a l s who had not worked a t l e a s t 50 weeks i n 1959 were a l s o r e j e c t e d . I t i s l i k e l y t h a t many i n d i v i d u a l s who changed o c c u p a t i o n o r I n d u s t r y i n 1959 would have been v o l u n t a r i l y 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 p e r i o d of t i m e . Hence, by r e j e c t i n g such p e r s o n s , d a t a e r r o r s of t h i s t y p e w i l l be reduced. G.J. S t i g l e r , C a p i t a l and Rates of R e t u r n i n M a n u f a c t u r i n g I n d u s t r i e s . P r i n c e t o n , P r i n c e t o n U n i v e r s i t y P r e s s 1963, pp. 125"'- 127. - 26 - 2. C o n c e n t r a t i o n The f i g u r e s used are 1958 f o u r f i r m c o n c e n t r a t i o n r a t i o s c a l c u l a t e d on p r o d u c t shipments. The r a t i o s have been s c a l e d up f o r t h o s e p r o d u c t s s e l l i n g i n l o c a l or r e g i o n a l p r o d u c t markets. I t was found, by Weiss, t h a t on t h e average, n a t i o n a l c o n c e n t r a t i o n r a t i o s for. p r o d u c t s s o l d on n a t i o n a l markets were I.98 t i m e s the n a t i o n a l c o n c e n t r a t i o n r a t i o s f o r t h o s e s o l d on r e g i o n a l markets and 2.67 f o r t h o s e s o l d on l o c a l m a r kets. Hence the a p p l i c a b l e c o n c e n t r a t i o n r a t i o s were s c a l e d up by t h e s e f a c t o r s . 3. P r o d u c t 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 e n t r a n t s can be a t t r i b u t e d t o s e v e r a l s o u r c e s , n o t a b l y customer s e r v i c e , p r o d u c t d e s i g n and a d v e r t i s i n g i n t e n s i t y . However, i n h i s s t u d y of t w e n t y i n d u s t r i e s , B a i n found t h a t 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 . T h e r e f o r e , i t i s t h e r a t i o of a d v e r t i s i n g e x p e n d i t u r e t o s a l e s t h a t i s used as a measure of p r o d u c t d i f f e r e n t i a t i o n . I t s h o u l d be n o t e d t h a t w h i l e a d v e r t i s i n g i s i m p o r t a n t 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 the 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 monopoly power can, i n many c a s e s , be e x p e c t e d t o spend 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 f i r m s . 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 c o n c e n t r a t i o n ^ B a i n , _op. c i t . , pp. 122 - 24. - 27 - i n an i n d u s t r y , t h e more each f i r m w i l l s t a n d t o g a i n from a d v e r t i s i n g e x p e n d i t u r e , as t h e r e w i l l be l e s s " s p i l l o v e r " t o o t h e r f i r m s . A l s o , due t o t h e u n c e r t a i n t i e s of p r i c e c o m p e t i t i o n , o l i g o p o l i s t s are o f t e n h y p o t h e s i z e d t o p r e f e r a d v e r t i s i n g and o t h e r s a l e s 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 of c o m p e t i t i o n . 4. Economies of S c a l e C o n s i d e r a b l e e f f o r t was a p p l i e d t o t h e p r o blem of m e a s u r i n g th e economies of s c a l e b a r r i e r t o e n t r y . The f i n a l c o n c l u s i o n r e a c h e d was t h a t a m e a n i n g f u l measure of t h i s v a r i a b l e cannot be d e r i v e d w i t h a v a i l a b l e t e c h n i q u e s and d a t a . Economies of l a r g e 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 t o e n t r y i f t h e new e n t r a n t , i n e s t a b l i s h i n g an o p t i m a l s i z e d p l a n t , or 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 of t h e market. I n t h i s s i t u a t i o n , t h e p o t e n t i a l e n t r a n t i s f a c e d w i t h two c h o i c e s . He. can o p e r a t e a s u b - o p t i m a l s i z e d p l a n t or f i r m , at h i g h e r t h a n minimum a t t a i n a b l e c o s t s , or he can e n t e r p r o d u c i n g t h e o p t i m a l o utput and i n d o i n g so l o w e r t h e s e l l i n g p r i c e . Secure i n the 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 i s at a, d i s - advantage, the e s t a b l i s h e d f i r m s can charge a p r i c e g r e a t e r t h a n minimum a t t a i n a b l e c o s t . They p o s s e s s a degree of monopoly c o n t r o l over s u p p l y . W h i l e t h i s concept i s s t r a i g h t f o r w a r d , measurement i s n o t . There i s no agreement on c r i t e r i a f o r c h o o s i n g th e o p t i m a l or minimum e f f i c i e n t s i z e of p l a n t or f i r m . I n a d d i t i o n , i t i s v i r t u a l l y i m p o s s i b l e t o d e s i g n a measure t h a t - 28 - t a k e s account of t h e shape of t h e i n d u s t r y c o s t c u r v e s . T h i s i s a s e r i o u s s h o r t c o m i n g f o r knowledge of t h e r a t e of d e c l i n e of u n i t c o s t as minimum e f f i c i e n t s i z e i s approached i s e s s e n t i a l i n e v a l u a t i n g t h e importance of t h e s c a l e h a r r i e r . F i n a l l y , t h e p r o blem i s f u r t h e r c o m p l i c a t e d by the concept of d i s e c o n o m i e s of l a r g e s c a l e . T h i s can presumably be a v o i d e d 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, of f i r m s , i t i s q u i t e c o n c e i v a b l e t h a t d i s e c o n o m i e s do e x i s t . E m p i r i c a l e v i d e n c e t o c l a r i f y t h i s p r o b l em 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 problems, t h e r e have been a t t e m p t s t o measure the b a r r i e r s t o e n t r y due t o economies of s c a l e . Presumably, because of t h e q u e s t i o n of d i s e c o n o m i e s of l a r g e f i r m s , t h e s e a t t e m p t s have c o n c e n t r a t e d on p l a n t economies of s c a l e . Two of t h e s e measures w e r e i n v e s t i g a t e d i n d e t a i l f o r t h i s s t u d y . The f i r s t , by. B a i n , t a k e s advantage of t h e f a c t t h a t t h e U.S. Census of 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 d a t a , g r o u p i n g p l a n t s i n t o s i z e c l a s s e s , s i z e b e i n g measured by number of Q employees. H i s measure i s a r r i v e d at by e x p r e s s i n g t h e v a l u e 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 s i z e c l a s s as a p e r c e n t a g e of i n d u s t r y v a l u e added.- The weakness of t h i s measure i s t h a t t h e c h o i c e of t h e o p t i m a l or minimum e f f i c i e n t g See B a i n , _op. c i t . , pp. 6 l - 6 2 . q _ . S e e B a i n , _op. c i t . , pp. 69, 75. - 29 - p l a n t s i z e i s e s s e n t i a l l y a r b i t r a r y . 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 t h i s s t u d y , hut t h e r e s u l t s appeared t o he m e a n i n g l e s s as a measure of the- economies of s c a l e h a r r i e r . F o r i n s t a n c e , t h e c a l c u l a - 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 of s c a l e t o th e 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 ^ 10 equipment. I n t h e l a r g e s t s i z e c l a s s , t e x t i l e s had t e n e s t a b l i s h - ments p r o d u c i n g a v a l u e added of $236,5^5,000 w i t h t o t a l I n d u s t r y v a l u e added of $4,857,638,000. T h i s gave an economy of s c a l e measure of .0049. F o r t r a n s p o r t a t i o n equipment the c o r r e s p o n d i n g f i g u r e s were .134 e s t a b l i s h m e n t s p r o d u c i n g $9,244,433,000 v a l u e added compared t o $15,283,694,000 f o r t h e i n d u s t r y f o r a measure of .0045. T e x t i l e s i s t h e t e x t b o o k example of a c o m p e t i t i v e , ease of 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 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 u t o m o b i l e s , a i r p l a n e s and s h i p s i n w h i c h economies of s c a l e i n p r o d u c t i o n , are of g r e a t i m p o r t a n c e . C l e a r l y , B a i n ' s measure i s of 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 used i n t h i s s t u d y . The o t h e r measure of economies of 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 used 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 of "^See U.S. Census of M a n u f a c t u r i n g 1958, V o l . 1, p. 2 - 3. - 30 - monopoly power. " T h i s measure i s d e r i v e d by t a k i n g t h e average p l a n t s i z e among the l a r g e s t p l a n t s a c c o u n t i n g f o r 50 p e r c e n t of i n d u s t r y o utput and d i v i d i n g by t o t a l o u t p u t i n t h e r e l e v a n t market. T h i s measure s u f f e r s from a l l t h e t h e o r e t i c a l s h o r t - comings l i s t e d above. I t i g n o r e s p o s s i b l e economies of l a r g e f i r m s . . I t s c h o i c e of a minimum e f f i c i e n t p l a n t s i z e i s a p p a r e n t l y a r b i t r a r y . I t does not attempt t o measure the r a t e of d e c l i n e of u n i t c o s t s as p l a n t s i z e i n c r e a s e s . I n vieiv of t h e s e s h o r t c o m i n g s and of t h e d i f f i c u l t y -- i f not i m p o s s i b i l i t y -- of c a l c u l a t i n g t h e measure w i t h a v a i l a b l e d a t a , no attempt at c a l c u l a t i o n was made. I t was c o n c l u d e d t h a t t h e economies of s c a l e b a r r i e r c o u l d not e f f e c t i v e l y be measured and t h e i d e a was abandoned. 5. C a p i t a l Requirements Measurement of t h e c a p i t a l 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 g e n e r a l l y f o l l o w s f rom th e economies of s c a l e measure. I t i s t h e amount of c a p i t a l r e q u i r e d t o e n t e r t h e i n d u s t r y w i t h a p l a n t or f i r m of minimum e f f i c i e n t s i z e . T h i s i s s a i d t o be a b a r r i e r . t o e n t r y on t h e grounds t h a t t h e c a p i t a l market may charge h i g h e r i n t e r e s t r a t e s t o p o t e n t i a l e n t r a n t s as compared t o e s t a b l i s h e d f i r m s . I t I s t hought t h a t 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 Market S t r u c t u r e and Performance", The Review of Economics and S t a t i s t i c s , V o l . 44, No. 4, "(November, I967), pp. 423 - 440. - 31 - of c a p i t a l g e t s l a r g e r , t h i s d i f f i c u l t y or e x t r a c o s t of o b t a i n - 12 i n g c a p i t a l f o r e n t r y i n c r e a s e s . W i t h o u t a v a l u e f o r t h e 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 . However, an a p p r o x i m a t i o n of t h e c a p i t a l r e q u i r e d t o e n t e r w i t h a s i n g l e p l a n t was c a l c u l a t e d by d i v i d i n g t o t a l a s s e t s by t h e number of p l a n t s i n 13 t h e i n d u s t r y . ' T h i s i s not meant t o be an a b s o l u t e measure of t h e c a p i t a l r e q u i r e d t o e n t e r an i n d u s t r y . I t s u f f e r s from th e s h o r t c o m i n g s of t h e p r e v i o u s l y d i s c u s s e d economies of s c a l e measures. However, as i t measures the amount of c a p i t a l r e q u i r e d t o b u i l d and o p e r a t e an average s i z e d p l a n t , i t s h o u l d be 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 r e l a t i v e c a p i t a l b a r r i e r s among i n d u s t r i e s . 6. C a p i t a l - Labour R a t i o T h i s i s measured by d i v i d i n g t o t a l i n d u s t r y a s s e t s by number of employees. 7. Growth The measure used i s i 9 6 0 i n d u s t r y employment d i v i d e d by 1950 i n d u s t r y employment. 12 B a i n , _op. c i t . , pp. 1 4 5 , 1 4 6 . ] 3 The U.S. Census of 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 not 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 terms are used more or l e s s i n t e r c h a n g e a b l y . - 32 - 8. O c c u p a t i o n and Sex These are two of the most i m p o r t a n t f a c t o r s d e t e r m i n - i n g s a l a r y l e v e l s . I t i s d e s i r a b l e t o e l i m i n a t e s a l a r y v a r i a t i o n due 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 i s a p p l i e d t o t h e model. T h i s i s a c c o m p l i s h e d by g r o u p i n g t h e 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 samples t h a t are 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 sex. O c c u p a t i o n s t o be t e s t e d were s e l e c t e d from t h e f o u r w h i t e - c o l l a r groups i n t h e p o p u l a t i o n census. The groups are 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 Workers, Managers, O f f i c i a l s and P r o p r i e t o r s E x c e p t Farm, C l e r i c a l and K i n d r e d Workers and S a l e s Workers. An o c c u p a t i o n c o u l d be s e l e c t e d f o r t e s t i n g o n l y i f i t would p r o v i d e a sample w i t h i n d i v i d u a l s d i s t r i b u t e d o v e r a r e a s o n a b l e number of t h e 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 i e s t o be t e s t e d . Thus, a m a j o r i t y of t h e o c c u p a t i o n s such 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 and i n s u r a n c e a g e n t s , c o u l d not be used. A l s o , o n l y o c c u p a t i o n s t h a t would p r o v i d e s u f f i c i e n t o b s e r v a t i o n s f o r m e a n i n g f u l r e g r e s s i o n a n a l y s i s c o u l d be chosen. Thus, many o c c u p a t i o n s such as e c o n o m i s t s , c i v i l e n g i n e e r s and s t a t i s t i c i a n s c o u l d not be t e s t e d as t h e r e 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 t h e f i n a l sample. T h i s p r o c e s s of s e l e c t i o n and e l i m i n a t i o n y i e l d e d t h e f i f t e e n o c c u p a t i o n s shown i n T a b l e I I . Four of t h e s e o c c u p a t i o n s , 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 , managers, o f f i c i a l s and p r o p r i e t o r s , and t y p i s t s c o r r e s p o n d t o groups t e s t e d i n Weiss' TABLE - I I OCCUPATIONAL GROUPINGS FOR REGRESSION ANALYSIS OCCUPATION NAME A c c o u n t a n t s Chemists D r a f t s m e n I n d u s t r i a l E n g i n e e r s M e c h a n i c a l E n g i n e e r s S a l e s E n g i n e e r s Engineers- (NEC)* P e r s o n n e l and Labor R e l a t i o n s Workers 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 Workers (NEC) Managers, O f f i c i a l s and P r o p r i e t o r s Bookkeepers S e c r e t a r i e s S t enographer s T y p i s t s Salesmen and S a l e s c l e r k s (NEC) SEX NO. OBSERVATIONS Male 100 Male 53 Male l l i l - Male 58 Male 110 Male 25 Male 33 Male 22 Male 56 Male 532 Female 99 Female 239 Female 50 Female 58 Male 322 1871 *NEC means Not El s e w h e r e C l a s s i f i e d - 3h - s t u d y . 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 of wages, r a t h e r t h a n s a l a r i e s , most of the o c c u p a t i o n s t e s t e d i n h i s s t u d y came from t h e l a b o u r i n g groups. F o r each o c c u p a t i o n a l group e i t h e r a l l males or 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. Most occu- p a t i o n s were almost c o m p l e t e l y homogeneous i n one sex or t h e o t h e r , so i t was d e c i d e d t o make them c o m p l e t e l y so. T h i s c o s t l i t t l e i n t h e way of sample s i z e and e l i m i n a t e d d i s t o r - t i o n s due t o an i m p o r t a n t and unwanted v a r i a b l e . 9. Pe r s o n a l Charac t e r i s11c s F o r each i n d i v i d u a l employee, s i x p e r s o n a l c h a r a c t e r - i s t i c s were r u n as independent 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 an attempt t o account f o r some of 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 e d u c a t i o n , age, s o u t h e r n r e s i d e n c e , r u r a l r e s i d e n c e , s i z e o f p l a c e of r e s i d e n c e 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 of s c h o o l or y e a r of u n i v e r s i t y c o mpleted, but t h e r e i s not a unique v a l u e of t h e 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 r e e f o r t h o s e whose h i g h e s t grade completed was one, two, t h r e e or f o u r , a v a l u e of f o u r f o r t h o s e whose h i g h e s t grade was f i v e or s i x , and so on up t o t w e l v e f o r t h o s e who f i n i s h e d f i v e or more y e a r s of c o l l e g e . S o u t h e r n r e s i d e n c e i s a dummy . v a r i a b l e w i t h a, v a l u e of one i f t h e i n d i v i d u a l r e s i d e d i n t h e s o u t h , z e r o o t h e r w i s e . RuraT r e s i d e n c e i s a dummy v a r i a b l e w i t h a v a l u e 14 Weiss, op. c i t . , pp. .102 - 10 J>. - 35 - o f one i f t h e i n d i v i d u a l r e s i d e d o u t s i d e an u r b a n i z e d area, or o u t s i d e a. S t a n d a r d M e t r o p o l i t a n S t a t i s t i c a l A r e a , z e r o o t h e r - w i s e . S i z e of p l a c e i s a v a r i a b l e w i t h a v a l u e r a n g i n g from one f o r a r u r a l f a r m t o t w e l v e f o r a p l a c e of one m i l l i o n or more. Race i s a dummy v a r i a b l e w i t h a v a l u e of one i f t h e i n d i v i d u a l i s w h i t e and does not 'have a S p a n i s h surname, z e r o o t h e r w i s e . 10. U n i o n i z a t i o n T h i s measure i s t a k e n from Weiss' s t u d y . I t i s t h e p e r c e n t a g e of employees i n e s t a b l i s h m e n t s where more t h a n h a l f t h e p r o d u c t i o n w o r k e r s are c o v e r e d by c o l l e c t i v e b a r g a i n i n g agreements. CHAPTER IV 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 used t o t e s t t h e h y p o t h e s i z e d 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 monopoly power, c a p i t a l - l a b o u r r a t i o and growth. R e g r e s s i o n i n p u t was c r e a t e d by ma t c h i n g i n d u s t r y d a t a from t h e v a r i o u s s o u r c e s w i t h t h e d a t a 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. Each p e r s o n was a s s i g n e d the v a l u e s of t h e v a r i a b l e s f o r the 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 , p e r s o n a l c h a r a c t e r i s t i c s and i n d u s t r y parameters I s a r e g r e s s i o n o b s e r v a t i o n . From t h e o r i g i n a l census sample of 1 8 6 , 0 0 0 r e c o r d s , 1871 such o b s e r v a t i o n s were s e l e c t e d over .15 o c c u p a t i o n s . T h i s c o n s t i t u t e s a s m a l l , v e r y s e l e c t sample. As e x p l a i n e d i n Ch a p t e r 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 of b e i n g employed I n one of t h e 6 3 i n d u s t r i e s i n Ta b l e I , h a v i n g worked 5 0 - 5 2 weeks i n 1 9 5 9 , h a v i n g no s e l f - employment income, as w e l l as b e i n g i n one of the d e s i g n a t e d o c c up a t I o n - s e x g r oups„ Two b a s i c s e t s of l i n e a r r e g r e s s i o n s were r u n , one 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 the o t h e r w i t h p e r s o n a l c h a r a c t e r i s t i c s added. The two r e g r e s s i o n e q u a t i o n s were: - 36 - - 37 - '1) S = b. + b nC + b^AS + b_,CR + b,,CL + b r G o 1 2 5 4 J? "r 5 (2) S = b + b.,C + b„AS + b vCR + b,,CL + b c G + x 1 o 1 2 3 4 5 b̂ -A + b,7E + b QRS + b„RR + b-, „SP + bn-,R o ( o 9 10 -11 where: S = S a l a r y C = C o n c e n t r a t i o n AS = A d v e r t i s i n g - S a l e s R a t i o CR ~ C a p i t a l Requirements CL = C a p i t a l - Labour R a t i o • ' G - Growth E = E d u c a t i o n 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 south RR = Dummy w i t h v a l u e 1 i f r u r a l r e s i d e n c e SP = S i z e of p l a c e of 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 i s w h i t e A c c o r d i n g t o t h e r e a s o n i n g of th e model i n Chapter I I , t h e 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 c o e f f i - c i e n t s . Growth, t h e c a p i t a l - l a b o u r r a t i o and the t h r e e monopoly power v a r i a b l e s , 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 r e q u i r e m e n t s , are a l l h y p o t h e s i z e d t o have a p o s i t i v e e f f e c t i n t h e d e t e r m i n a t i o n of i n d u s t r y s a l a r i e s . No p r e d i c t i o n s were made as 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 as t h e y were i n s e r t e d i n t h e r e g r e s s i o n e q u a t i o n s o n l y t o account f o r some of th e v a r i a t i o n i n s a l a r i e s . However, i t would be e x p e c t e d t h a t t h e c o e f f i c i e n t s of educa- t i o n , age, s i z e of p l a c e of r e s i d e n c e and r a c e would be p o s i t i v e and t h o s e of t h e two r e s i d e n c e dummy v a r i a b l e s n e g a t i v e . The f i r s t p r o b lem e n c o u n t e r e d upon r u n n i n g the r e g r e s s i o n s was t h e d i s c o v e r y of 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 - l a b o u r v a r i a b l e s . F o r 12 of t h e 15 o c c u p a t i o n s , the s i m p l e c o r r e l a t i o n c o e f f i c i e n t of t h e s e two v a r i a b l e s was g r e a t e r t h a n . 9 - C o l l i n e a r i t y was e x p e c t e d but not t o t h i s degree. I n o r d e r t o a v o i d e x t r e m e l y h i g h s t a n d a r d e r r o r s , i t was a r b i t r a r i l y d e c i d e d t o drop t h e c a p i t a l r e q u i r e m e n t s v a r i a b l e from t h e r e g r e s s i o n r u n s . No o t h e r problems of m u l t i c o l l i n e a r i t y were e n c o u n t e r e d . The second d i s c o v e r y made from t h e i n i t i a l r e g r e s s i o n runs was t h a t t h e r e was v e r y l i t t l e d i f f e r e n c e i n t h e c o e f f i - c i e n t s of t h e v a r i a b l e s between e q u a t i o n s (.1) and ( 2 ) . The o n l y i m p o r t a n t d i f f e r e n c e between the two s e t s of r e g r e s s i o n s was i n the amount of v a r i a t i o n a c c o u n t e d f o r . W i t h e q u a t i o n ( l ) 2 t h e v a l u e s of R were c o n s i s t e n t l y l e s s t h a n . 1 , but w i t h the p e r s o n a l c h a r a c t e r j . s t i e s added i t ranged between . 1 and . 5 . T h i s r e s u l t was ex p e c t e d . I n t h e w h i t e - c o l l a r 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 v a r y g r e a t l y a c c o r d i n g t o p e r s o n a l 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 e x p e r i e n c e and e d u c a t i o n . W i t h much of t h i s v a r i a t i o n a c counted f o r by t h e age and y e a r s i n 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 meaning- f u l . - 39 - A l o n g w i t h t h e c a p i t a l r e q u i r e m e n t s v a r i a b l e , r a c e and s i z e of p l a c e were dropped from the r e g r e s s i o n runs as n e i t h e r of them accounted f o r any of t h e v a r i a t i o n I n s a l a r y . Thus, the independent v a r i a b l e s i n the remainder of t h e 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 , a d v e r t i s i n g / s a l e s r a t i o , c a p i t a l - l a b o u r r a t i o , growth, e d u c a t i o n , age, s o u t h e r n r e s i d e n c e and r u r a l r e s i d e n c e . The r e s u l t s 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 i n T a b l e I I I . F o r each o c c u p a t i o n o n l y the c o e f f i c i e n t s of t h e i n d u s t r y v a r i a b l e s are shown. P a r a l l e l runs were made 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 of c a p i t a l - l a b o u r t o check t h a t the r e s u l t s would not be s u b s t a n t i a l l y d i f f e r e n t . The p r e s e n c e of one or two a s t e r i s k s i n d i c a t e s t h a t t h e c o e f f i c i e n t i s s i g n i f i c a n t a t t h e f i v e p e r ce n t or one p e r ce n t l e v e l on a t w o - t a i l e d T - t e s t . 1 T a b l e V I I n Appendix I I p r e s e n t s t h e s e r e g r e s s i o n r e s u l t s i n f u l l d e t a i l showing the c o e f f i c i e n t s of a l l t h e v a r i a b l e s a l o n g w i t h s t a n d a r d e r r o r s , F- p r o b a b i l i t i e s 2 and v a l u e s of R . A c c o r d i n g t o t h e model i n C h a p t e r I I , t h e s i g n s of th e c o e f f i c i e n t s 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 . C l e a r l y , t h e r e s u l t s do not o f f e r unambiguous s u p p o r t f o r the h y p o t h e s i s . The s i g n s are mixed and few of t h e c o e f f i c i e n t s a re s i g n i f i c a n t . C a r e f u l a n a l y s i s of t h e c o e f f i c i e n t s f o r each v a r i a b l e i s 'necessary 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 Appendix I I f o r an e x p l a n a t i o n of t h e t e s t . TABLE I I I MULTIPLE REGRESSION RESULTS - COEFFICIENTS OF INDUSTRY VARIABLES SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL VARIABLES OCCUPATION NUMBER OBSER. CONCEN- TRATION ADVER- TISING ' CAPITAL) ' (REQ. ) CAPITAL LABOUR GROWTH Ac c o u n t a n t s 100 - l.8o - 10470. - .04 - 4.20 - 6.49 Che m i s t s 53 + 7.91 + 978.2 + .17* + 18.56* - 3.36 D r a f t s m e n 114 + 24.69* + 18330. - .18 + .42 - 3.93 I n d u s t r i a l Eng. 58 + 15.74 - 99260.* + .35 + 18.76 - 4 .84 M e c h a n i c a l Eng. 110 + 19.24 + 26330. + .05 + 2.62 S a l e s E n g i n e e r s 25 + 87.12 -129500. -2.13 -120. -29.0 E n g i n e e r s (NEC) 33 +117.72 -130100. - .38 .- 95.51 -21.19 P e r s o n n e l and Lao o u r R e l a t i o n s 22 + 30.83 + 82480. - .03 - 3.55 - 2.48 P r o f e s s . , Tech. & K i n d r e d Workers 56 + 4.58 + 27050. - -57 - 2. 23 - 4.20 Managers, O f f i c i a l s & P r o p r i e t o r s 532 - 10.47 + 17780. + .03 - 1.39 - 4.oo Bookkeepers 99 - 1.91 - 5812. - .02 - 2.19 + 5.71 S e c r e t a r i e s 239 + 21.35** - 5552. + .04* + 4.99* + .88 S t e n o g r a p h e r s 50 + 14.34 - 11220. - .03 - 3.5^ + 1.42 T y p i s t s 58 + 29.55* + 2105. - .04 - 3.89 - 2.25 Salesmen and S a l e s c l e r k s 322 - 57.77* - 9563. + .12 + 10.63 - 5.7 ( 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 Requirements i n p l a c e of C a p i t a l Labour - o n l y the one c o e f f i c i e n t i s shown as t h e r e was a n e g l i g i b l e change 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 t h a t o f f e r s s t r o n g s u p p o r t f o r t h e model. The c o e f f i c i e n t of c o n c e n t r a t i o n i s p o s i t i v e 11 out of 15 t i m e s and t h r e e of 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 t o measure t h e p r o b a b i l i t y of h a v i n g at l e a s t 11 sample c o e f f i c i e n t s of t h e same s i g n . i f t h e c o e f f i c i e n t of c o n c e n t r a t i o n was i n f a c t z e r o . Assuming a p r o b a b i l i t y of .5 f o r e i t h e r a p o s i t i v e or a n e g a t i v e s i g n , t h e p r o b a b i l i t y of h a v i n g a t l e a s t 11 p o s i t i v e o r 11 n e g a t i v e c o e f f i c i e n t s i s .119. However, on a p p l y i n g a o n e - t a i l e d t e s t , t h a t i s , assuming the c o e f f i c i e n t of c o n c e n t r a t i o n cannot be n e g a t i v e , t h i s p r o b a b i l i t y f a l l s t o .059.- The n u l l h y p o t h e s i s can be r e j e c t e d at t h e six. p e r cent l e v e l of s i g n i f i c a n c e . The u n f o r t u n a t e r e s u l t of a s i g n i f i c a n t , n e g a t i v e c o e f f i c i e n t i n the Salesmen and S a l e s c l e r k s sample can p o s s i b l y be 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 g e n e r a l l y e a r n c o n s i d e r a b l y h i g h e r s a l a r i e s t h a n s a l e s c l e r k s . 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 e x p l a i n e d by age or e d u c a t i o n . I t i s p o s s i b l e t h a t t h e f i r m s i n t h e more c o n c e n t r a t e d i n d u s t r i e s employ a g r e a t e r p r o p o r t i o n of s a l e s - c l e r k 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 . T a k i n g t h i s f a c t o r i n t o c o n s i d e r a t i o n , a l o n g w i t h t h e r e s u l t s of t h e b i n o m i a l t e s t , the r e g r e s s i o n r e s u l t s can be s a i d t o o f f e r s u p p o r t f o r t h e h y p o t h e s i s t h a t i n d u s t r y c o n c e n t r a t i o n has a p o s i t i v e e f f e c t upon s a l a r i e s . • 2. A d v e r t i s i n g The r e s u l t s f o r t h i s v a r i a b l e are s u r p r i s i n g l y poor. A d v e r t i s i n g / s a l e s i s a s i m p l e , e f f e c t i v e measure of a d v e r t i s i n g i n t e n s i t y and s h o u l d be a good 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 - t i o n b a r r i e r . However, t h e r e are e i g h t n e g a t i v e c o e f f i c i e n t s i n th e r e s u l t s and one of them i s s i g n i f i c a n t . The h y p o t h e s i s t h a t p r o d u c t d i f f e r e n t i a t i o n i s a f a c t o r i n e x p l a i n i n g s a l a r y r a t e s must be r e j e c t e d . 3. C ap 11 a l Requ 1 rement s A l t h o u g h t h i s v a r i a b l e I s t w i c e s i g n i f i c a n t w i t h a p o s i t i v e s i g n , 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 t i m e s . The n u l l h y p o t h e s i s of no r e l a t i o n s h i p between t h e c a p i t a l 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 cannot be r e j e c t e d . However, i n view of t h e l a c k of p r e c i s i o n i n m e a s u r i n g t h i s v a r i a b l e , no f i r m c o n c l u s i o n s can be drawn from t h e s e r e g r e s s i o n r e s u l t s . 4. C a p i t a l - L a b our R a t i o The r e s u l t s f o r t h i s v a r i a b l e were t h e same as f o r c a p i t a l r e q u i r e m e n t s . A g a i n , t h e c o n f l i c t i n g p o s i t i v e and n e g a t i v e c o e f f i c i e n t s p r e v e n t r e j e c t i o n of t h e 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 degree of c o l l i n e a r i t y .between t h e s e two v a r i a b l e s , t h e i r i n d i v i d u a l e f f e c t s cannot be s e p a r a t e d out. A l l t h a t can be s a i d i s t h a t i t appears - 43 - t h a t t h e amount o f c a p i t a l i n an i n d u s t r y does not have an e f f e c t upon s a l a r i e s . 5• Growth These r e s u l t s a r e s t r o n g l y c o n t r a r y t o the h y p o t h e s i W i t h 12 out of 15 n e g a t i v e c o e f f i c i e n t s , an h y p o t h e s i s t h a t 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 a c c e p t e d . 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 , hut t h e e x p l a n a t i o n f o r t h e s e p e r v e r s e r e s u l t s p r o b a b l y l i e s i n t h e method of measure- ment of t h e v a r i a b l e . Change i n employment was used as a measure of growth m a i n l y because t h e s e f i g u r e s were the o n l y ones a v a i l a b l e f o r t h e d e t a i l e d I n d u s t r y breakdown. I n r e t r o s p e c t , i t must be c o n s i d e r e d a poor measure. I t f a i l s t o t a k e i n t o account t h e i n t r o d u c t i o n of l a b o u r s a v i n g i n n o v a t i o n s , t h u s u n d e r s t a t i n g t h e growth r a t e f o r t h e more p r o g r e s s i v e i n d u s t r i e s . T h i s weakness can be i l l u s t r a t e d t h r o u g h c o mparison w i t h a s i m i l a r growth measure based on v a l u e added. F o r two i n d u s t r i e s , O f f i c e , Computing and A c c o u n t i n g Machines, and D a i r y P r o d u c t s , t h e growth r a t e s c a l c u l a t e d on i960 employ- ment/1950 employment are 153 and 154 r e s p e c t i v e l y , as shown i n T a b l e I . However, t h e growth f o r t h e s e two I n d u s t r i e s based on 1958 v a l u e added/194? v a l u e added are 193 and 14?. 2 V a l u e added f i g u r e s are t a k e n from Bureau of t h e Census, U n i t e d S t a t e s Census of M a n u f a c t u r e r s : 1947 and I958. _ 44 - As a growth measure, v a l u e added may he d i s t o r t e d by r e l a t i v e p r i c e changes, but i t would more a c c u r a t e l y r e f l e c t change i n 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 change i n employment a. weak measure of growth, but 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 might be i n v e r s e l y r e l a t e d t o s a l a r i e s . Those i n d u s t r i e s p a y i n g h i g h e r s a l a r i e s would be more i n t e n t on a c h i e v i n g growth w i t h a m i n i m a l i n c r e a s e i n employment. There would be g r e a t e r emphasis on s u b s t i t u t i n g o t h e r f a c t o r s of p r o d u c t i o n f o r l a b o u r . Growth measured by i n c r e a s e i n employment would t e n d t o be l e s s f o r t h e h i g h e r p a y i n g i n d u s t r i e s . Thus, not o n l y i s change i n employment an I n a c c u r a t e measure of growth, but i t might w e l l be b i a s e d towards showing a h i g h e r r a t e o f growth f o r l o w e r p a y i n g i n d u s t r i e s . I n l i g h t of t h i s measurement problem, l i t t l e c an be c o n c l u d e d about the e f f e c t of i n d u s t r y growth upon s a l a r y r a t e s . 6. U n i o n i z a t i o n R e g r e s s i o n s were r u n t o d e t e r m i n e what e f f e c t the 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 s a l a r i e s . The r e s u l t s showed, as e x p e c t e d , t h a t c o n c e n t r a t i o n and u n i o n i s m are h i g h l y c o l l i n e a r . The c o r r e l a t i o n c o e f f i c i e n t s f o r t h e s e two v a r i a b l e s ranged from .20 t o .79 w i t h a median of .50 f o r t h e 15 o c c u p a t i o n s . - 45 - When u n i o n i s m was r u n al o n e a g a i n s t s a l a r y , r e s u l t s suggest t h a t I t i s a s i g n i f i c a n t e x p l a n a t o r y v a r i a b l e . However, when u n i o n i s m 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 out of 15 of i t s c o e f f i c i e n t s were p o s i t i v e and none of them s i g n i f i c a n t . T h i s 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 u n i o n i s m has hampered most r e s e a r c h e f f o r t s t o i s o l a t e 4 t h e e f f e c t s of t h e s e - v a r i a b l e s . 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 lem of m u l t I c o l l i n e a r i t y was Weiss, He i n c l u d e d c o n c e n t r a t i o n , u n i o n i s m and the p r o d u c t of the two i n h i s 5 m u l t i p l e r e g r e s s i o n s . I f i s u n l i k e l y , however, t h a t the e f f e c t s of 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 can be d e t e r m i n e d t h r o u g h 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 . C o n c l u s i o n s must be reached by- r e c o u r s e t o t h e a p r i o r i r e a s o n i n g I n Ch a p t e r I I . There a re 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 monopoly power and hence c o n c e n t r a t i o n w i l l be i m p o r t a n t i n e x p l a i n i n g s a l a r i e s / How- e v e r t h e r e i s l i t t l e t h e o r y or e v i d e n c e t o su p p o r t t h e b e l i e f 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 w o r k e r s w i l l See T a b l e V I I , Appendix I I , f o r r e s u l t s . ^See 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 'the U n i t e d S t a l e s , The U n i v e r s i t y of Ch i c a g o P r e s s , Chicago^ 1963, "'Weiss, op. c i t . , p. '98. - 46' - s i g n i f i c a n t l y a f f e c t t h e s a l a r i e s of w h i t e - c o l l a r employees. T h e r e f o r e , i t seems l o g i c a l t o a t t r i b u t e , t o c o n c e n t r a t i o n , most of t h e v a r i a t i o n i n s a l a r i e s t h a t i s e x p l a i n e d by t h e s e two v a r i a b l e s . 7. Comparison W i t h Weiss I t i s of i n t e r e s t t o compare t h e r e s u l t s of t h i s study- t o t h o s e of Weiss, s i n c e t h e d a t a and t o a c e r t a i n e x t e n t t h e approach, of t h e two s t u d i e s a re s i m i l a r . A l t h o u g h Weiss c o n c e n t r a t e d on h o u r l y p a i d wage e a r n e r s , he d i d r u n r e g r e s s i o n s f o r f o u r s a l a r i e d o c c u p a t i o n s t h a t are c o v e r e d by t h i s s t u d y . They are 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 , managers, o f f i c i a l s and p r o p r i e t o r s (NEC) and t y p i s t s . R e g r e s s i o n 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 , t h e main v a r i a b l e t h a t t h e two s t u d i e s have i n common, are shown i n T a b l e IV. TABLE IV COMPARISON WITH REGRESSION RESULTS OF WEISS' STUDY SALARY RELATED TO CONCENTRATION ALONE AND TO CONCENTRATION ALONG WITH OTHER INDUSTRY AND PERSONAL VARIABLES - ONLY COEFFICIENTS FOR CONCENTRATION SHOWN WEISS' STUDY OCCUPATION 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 Managers . O f f i c i a l s , & P r o p r i e t o r s T y p i s t s No. Oh s r, 150 126 693 126' Me an S a l a r y 5763 8998 IO980 2693 C one. A l one 44.36* (13O0) 24. 32 (26.73) 31.03 (24.05) 13.78 (10.52) Cone. W i t h Other V a r i a b l e s 5 . 7 7 3 ( 7 2 . 0 8 ) - . 5 2 4 9 ( 1 5 2 . 7 ) 11. 23 ; 116.40) -13.14 (78.66) No. Ob s r. 1 1 4 110 532 THIS STUDY Mean Cone. S a l a r y A l o n e 58 6389 O.lLOil s 1 J • 11840 3256 24.21* (10.72) 20,43 (30.40) -12.98 (26.81) 25.41* (9.69) Cone. W i t h Other V a r i a b l e s 24.6Q* (12.33) 19.24 (31.83) ' -10.47 (28.99) 29.55* (11.23) • 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 are shown I n b r a c k e t s i m m e d i a t e l y below 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 by the f a c t t h a t employees who d i d not work at l e a s t 5 0 weeks i n 1 9 5 9 were dropped from t h i s s t u d y , but not from Weiss'. T h i s e x p l a i n s why Weiss' mean s a l a r i e s are l o w e r . A p p a r e n t l y f o r 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 t y p i s t s , t h e i n c l u s i o n of t h e s e employees d i d not b i a s t h e sample f o r or a g a i n s t c o n c e n t r a t i o n . L o o k i n g at t h e 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 the o n l y I n d u s t r y v a r i a b l e i n the r e g r e s s i o n , t h e r e s u l t s of t h e two s t u d i e s a re almost i d e n t i c a l . F o r t h e m a n a g e r i a l o c c u p a t i o n group, t h e r e s u l t s are n o t i c e a b l y d i f f e r e n t . T h i s d i s c r e p a n c y may be 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 self-employment income were dropped by t h i s s t u d y . Many of t h e s e e x c l u d e d 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 and r e c e i v e d l i t t l e or no s a l a r y income. The i n c l u s i o n of t h e s e o b s e r v a t i o n s i n the r e g r e s s i o n s would b i a s t h e r e s u l t s i n f a v o u r of a s t r o n g e r r e l a t i o n s h i p between s a l a r i e s and con- c e n t r a t i o n . I t i s not c l e a r e x a c t l y how Weiss h a n d l e d t h i s problem. I f he d i d not drop a l l employees w i t h self-employment income, t h e n h i s r e s u l t s would be d i f f e r e n t , and perhaps b i a s e d . The r e s u l t s f o r t h e two s t u d i e s a re d e c i d e d l y d i f f e r e n t , when the 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 v a r i a b l e s . P a r t of t h i s d i f f e r e n c e i s p r o b a b l y due t o t h e f a c t t h a t the two 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 i n d u s t r y and _ 49 - p e r s o n a l v a r i a b l e s . 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 Weiss i n c l u d e d t h e t h r e e c o l l i n e a r v a r i a b l e s , 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 p r o d u c t t o g e t h e 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 . T h i s i s c o n f i r m e d by t h e v e r y h i g h s t a n d a r d e r r o r f o r c o n c e n t r a t i o n . CHAPTER V CONCLUSIONS The model t h a t t h i s s t u d y s e t out t o t e s t p r e d i c t s t h a t i n t e r i n d u s t r y s a l a r y v a r i a t i o n i s d e t e r m i n a t e d , t o a s i g n i f i c a n t e x t e n t , -by i n d u s t r y monopoly power, c a p i t a l - l a b o u r r a t i o , and growth. The r e s u l t s of t h e l i n e a r r e g r e s s i o n a n a l y s i s do. not l e a d t o a s i m p l e c o n c l u s i o n of ac c e p t a n c e or r e j e c t i o n of t h e model. R a t h e r , t h e y s uggest t e n t a t i v e a c c e p t a n c e o f c e r t a i n a s p e c t s of the model, r e j e c t i o n of o t h e r s and f o r some of t h e hypotheses t h e e v i d e n c e i s s i m p l y i n - c o n c l u s i v e . T h i s f a i l u r e t o e s t a b l i s h c o n c l u s i v e e v i d e n c e , e i t h e r f o r or a g a i n s t t h e model, can be blamed l a r g e l y on problems of measurement. W h i l e t h e e a r n i n g s d a t a on i n d i v i d u a l employees was good, t h e I n d u s t r y v a r i a b l e s caused d i f f i c u l t i e s . Of t h e monopoly power measures, o n l y c o n c e n t r a t i o n c a n be c o n s i d e r e d c o n s i s t e n t l y a c c u r a t e and m e a n i n g f u l . Economies of s c a l e c o u l d n o t be measured, c a p i t a l r e q u i r e m e n t s 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 a d v e r t i s i n g was e a s i l y measured, i t s u f f e r e d , as d i d t h e o t h e r s , from a g g r e g a t i o n . - 50 - - 51 - The c a p i t a l - l a b o u r r a t i o had t o be measured on an a g g r e g a t e b a s i s and i n a d d i t i o n , i t was h i g h l y c o l l i n e a r w i t h c a p i t a l r e q u i r e m e n t s . Growth was a v a i l a b l e on a d e t a i l e d i n d u s t r y b a s i s , but change i n employment was judged a weak measure of growth i n demand. T h i s b e i n g t h e c a s e , l i t t l e was l e a r n e d from t h e b e h a v i o u r of t h e growth v a r i a b l e . D e s p i t e th e measurement problems, t e n t a t i v e con- c l u s i o n s can be drawn from the r e g r e s s i o n r e s u l t s . The e v i d e n c e i n d i c a t e s t h a t t h e amount of c a p i t a l i n an i n d u s t r y has no e f f e c t upon s a l a r y l e v e l s . The same can be s a i d f o r t h e degree of a d v e r t i s i n g i n t e n s i t y . Any c o n c l u s i o n s on the e f f e c t of monopoly power w i l l have t o be based upon the performance of t h e c o n c e n t r a t i o n v a r i a b l e , as i s t h e case i n most s t u d i e s . R e g r e s s i o n r e s u l t s i n d i c a t e t h a t 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 a, p o s i t i v e e f f e c t upon s a l a r y r a t e s . The r e s u l t s were n e i t h e r unanimous, nor s t r o n g l y s i g n i f i c a n t , but t h e p r o p o r t i o n of p o s i t i v e c o e f f i c i e n t s was h i g h enough t o suggest t h i s r e l a t i o n s h i p . Perhaps the s t r o n g e s t c o n c l u s i o n t h a t can be drawn from the s t u d y i s t h a t t h e 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 c h a r a c t e r i s t i c s i s a complex one. The i n t e r i n d u s t r y s a l a r y s t r u c t u r e i s u n d o u b t e d l y d e t e r m i n e d by a l a r g e number of i n t e r r e l a t e d v a r i a b l e s . Much e f f o r t w ould be r e q u i r e d t o s u c c e s s f u l l y d e velop and t e s t a complete model, but i t would be an i m p o r t a n t c o n t r i b u t i o n t o t h e s t u d y of economics. BIBLIOGRAPHY A. BOOKS B a i n , J.S. B a r r i e r s t o New C o m p e t i t i o n . Cambridge, H a r v a r d 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 . B u s i n e s s B e h a v i o r , "Value and Growth. New York, M a c m i l l a n , 1 9 5 9 » Bowen, W.G. Wage B e h a v i o r i n the Postwar P e r i o d : An E m p i r i c a l A n a l y s i s . P r i n c e t o n , P r i n c e t o n U n i v e r s i t y • P r e s s , i 9 6 0 . G a l b r a i t h , J.K. The New I n d u s t r i a l S t a t e . 'Boston, Houghton M i f f l i n , 1967^ L e w i s , H. G. U n i o n i s m and R e l a t i v e Wages i n the U n i t e d S t a t e s . C h i c a g o , U n i v e r s i t y of Chica g o P r e s s , 1 9 6 3 . ~ R o b e r t s , D a v i d R. E x e c u t i v e Compensation. I l l i n o i s , F r e e P r e s s of Glencoe, 1959- R o b i n s o n , Joan The Economics of I m p e r f e c t Compet.ltion. London, M a c m i l l a n , 1 9 6 I . S t i g l e r , George J . C a p i t a l and Rates of R e t u r n i n M a n u f a c t u r i n g I n d u s t r i e s . P r i n c e t o n , P r i n c e t o n U n i v e r s i t y P r e s s , 1 9 6 3 . S t u r m t h a l , A d o l f W h i t e - C o l i a r Trade Unions: Contemporary Developments i n I n d u s t r i a l i z e d 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 P r e s s , 1966"! - 52 - - 53 - W i l l i a m s o n , O.E. The Economics of D i s c r e t i o n a r y B e h a v i o r : M a n a g e r i a l O b j e c t i v e s i n a Theory of t h e F i r m . Englewood C l i f f s , P r e n t i c e - H a l l , I96IL B. ARTICLES A l l e n , B.T. "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. M a n u f a c t u r i n g , 1947 - 1964." 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 Review, V o l . 21, No. 1 (March 1966), PP. 353 - 365. Brown, D.G.. "Expected A b i l i t y t o Pay and 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 Labor R e l a t i o n s Review, V o l . 16, N o . ~ l (O c t o b e r igh~2) , pp. 45 -~61T. •Comanor, S. and W i l s o n , T.A. " A d v e r t i s i n g Market S t r u c t u r e and Performance." Review of Economics and S t a t i s t i c s , V o l . 49, No. 4 (November I90T) , p p . 4 2 3 - ^W. G a r b a r i n o , J.W. "A Theory 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 of Economics, V o l . 64, No. T~ (August l 9 5 o y r ~ p p - 2&r2' - 305. Gol d n e r , W. and Ross, A.M. "Forces 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 of Economics, V o l . 64, No. 2 "pfey 1950)7 pp. 254 - 2 8 1 . H a r b e r g e r , A.C. "Monopoly and Resource A l l o c a t i o n . " A m e r i c a n Economic Review. V o l , 44, No. 2 (May 1954), pp. 77 ~^7, H e r r n s t a d t , I.L. "Comment on 'Monopoly and Wages'." Cana d i a n J o u r n a l of Economics and P o l i t i c a l S c i e n c e , V o l . 27, No. 3 (August 1 9 6 T ) , pp. 428 - 4 38^ - 54 - Kaysen, C a r l "The C o r p o r a t i o n : How Much Power? What Scope?" i n The C o r p o r a t i o n i n Modern S o c i e t y , Edward S. Mason, ed., Cambridge, H a r v a r d U n i v e r s i t y P r e s s , 1959- L a m e r , R.J. "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 Economic Review, V o l . 56, No. 4 XSeptemher 196F)7~pp. 777 - 787. McGuire, J.W., C h i u , J.S.Y. and E l b i n g , A.O. " E x e c u t i v e s ' Incomes, S a l e s and P r o f i t s . " A m e r ican Economic Review, V o l . 52, No. 4 (September 1962") , pp. 753 - 761. Simon, H.A. "The Compensation of E x e c u t i v e s . " S o c i o m e t r y , V o l . 20, No. 4 (December 1957), pp. 32 - 35- Shwartzman, D. "Monopoly and Wages." Can a d i a n J o u r n a l of Economics and P o l i t i c a l S c i e n c e , V o l . 26, No] 3 "(August I960), pp. 428 - 438. Solomon, B. and Burns, 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 of B u s i n e s s , V o l . 36, No. 2 " ( A p r i l 1963), pp."141 - lb~5~. Weiss, L.W. " C o n c e n t r a t i o n and Labor E a r n i n g s . " A m e r i c a n Economic Review, V o l . 56, No. '1 (March 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 B e h a v i o r . " A m e rican Economic Review, V o l . 53, No. 5 (December ±9b~5T, pp. .1033 - 1057". Yordon, W.J. "Another Look at Monopoly and Wages." Canadian J o u r n a l of Economics and P o l i t i c a l S c i e n c e , V o l . 27, No. 3 (August 1961), pp. 373 - 379- C. U.S. GOVERNMENT PUBLICATIONS Bureau of the Census, U n i t e d S t a t e s Census of M a n u f a c t u r e r s : . ' 1 9 4 7 . V o l . I . Bureau of the Census, U n i t e d S t a t e s Census of M a n u f a c t u r e r s : 1 9 5 8 . V o l . I . Bureau.of t h e Census, U n i t e d S t a t e s Census of M i n e r a l I n d u s t r i e s : 195~87 V o l . I . Bureau of t h e Census, U.S. Censuses of P o p u l a t i o n and Housing i 9 6 0 . 1/I00 " 0~and 1 / 1 0 0 0 0 , Two N a t i o n a l Samples o f ~ th e P o p u l a t i o n of t h e U n i t e d S t a t e s , D e s c r i p t i o n and Documentation. 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 of Income: J u l y 1 9 5 9 - June i 9 6 0 . APPENDIX I MATCHING OF INDUSTRY DATA As i n d i c a t e d i n Chapter I I I , i n d u s t r y d a t a f o r t h i s s t u d y comes from t h r e e s o u r c e s : 1. S t a t i s t i c s of Income, 1959 - I960, p u b l i s h e d by the I n t e r n a l Revenue S e r v i c e , U.S. T r e a s u r y Department. T h i s s o u r c e 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 , a s s e t s and a d v e r t i s i n g . 2. U.S. Census of M a n u f a c t u r e r s : '1958, and U.S. Census of M i n e r a l I n d u s t r i e s : 1958, b o t h p u b l i s h e d by t h e Bureau of t h e Census, U.S. Department of Commerce. F i g u r e s f o r number of e s t a b l i s h m e n t s and number of employees are t a k e n from h e r e . 3. " C o n c e n t r a t i o n and L a b or E a r n i n g s " by L.W. Weiss I n t h e A m e r i c a n Economic Review, March 1966, pp. 96 - 117. The a p p e ndix of t h i s a r t i c l e p r o v i d e d f i g u r e s f o r growth and c o n c e n t r a t i o n . The growth d a t a o r i g i n a l l y came from t h e 1950 and i960 p o p u l a t i o n c e n s u s e s . The o r i g i n a l s o u r c e s f o r c o n c e n t r a t i o n d a t a were T a b l e IV of C o n c e n t r a t i o n R a t i o s i n M a n u f a c t u r i n g I n d u s t r i e s , P a r t I (Senate J u d i c i a r y , 1962) 'and - 56 - - 57 - U.S. Census of M i n e r a l I n d u s t r i e s : 1 9 5 8 . The i n d u s t r y v a r i a b l e s t o be used i n t h e s t u d y were d e v e l o p e d as f o l l o w s . A t o t a l of 6j5 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 i e s were s e l e c t e d f o r t h e study. They were c l a s s i f i e d a c c o r d i n g t o t h e 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 the p o p u l a t i o n census. Growth and c o n c e n t r a t i o n f i g u r e s were t a k e n d i r e c t l y from Weiss' s t u d y s i n c e he r e p o r t e d them a c c o r d i n g t o t h e t h r e e - d i g i t code. The r e m a i n d e r of t h e i n d u s t r y d a t a was a v a i l a b l e o n l y on a major i n d u s t r y b a s i s as t h e S t a t i s t i c s of Incorne does not r e p o r t t h e r e q u i r e d f i g u r e s on a d e t a i l e d i n d u s t r y l e v e l . M a j or i n d u s t r y f i g u r e s from th e S t a t i s t i c s of Income were matched by name t o t h e major groups of the p o p u l a t i o n census. F o r each group t h e s e aggregate f i g u r e s were a s s i g n e d t o the d e t a i l e d i n d u s t r y c l a s s i f i c a t i o n s . The Census of M a n u f a c t u r e r s r e p o r t s i n d u s t r y d a t a on a major t w o - d i g i t and minor f o u r - d i g i t b a s i s . However, t h e e s t a b l i s h m e n t and employment f i g u r e s f r om t h i s s o u r c e must be chosen on t h e same b a s i s as the a s s e t s d a t a from the S t a t i s t i c s of Inc 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 t h e p o p u l a t i o n and m a n u f a c t u r i n g censuses c o r r e s p o n d e x a c t l y , but t h e r e are two c a s e s f o r w h i c h the S t a t i s t i c s of Income c l a s s i f i c a t i o n d i f f e r . These are i n T r a n s p o r t a t i o n Equipment and Food and K i n d r e d P r o d u c t s where Motor V e h i c l e s and Equipment and Beverages are r e p o r t e d s e p a r a t e l y by t h e S t a t i s t i c s of' Inc orne. S i n c e i t i s d e s i r e d t o have as d e t a i l e d an i n d u s t r y breakdown •as i s p o s s i b l e , t h i s c l a s s i f i c a t i o n i s used. F i g u r e s f o r Beverages are dev e l o p e d from t h e Census of M a n u f a c t u r e r s by summing f i g u r e s f o r t h e 208X f o u r - d i g i t i n d u s t r i e s . These a r e M a l t L i q u o r s (20-82), M a l t (2083), Wine and Brandy (2084), D i s t i l l e d L i q u o r e x c e p t Brandy (2085), b o t t l e d and canned s o f t d r i n k s (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 Food 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 from t h e S t a t i s t i c s of Income, t h e s e Beverages f i g u r e s were s u b t r a c t e d from Food and Kindred' P r o d u c t s (20). S i m i l a r l y , t h e f i g u r e s f o r Motor V e h i c l e s and Equipment were d e v e l o p e d by summing t h o s e f o r T r u c k and Bus B o d i e s (37-13), T r u c k T r a i l e r s (3715), and Motor V e h i c l e s and P a r t s (3717). 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 m a t c h i n g . 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 are 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 T a b l e I . T h i s . i n d u s t r y d a t a was e n t e r e d on punched c a r d s so 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 d a t a w h i c h i s s t o r e d on magnetic t a p e . Each i n d i v i d u a l employee s e l e c t e d from t h e p o p u l a t i o n - c e n s u s was a s s i g n e d t h e i n d u s t r y v a r i a b l e s c o r r e s p o n d i n g t o t h e t h r e e - d i g i t 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 r e c o r d , a g a i n on magnetic 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 r e g r e s s i o n a n a l y s i s . I NT) NAME 126 M e t a l M i n i n g 136 C o a l M i n i n g 146. Crude P e t . & Nat. Gas 156 N o n - M e t a l i c M i n i n g Lumber, and Wood P r o d u c t s 206 L o g g i n g 207 S a w m i l l s , P l a n i n g M i l l s , M i l l w o r k 208 M i s c . Wood P r o d u c t s 209 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 P r o d u c t s 216 G l a s s and G l a s s P r o d u c t s 217 Cement, C o n c r e t e , Gypsum and P l a s t e r 218 S t r u c t u r a l C l a y P r o d u c t s 219 P o t t e r y and R e l a t e d P r o d u c t s 23o M i s c . N o n - M e t a l i c M i n e r a l s TABLE V BASIC INDUSTRY DATA UNION- Acc^rpo q f l T p q ADVER- NO. NO. IZATION O D ° an-jaa TISING EST. EMF. $' 000 • $'000 ' $ ! 000 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 IND NAME P r i m a r y M e t a l I n d u s t r i e s 237 B l a s t F u r n a c e s , S t e e l Works, e t c . 238 Other P r i m a r y I r o n & S t e e l 239 P r i m a r y , Non-Ferrous M e t a l s F a b r i c a t e d M e t a l P r o d u c t s 246 C u t l e r y , Hand T o o l s , Hardware 247 F a b r i c a t e d S t r u c t u r a l M e t a l P r o d u c t s 248 • M i s c . Fab. M e t a l P r o d u c t s M a c h i n e r y E x c e p t E l e c t r i c a l 256 Farm M a c h i n e r y 257 O f f i c e , Computing & A c c t g Mach. 258 M i s c . M a c h i n e r y 259 E l e c t r i c a l M a c h i n e r y 267 Motor V e h i c l e s and Equipment TABLE V (C o n t i n u e d ) UNION- IZATION ASSET'S $'000 SALES $' 000 ADVER- TISING $'000 NO. EST. NO. EMP. 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 11772597 18712082 167205 24782 1057986 73 11772597 18712082 167205 24782 1057986 90 20137931 24938517 262160 29839 1348245 42 20137931 24938517 262160 29839 1348245 69 20137931 24938517 262160 29839 1348245 73 '14300144 22500260 389261 8091 1122284 98 16561217 24273354 196745 2283 210519 TABLE V (Continued) I NT) NAME i ^ I 0 I L T ASSETS IZATION T r a n s p o r t a t i o n Eqpt E x c e p t Auto $'000 268 A i r c r a f t and P a r t s ' 82 9694529 269 S h i p & Boat B u i l d i n g & R e p a i r 70 9694529 276 R a i l r o a d & M i s c . Transp. Eqpt 50 9694529 I n s t r u m e n t s and R e l a t e d P r o d u c t s 286 P r o f e s s i o n a l Eqpt and S u p p l i e s 53 4545251 287 P h o t o g r a p h i c Eqpt and S u p p l i e s 43 4545251 289 Watches, C l o c k s , E t c . " 90 4545251 296 M i s c e l l a n e o u s Mfgrs 55 4518551 Food and K i n d r e d P r o d u c t s 306 " Meat P r o d u c t s 83 18010406 307 D a i r y P r o d u c t s 6 l 18010406 308 C a n n i n g and P r e s e r v i n g 69 l8010406 309 G r a i n M i l l P r o d u c t s ' 74 l8oio4o6 SALES $'000 ADVER- TISING $'000 NO. EST. NO. EMP. 16465594 16465594 16465594 46287 46287 46287 4324 4324 4324 100571 100571 100571 6200826 6200826 6200826 139904 139994- 139994 3526 3526 3526 296558 296558 296558 7249222 133726 14273 571432 50112468 50112468 50112468 50112468 963744 963744 963744 963744 36061 36061 36061 36061 1492617 1492617 1492617 1492617 INT) NAME 316 B a k e r y Product's 317 C o n f e c t i o n e r y & R e l a t e d P r o d t i c t s 319 M i s c . Food P r e p a r a t i o n s 318 Beverages 329 Tobacco P r o d u c t s T e x t i l e M i l l P r o d u c t s 346 K n i t t i n g M i l l s 3^7 Dying and F i n i s h i n g 348 F l o o r C o v e r i n g s Except Hard S u r f a c e s 349 Y a r n , Thread and F a b r i c 356 M i s c . T e x t i l e s 359 A p p a r e l and A c c e s s o r i e s 367 M i s c . Fan. T e x t i l e s Paper and A l l i e d P r o d u c t s 386 P u l p , Paper & Paperboard 387 P a p e r b o a r d C o n t a i n e r s 389 M i s c . Paper & Pulp P r o d u c t s ABLE V (Continued) UNION- IZATION ASSETS $' 000 SALES $'000 ADVER- TISING $'000 NO. EST. NO. EMP. 50 51 72 18010406 i8oio4o6 i8oio4o6 50112468 • 50112468 50112468 963744 963744 963744 36061 36061 36061 1492617 1492617 1492617 70 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 11843834- 11843834 115827 115827 29297 29297 1180517 1180517 90 62 71 9977017 9977017 9977017 11579374 11579374 11579374 97458 97458 97453 5271 5271 5271 555398 555398 . 555398 IND NAME P r i n t i n g and P u b l i s h i n g 396 Newspapers 39° P r i n t i n g & P u b l i s h i n g E x c e p t Newspapers C h e m i c a l s and A l l i e d P r o d u c t s 406 S y n t h e t i c F i b r e s 407 Drugs and M e d i c i n e s 408 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 409 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 P e t r o l e u m and C o a l P r o d u c t s 416 • P e t r o l e u m R e f i n i n g 419 M i s c . P e t . & C o a l P r o d u c t s Rubber and P l a s t i c s P r o d u c t s 426 42°/ Rubber P r o d u c t s M i s c . P l a s t i c P r o d u c t s TABLE V (Co n t i n u e d ) UNION- IZATION ASSETS £'000 SALES $ 1 000 ADVER- TISING $'000 NO. EST NO. EMP. 90 56 8146482 12238036 92601 35368 864101 8146482 12238036 92601 35368 864101 75 33 67 70 23202242 23202242 23202242 23202242 26065022' 26065022 26065022 26065022 986856 986856 986856 986856 11309 11309 11309 11309 699166 699166 699166 699166 OA 90 39748483 39748483 36004854 36004854 164859 164859 1608 1608 179166 179166 81 50 4906503 4906503 7737607 7737607 127152 127152 4462 4462 349050 349050 TABLE V (Continued) IND NAME IZATION ASSETS L e a t h e r and L e a t h e r P r o d u c t s $'000 436 L e a t h e r T a n n i n g , e t c . 67 1843319 437 Footwear E x c e p t Rubber 48 1843319 438 L e a t h e r P r o d u c t s Exc. Footwear 48 1843319 $'000 $'000 3907359 43585 4534 349050 3907359 43585 4534 349050 3907359 43585 4534 349050 APPENDIX I I DETAILED REGRESSION RESULTS T a b l e V I shows i n d e t a i l t h e r e s u l t s of the m u l t i p l e • r e g r e s s i o n s . F o r each o c c u p a t i o n t h e number of o b s e r v a t i o n s , t h e mean s a l a r y , t h e c o n s t a n t term and t h e c o e f f i c i e n t s of the 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 are shown. I n b r a c k e t s i m m e d i a t e l y below each c o e f f i c i e n t i s shown t h e s t a n d a r d e r r o r of t h e c o e f f i c i e n t . I m m ediately below t h i s i s t h e F~ p r o b a b i l i t y , where F i s a s t a t i s t i c c a l c u l a t e d by d i v i d i n g 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 e r r o r and s q u a r i n g t h e r e s u l t i n g term. T h i s i s t h e p r o b a b i l i t y of o b t a i n i n g a v a l u e of F g r e a t e r t h a n o r e q u a l t o t h e one c a l c u l a t e d , g i v e n t h a t t h e c o e f f i c i e n t i s a c t u a l l y z e r o . At t h e f a r r i g h t hand s i d e of t h e t a b l e , t h e v a l u e 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 d e t e r m i n a t i o n , i s g i v e n 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 e r r o r of t h e e s t i m a t e . As e x p l a i n e d i n Ch a p t e r 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 r e q u i r e m e n t s and c a p i t a l l a b o u r v a r i a b l e s - 65- - 66 n e c e s s i t a t e d t h e d r o p p i n g of one of them from t h e r e g r e s s i o n r u n s . Thus, t h e c a p i t a l r e q u i r e m e n t s v a r i a b l e does not appear i n T a b l e V I . R e g r e s s i o n s r u n w i t h t h i s v a r i a b l e i n p l a c e 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 . T a b l e V I I g i v e s t h e r e g r e s s i o n r e s u l t s f o r t h e runs 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 . The c o e f f i c i e n t s are 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 i n d u s t r y v a r i a b l e r u n . 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 c o n c e n t r a t i o n are shown when b o t h were r u n i n the same r e g r e s s i o n . The pr e s e n c e of one or two a s t e r i s k s 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^ or l°/o l e v e l on a, 2 - t a i l e d T - t e s t . TABLE VI MULTIPLE REGRESSION RESULTS SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL VARIABLES OCCUPATION N,M CONSTANT CONCEN-TRATION ADVER- TISING CAP/LAB GROWTH SOUTH AGE EDUCA- TION RURAL RSQ Accountants (Std. Err.) (F Prob) 100, + 977.4 7208 (2126.1) - 1.80 (15.33) (.8733) - 10470. (19610.) (.6013) 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) - 61.1 (459.7) ( .8640) .2854 (1846.) Chemists 1,3, - 2097. 7503 (3081.) + 7.91 (32.27) (.7945) + 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.) Draftsmen 114, + 576.8 6389 (1807.) + 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.) Industrial Engineers 58, + 50.29 8145 (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.) Mechanical Engineers 110, - 1063. 9494 (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.) TABLE VI MULTIPLE REGRESSION RESULTS SALARY RELATED TO 4 INDUSTRY AND 4 PERSONAL VARIABLES OCCUPATION N,M CONSTANT CONCEN-TRATION ADVER- TISING CAP/LAB GROWTH SOUTH AGE EDUCA- TION RURAL RSQ Accountants (Std. Err.) (F Prob) 100, + 977.4 7208 (2126.1) - 1.80 (15.33) (.8733) - 10470. (19610.) (.6013) 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) • 61.1 (459.7) (.8G40) .2854 (1846.) Chemists 53, - 2097. 7503 (3081.) + 7.91 (32.27) (.7945) + 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.) Draftsmen 114, + 576.8 6389 (1807.) + 24.69 (12.33) (.0452) + 18330. (20510.) (.3773) .4221 (5.29) (.8957) - 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.) Industrial Engineers 58, + 50.29 8145 (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.) Mechanical Engineers 110, - 1063. 9494 (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 (42.00) (.0171) + 523.0 (280.2) (.0616) -2180. (1272.) (.0858) .1107 (3972.) Sales Engineers 25, -15750. 11950 (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, -15540. 9520 (9715.8) +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.) - 69 - TABLE V I I REGRESSION RESULTS FOR UNIONIZATION OCCUPATION A c c o u n t a n t s Chemists D r a f t s m a n I n d u s t r i a l E n g i n e e r s M e c h a n i c a l E n g i n e e r s S a l e s E n g i n e e r s E n g i n e e r s (NEC) P e r s o n n e l and Labour R e l a t i o n s Workers P r o f . , Tech. and K i n d r e d Workers (NEC) •Managers, O f f i c i a l s and P r o p r i e t o r s Bookkeepers S e c r e t a r i e s S t e n o g r a p h e r s T y p i s t s Salesmen and S a l e s c l e r k s UNIONIZATION ALONE -10.97 +13.82" +24.03* +30.14 +17.10 -61.65 +66.23 -29.48 - 3.98 + 9-99 + 2.50 +12.35** + 1 . 9 2 +30.39** - 4.08 UNIONIZATION CONCENTRATION - 9.09 • 31 + 20.02 + 13.45 + 20.08 - 99.31 - 25.06 -105.9 -. 5.36 + 16.20 + .91 + .04 - 4.39 + 29.28 + 14.17 + . 23 - 1.16 + 15.17 - 15.37 + 2.28 +243.3 + 80.18 +180.22 + 14.74 - 19.1c + 6.68 + 23.04** + 21.83 + 11.75 - 71.25**

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