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Wage structure and the wage determining process for six British Columbia industries. Colli, Terry Ross 1970

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WAGE STRUCTURE AND THE WAGE DETERMINING PROCESS FOR SIX BRITISH COLUMBIA INDUSTRIES  by  TERRY ROSS COLLI B . A . , Brandon U n i v e r s i t y ,  1969  A THESIS SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE DEGREE OF MASTER OF ARTS .  i n the  Department of  Economics  We accept this thesis as conforming to the required standard  THE UNIVERSITY OF BRITISH COLUMBIA September, 1970  In  presenting  this  an a d v a n c e d  degree  the  shall  I  Library  f u r t h e r agree  for  scholarly  by  his  of  this  written  thesis at  the U n i v e r s i t y  make  that  it  purposes  for  freely  permission may  representatives. thesis  in p a r t i a l  is  financial  British for  for extensive by  gain  Department Columbia  shall  the  that  not  requirements  Columbia,  I  agree  r e f e r e n c e and copying of  t h e Head o f  understood  permission.  The U n i v e r s i t y o f B r i t i s h V a n c o u v e r 8, Canada  of  available  be g r a n t e d  It  fulfilment of  or  that  study.  this  thesis  my D e p a r t m e n t  copying  for  or  publication  be a l l o w e d w i t h o u t  my  ABSTRACT This thesis i s an attempt to combine two opposing arguments which have appeared i n the l i t e r a t u r e of labour economics for nearly 25 years. The analysis deals with the formulation of a c o l l e c t i v e bargaining model which yields some insight into the wage-determining process. The economic c r i t e r i a for a wage settlement proposed by J . T. Dunlop i n his  book, Wage Determination  Under Trade  Unions  }  are  combined  with the ' p o l i t i c a l ' or 'power' variables which A. M. Ross had advocated as the most important determinants of wages i n his  book,  Trade  Union Wage  The r e s u l t i s an analysis very s i m i l a r to that of recent bar-  Policy.  gaining theory studies. Six industries from the B r i t i s h Columbia economy are examined within the concept of the model developed. major part of the output of this region. tries,  These industries produce a The examination of these indus-  therefore, provides a key to the comprehension of the general  trends and forces at work i n the B r i t i s h Columbia labour market. The model attempts to discover the variables most s i g n i f i c a n t i n explaining the movement of wages i n each industry from 1948 to 1968. The variables examined represent a combination of the economic and p o l i t i c a l forces which are hypothesized to act upon the wage determination process. In a d d i t i o n , the thesis examines those industries i n the-context of a general wage structure.  It i s hypothesized that the existence of  such a structure plays a large role i n the wage determining,- process and  iii  has a s i g n i f i c a n t i n f l u e n c e upon t r e n d s i n the economic a c t i v i t y o f the province.  The end r e s u l t w i l l be an e x p l a n a t i o n o f the s i n g l e and c o l -  l e c t i v e wage movements o f these s i x i n d u s t r i e s . The  f i n d i n g s g e n e r a l l y support the t h e o r e t i c a l h y p o t h e s i s t h a t  the wage d e t e r m i n i n g p r o c e s s i s s u b j e c t t o b o t h p o l i t i c a l and economic forces.  Economic v a r i a b l e s a r e a b l e t o c o n f i n e wage s e t t l e m e n t s w i t h i n  a range.  The s i z e o f t h i s range a l s o depends upon economic f o r c e s .  W i t h i n the range, however, b a r g a i n i n g may i n v o l v e a m u l t i p l i c i t y o f criteria.  Both t h e u n i o n and the f i r m w i l l o f t e n choose some e a s i l y  o b s e r v a b l e c r i t e r i a upon which t o base wage s e t t l e m e n t s . attempts  t o determine The  T h i s study  the main c r i t e r i a chosen w i t h i n each i n d u s t r y .  c o n c l u s i o n s reached  show t h a t wage comparisons made among  i n d u s t r i e s by both workers and employers a r e a b l e t o e x p l a i n the l a r g e s t p a r t o f wage movements.  A b a r g a i n i n g t h e o r y model i s supported and  ample evidence o f a wage s t r u c t u r e which p l a y s an important the wage d e t e r m i n i n g p r o c e s s i s found.  role i n  TABLE OF CONTENTS Page  LIST OF TABLES . . -  V  LIST OF CHARTS  . . .  vi  Chapter I. II. III. IV. V. VI.  INTRODUCTION  . . . . . . . . .  1  THEORETICAL BACKGROUND  . . . . . . . . . . .  THE MODEL EMPIRICAL RESULTS  .  31 47  •.  . . . . . . . . . . . .  BIBLIOGRAPHY APPENDIX A . . . .  3  . . . . . . . . . . . . .  THE INTERINDUSTRY WAGE STRUCTURE A CONCLUDING SYNTHESIS  .  . .  76 82  85 91  CHARTS  92  TABLES . . . . . . . . . . . . . . . . .  iv  . . . . . . . . . .  94  LIST OF TABLES  Table I II  III  IV  V  VI  VII  VIII  IX  X  Page INDEX OF REAL VALUE-ADDED OUTPUT PER INDUSTRY  94  AVERAGE HOURLY WAGE RATES IN SIX BRITISH COLUMBIA INDUSTRIES, 1948-1968  95  COMPARISON OF THE WAGE BILL TOTAL OUTPUT RATIO AND AVERAGE HOURLY PERCENTAGE WAGE INCREASES FOR SIX BRITISH COLUMBIA INDUSTRIES, 1949-1967  96  WAGE DIFFERENTIAL BETWEEN TOP AND LOWEST WAGE INDUSTRIES 1949-1968 . . . .  97  ANNUAL PERCENTAGE RATE OF WAGE CHANGE FOR SIX BRITISH COLUMBIA INDUSTRIES, 1949-1968  98  CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN INDUSTRY WAGE CHANGES  99  CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN VALUE-ADDED OUTPUT PER MAN-HOUR CHANGES PER INDUSTRY . . . CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN EMPLOYMENT CHANGE PER INDUSTRY  100  .101  PERCENTAGE CHANGE IN EMPLOYMENT FOR SIX BRITISH COLUMBIA INDUSTRIES, 1949-1968  102  ANNUAL PERCENTAGE CHANGE IN VALUE-ADDED OUTPUT PER •'MAN-HOUR FOR SIX BRITISH COLUMBIA INDUSTRIES, 1949-1968  103  v  LIST OF CHARTS  Chart I II  Page REAL VALUE-ADDED OUTPUT PER INDUSTRY, 1948 - 1968 . . . .  92  AVERAGE HOURLY WAGE RATE PER INDUSTRY  93  vi  A C K N O W L E D G E M E N T  I would l i k e to take this opportunity to express my gratitude to Dr. Stuart Jamieson, without whose patient help this thesis would never have been possible.  In addition, Drs. Roslyn Kunin and Curtis  Eaton have given many useful comments.  Mr. C. Perry of the  Inter-  national Woodworkers of America, and Mr. C. M i t c h e l l of the B r i t i s h Columbia Mining Association were kind enough to explain various of their industries  aspects  to me.  This thesis was financed by grants from the Industrial  Relations  Institute of the University of B r i t i s h Columbia and the Economics and Research branch of the Canadian Department of Labour.  -,vii  CHAPTER I INTRODUCTION The determination of the payment to the factor labour has always been more or less a theoretical n i c e t y .  An exact wage rate is reached  by use of theoretical models, but more recent attempts to modernize wage theory by introduction of labour unions and employer associations into the analysis has caused the precise methods of e a r l i e r theories to break down.  Sociological and human r e l a t i o n factors which attend this analysis  elude such p r e c i s i o n . The attempt to introduce c o l l e c t i v e bargaining procedures  into  neoclassic marginal productivity theory has created a debate as to whether the p o l i t i c - s o c i o l o g i c forces attending such procedures are able to cause wage settlements different  than those which would have resulted from eco-  nomic forces alone. . A labour market i n which c o l l e c t i v e bargaining practiced i s often referred to as being i n s t i t u t i o n a l i n operation.  is For-  ces are grouped around the leadership of the union on the one hand and the management team on the other. i n such a market.  Government action i s not unheard of  The nature of the market no longer approaches the i n -  d i v i d u a l i s t nature assumed i n c l a s s i c a l  theory.  For this reason alone  i t should be expected that wage determination i n an i n s t i t u t i o n a l w i l l d i f f e r from the o r i g i n a l theoretical r e s u l t s .  setting  This thesis i s an  attempt to examine both of these sets of forces — economic and sociol o g i c ^ p o l i t l c within the context of the B r i t i s h Columbia labour market. 1  2  Debate has more recently centred p a r t i c u l a r l y on whether the i n s t i t u t i o n a l i z a t i o n of the labour market leads to wages which d i f f e r s i g n i f i c a n t l y from what they would have been were market forces alone to p r e v a i l .  On this subject the findings are somewhat less certain due  to the examination only of industries which are unionized to a high degree.  Non-unionized industries and industries of low degrees of union-  i z a t i o n lack the s t a t i s t i c s required for comparison with the industries analyzed here.  Very often wage data are non-comparable since non-unionized  workers often receive discount prices and other fringe benefits which are not easily compared across industries.  In addition the fact that many non-union-  ized firms h i r e fewer than 15 employees means that D.B.S. s t a t i s t i c s (which exclude firms of less than 15 employees) Nevertheless  are doubtful as to accuracy.  the results found are believed to be s i g n i f i c a n t .  In addition  the findings lead to the proposal of a synthesis of the economic-politic arguments which, i f properly developed, w i l l allow a much more f r u i t f u l analys i s of the subject of wage determination i n the future. F i r s t , the main body of l i t e r a t u r e on the question w i l l be examined and then a model which may be tested on the B r i t i s h Columbia economy w i l l be developed.  CHAPTER II THEORETICAL BACKGROUND I n s t i t u t i o n a l wage theories began to appear.in the early 1900's. They were a response stimulated by the rapid growth of unions during the early twentieth century.  It was not u n t i l the mid-1940's,  the heated debate arose as to whether economic or  howeverj  'political-power'  that var-  iables were more important i n the formulation of a wage r a t e . J.  T. Dunlop's book, Wage Determination  Under Trade  Unions,^  published i n 1944, served as chief proponent of the argument that wage determination was largely the result of economic forces.  The union was  viewed as an economic enterprise faced with a set of demand and supply functions.  It was regarded as a maximizer of some goal for those em-  ployed i n the industry i n which"the union i s organized — goals such as the volume of employment provided i t s membership; the t o t a l wage b i l l of those employed; the t o t a l earnings of the workers (including public payments to the unemployed); the average earnings per unit of labour; or more narrowly, the average earnings of those who control the union,  i.e.,  those with s e n i o r i t y . It should be noted that Dunlop saw the union leadership being faced with a choice between several different demand and supply functions.  J.  T. Dunlop, Wage Determination  Augustus M. K e l l y ) , reprinted 1966.  3  Under Trade Unions  (New York:  4  In  addition there were  "perceived  functions  (that i  , what the union be-  s  lieved to be the relationship between certain variables) and  actual  tions which might not be accurately observed by the leadership.  func-  He con-  cluded that : "the most suitable generalized model of the trade union for a n a l y t i c a l purposes i s probably that which depicts the maximization of the wage b i l l for the t o t a l membership.11 2 The  Dunlop analysis i s perhaps best i l l u s t r a t e d by A l l a n  Cartter's  3 account of trade union a c t i v i t y .  Cartter demonstrates that the trade  union — i f assumed to be a maximizer of some p o l i c y — may be introduced into marginal productivity analysis.  In addition, he shows that techno-  l o g i c a l factors w i l l affect the shape of the labour demand curve. result might be a demand curve far different  The  from the near perfectly elas-  t i c one assumed i n neoclassic theory. Cartter also adopts the analysis of 4 5 6 Edward Chamberlin, Joan Robinson and Paul Sweezy to demonstrate that market structure may also affect the demand curve for labour and allow wages to r i s e without the corresponding f a l l i n employment which was i n dicated by marginal productivity analysis.  ment  2 Dunlop, op. cit.3 p. 44. 3 A. Cartter and F. R. Marshall, Labour Economicd: Wages, Employand Trade Unionism (Homewood, 111.: Richard D. Irwin, I n c . , 1967). 4  Edward Chamberlin, The Theory of Monopolistic bridge, Mass.: Harvard University Press, 1933). ~*Joan Robinson, Macmillan, 1933).  Readings  The Economics  of Imperfect  Competition  Competition  (Cam-  (London:  Paul Sweezy, "Demand Under Conditions of O l i g o p o l y , " i n A.E.A. Theory (Chicago: R. D. Irwin I n c . , 1952).  in Price  5  In. neoclassical  terms the demand curve of the firm for the fac-  tor r e s u l t s from a relationship between the quantity of the factor employed and i t s product.  Cartter emphasizes that the demand for labour  i s a r e f l e c t i o n of the demand curve for the product i n the product market.  It i s therefore to be expected that the type of market i n which  the industry i s situated, becomes s i g n i f i c a n t  i n determining the wage  rate. "The marginal product curve i s the demand curve for labour. . . i t indicates to the employer the increment of product which w i l l be added by the employment of another unit of labour; i t measures the .[:real] value of the marginal employee to the f i r m . " 7 To translate this demand curve from r e a l into money terms,  the  extra product of a unit of labour i s multiplied by the marginal revenue, that i s ,  the d o l l a r value generated by the sale of the extra output.  The demand curve for the firm's product w i l l depend upon the type of market i n which i t operates: or i n e l a s t i c monopoly).  i t may be e l a s t i c (perfect competition)  to varying degrees (imperfect competition^, oligopoly, or The type of product market i n which the firm operates w i l l  therefore affect the marginal revenue generated for the firm by the sale of the extra product — and i t i s the marginal revenue product which ultimately forms the demand curve for labour and helps to determine the money wage rate. Cartter i s then able to use Dunlop's analysis to show how the union may attempt to manipulate the supply curve according to the market  Cartter and Marshall, op. cit., p.  247.  6  i n w h i c h the l a b o u r i t i s concerned w i t h i s s o l d i n order to a c h i e v e i t s goal. of  The use of a monopoly model of the f i r m  o l i g o p o l y ) shows scope f o r u n i o n o p e r a t i o n s .  (or the s p e c i a l  case  In F i g u r e 1 the demand,  s u p p l y and m a r g i n a l demand and s u p p l y curves f o r l a b o u r are'Tgiven.  The  c u r v e D r e p r e s e n t s the f i r m ' s demand curve f o r l a b o u r ( i . e . , the m a r g i n a l revenue product c u r v e ) , as has a l r e a d y been e x p l a i n e d . for  The s u p p l y curve  l a b o u r must be regarded as l e s s than p e r f e c t l y e l a s t i c  r e l a t i v e l y l a r g e i n a l o c a l or r e g i o n a l market.  i f the f i r m i s  In t h i s case the m a r g i -  nal  c o s t of l a b o u r to the f i r m i s g r e a t e r than the wage p a i d to the m a r g i -  nal  man  since raising  increasing  the wage l e v e l  to a t t r a c t an e x t r a worker i n v o l v e s  the wages of a l l o t h e r workers as w e l l .  Thus the p r o f i t - m a x i -  m i z i n g f i r m w i l l attempt to s e t employment where the added c o s t s a s s o c i * ated w i t h employment expansion  ( i . e . , m a r g i n a l l a b o u r c o s t ) equal the  added revenue generated by the output of the m a r g i n a l employers  (i.e.,  m a r g i n a l revenue p r o d u c t ) .  Employment s e t by the employer w i l l  f o r e be a t E^ i n F i g u r e 1.  The wage l e v e l p a i d , however, w i l l be  s i n c e t h a t i s the wage n e c e s s a r y to c a l l  there,  f o r t h E^ workers a c c o r d i n g to  the l a b o u r s u p p l y f u n c t i o n . I f , on the o t h e r hand, the union i s regarded as a m o n o p o l i s t w i t h the o b j e c t i v e of maximizing some g o a l , such as the r e n t a c c r u i n g to  l a b o u r , then employment w i l l be s e t where the s u p p l y of u n i o n i z e d  labour  (S i n F i g u r e 1) , w h i c h is. regarded as a m a r g i n a l c o s t curve by  the u n i o n , equals the m a r g i n a l demand curve f o r l a b o u r  (MD).  g i n a l demand c u r v e i s m a r g i n a l to the m a r g i n a l revenue product  T h i s marcurve.  I t r e p r e s e n t s the e x t r a revenue w h i c h t h e u n i o n as a m o n o p o l i s t i c s e l l e r  Figure x.  7  of labour would expect to earn from the " s a l e " of an extra unit of l a b our . The employment l e v e l which the union would set i f all-powerful would be at E with a wage rate W . u u for  labour curve, D, indicates  This i s the wage which the demand  the firm would be w i l l i n g to pay for E^ g  labour.  At this wage unionized labour rent would be maximized. In actual bargaining neither the union nor the firm has complete  bargaining power.  The r e s u l t is a b i l a t e r a l monopoly theory i n which a  bargaining range of W - W or W - W occurs. u r Wo £ that .the precise wage rate w i l l normally l i e .  It i s within this range It should also be noted  that the union i s capable of achieving a higher wage without a necessarily large s a c r i f i c e of employment. A s o l i d analysis of how the union attempts or could attempt to manipulate the supply curve of labour i n the long-run i s never given. Of  course allusions are made to closed shops, r a c i a l discrimination or  some other method of politically  l i m i t i n g supply.  But this does not sat-  i s f y Dunlop's contention that the wage rate i s generally economically determined.  A l a t e r a r t i c l e by Dunlop written i n c r i t i c i s m of the neglect  If the union's goal is regarded to be that of maximizing the t o t a l wage b i l l then union negotiators w i l l attempt to set unemployment at E ^ (Fig. 1) where the marginal demand curve for labour intersects the empYoyment axis (abscissa). This i s analogous to a s e l l e r who regards his marginal costs to be zero. Total revenue w i l l therefore be maximized where unit e l a s t i c i t y of the demand curve for labour e x i s t s ; this is the case when the marginal demand curve i s zero. The wage rate which the firm would be w i l l i n g to pay for this amount of labour i s W . A bargaining range of W exists i n this case. An interesting case i s shown i n Figure 2 where the union, i f i t  8  of the supply of labour function by n e o c l a s s i c i s t s i s unsatisfactory this point as w e l l .  on  His analysis, which concludes that "the work force  tends i n important respects to adapt i t s e l f  to a long-established  rate  9  structure of key jobs" classical  does not d i f f e r substantially  from t r a d i t i o n a l  analysis.  The capacity of the union to manipulate labour supply i n the short-run and influence i t i n the long-run cannot be ignored.  Methods  r e s t r i c t i n g the supply for a few days or weeks can be highly  effective,  especially i f the leadership  is very sensitive to correct timing.  In  the long-run general knowledge i n the labour market of the d i f f i c u l t y experienced i n j o i n i n g the union ( i f a closed shop exists) or of being hired ( i f union-controlled h i r i n g occurs) w i l l deter prospective workers from applying for jobs.  In addition unions have played a s i g n i f i c a n t  role i n developing c r i t e r i a for new h i r i n g ( e . g . , r a i s i n g the required experience l e v e l , educational standards. As shown e a r l i e r , Dunlop's analysis e s s e n t i a l l y b i l a t e r a l monopoly model or some variant thereof,  reduced to a  i n which the firm,  pursues a t o t a l wage b i l l maximization goal, w i l l bargain for a wage rate lower than the rate which the firm would be w i l l i n g to offer as a result of market forces alone! Such occurrences are, of course, never found i n c o l l e c t i v e bargaining h i s t o r y . It would be p o l i t i c a l suicide for a union leaderirto propose a wage decrease, for while the decrease may result i n a net i n crease of welfare for the union membership as a whole, i t c e r t a i n l y w i l l be contrary to i n d i v i d u a l employee welfare. 9  J . T. Dunlop (ed.), The Macmillan and C o . , 1964), p. 24.  Theory  of Wage Determination  (London:  9  attempting to maximize p r o f i t s ,  provided the demand curve for labour, and  the union, attempting to maximize the t o t a l wage b i l l of i t s members or pursuing some other g o a l ( s ) , manipulated the labour supply curve."^  Union  negotiators must, however, keep i n mind both wage and unemployment l e v e l s . A high wage p o l i c y cannot be pursued with utter disregard for employment and consequent union membership d e c l i n e .  Neither i s the opposite policy  feasible. The  question which now arises i s :  has this c a p a b i l i t y of the  union to manipulate and influence the supply of labour curve led to the determination of the wage rate by variables The  other than the economic ones?  Dunlop model sees the wage rate as being e s s e n t i a l l y  sult of supply and demand v a r i a b l e s ,  and shows the r e s u l t i n g wage rate to  be economically determined within some range. y i e l d i n g an exact wage r a t e .  the r e -  The model i s i l l - s u i t e d to  As was demonstrated i n Figure 1, the exact  location of the wage rate w i l l depend upon the extent to which either side i s capable of manipulating the demand and supply curves as seen i n the minds of i t s In  opponents.  later writings Dunlop outlined the variables he considered to  be most important i n wage determination."'""'" mand v a r i a b l e s .  Again, these are c h i e f l y de-  The major variable chosen i s p r o d u c t i v i t y .  As can be  seen from Figure 1, the marginal revenue product curve is the demand curve for  labour.  op. cit.  3  ployment W.  In the case of near-perfect  competition the marginal revenue  For precise development of this model, see Cartter and Marshall, pp. 296-98. J.  T. Dunlop, "Productivity and the Wage Structure,"  and Public  Policy:  Essays  W. Morton and C o . , 1948), p.  342.  in Honour of Alvin  H. Hansen  Income,  Em-  (London:  10  product c u r v e d i f f e r s l i t t l e the use  from the average v a l u e p r o d u c t c u r v e .  Thus  of average v a l u e output per man-hour as an approximate measure  of demand f o r l a b o u r w i l l be p e r f e c t l y competitive.  correct  i f the i n d u s t r i e s examined a r e  Moreover, Dunlop has  l a t i o n s h i p between wage and  not  i n s i s t e d that  " p r o d u c t i v i t y " changes be hard and  the  nearre-  fast.  He  adds: " i n d u s t r i e s w i t h more than average g a i n s i n p r o d u c t i v i t y i n c r e a s e wage and s a l a r y r a t e s somewhat more than average. In i n d u s t r i e s w i t h l e s s than average p r o d u c t i v i t y wage r a t e s would i n c r e a s e somewhat l e s s than a v e r a g e . " In a d d i t i o n  the r e l a t i o n s h i p  d u c t i v i t y , wages, p r i c e s , p r o f i t s and pending upon the  firm's  wage changes are  l i k e l y to be  d i t y i n the market, the If  of the  productivity  reflected i n either  wage i n c r e a s e s  increases,  ployment as o t h e r f a c t o r s are  the p r i c e of  substituted  c i t y of demand would need to be  type of a n a l y s i s has  by  both.  that  either a r i s e i n price  i n labour's place o r , as  employment d e c l i n e ,  in  em-  (depending  i s more l i k e l y , since  p e r f e c t l y i n e l a s t i c f o r no  output to r e s u l t from a p r i c e  the  fall  elastii n demand-  rise. further  implications  f o r those who  a t t e m p t i n g to determine whether i n f l a t i o n i s demand-pull or character.  De-  the commo-  production costs, a f a l l  e l a s t i c i t y of s u p p l y of o t h e r f a c t o r s )  This  explored.  are g r e a t e r than  t h e r e w i l l be  increased  some combination of p r i c e r i s e and  ed  market power must be  employment of l a b o u r i n i t s p r o d u c t i o n , or  commodity to cover the  upon the  i s l i k e l y to e x i s t between p r o -  market power, p r o d u c t i v i t y changes not matched  the market i s i m p e r f e c t , and  warranted by  that  I f the r e a s o n i n g i n Dunlop's a n a l y s i s  are  cost-push i n  i s c o r r e c t , one  could  11  conclude that i f price increases follow the wage increase, i n f l a t i o n may be claimed.  cost-push  On the other hand, i f wage increases were  found to follow price increases a charge of demand-pull i n f l a t i o n is l i k e l y to be l a i d . for  Whether wage changes follow the change i n demand  the output of an industry or demand follows wage changes i s im-  possible  to determine casually.  A look at the l i t e r a t u r e on this  subject leads one to reach conclusions not much more definite empirically. As  a development of the b i l a t e r a l monopoly theory mentioned  e a r l i e r , Dunlop has suggested that the smaller the r a t i o of labour costs to t o t a l costs, the higher we should expect the rate of wage increase to be.  It i s obvious that i f the union were to demand higher wages and  threaten to back such a demand by short-term withdrawal of.supply, then the increase i n costs to the industry from the higher t o t a l wage b i l l would be very small i n proportion to the p o t e n t i a l loss i f a shutdown were to occur. At  approximately the same time that Dunlop was arguing i n  favour of an economic analysis of wage determination i n an i n s t i t u t i o n al  setting,  another group of writers was attempting a much more s p e c i f i c 12  analysis  of  of wage determination based on p o l i t i c a l elements  A. M. Ross, Trade C a l i f o r n i a Press, 1948).  Union Wage Policy  (Berkeley:  and a bar-  University  12  gaining theory analysis"^' general welfare The who  ' ^  based on indifference curves and  theory.  use of the word " p o l i t i c a l " often serves to confuse those  are unfamiliar with the c o l l e c t i v e bargaining process.  The conven-  t i o n a l use of the word " p o l i t i c a l " is associated with government i n t e r vention.  In c o l l e c t i v e bargaining terms, however, the word " p o l i t i c a l "  i s used to refer to the i n t e r n a l i n s t i t u t i o n a l forces which operate within  the union or firm.  The attempt by union leaders, for  of  status or prestige, to make a wage settlement better than those made  by unions i n related i n d u s t r i e s ,  is essentially  considerations  "political."  The pres-  sures from other employers put upon a management bargaining team i n a key  industry to r e s i s t making a wage settlement  that i s "out of l i n e "  with recent trends, i s likewise " p o l i t i c a l . " It is within this context that Arthur Ross introduces  the  Trade  " p o l i t i c a l " forces of wage determination i n his now c l a s s i c book,  Union Wage Policy.  Ross, foremost among the " p o l i t i c a l " t h e o r i s t s ,  agrees sharply with the Dunlop analysis,  arguing:  13  Review, poly  J. Pen, "A General Theory of Bargaining," V o l . XLII, No. 1 (March, 1952), pp. 24-42. "^F.  American  Zeuthen, "Economic Theory and Method," i n Problems of MonoWelfare (New York; Augustus M. K e l l y , reprinted 1968), "'  :  "^B,  Relations  Mabry, "The Pure Theory of Bargaining," Review, V o l . 18, No. 4 (July, 1965).  Industrial  "^R. B. McKersie and R. E. Walton, "Communications: Bargaining," and B. Mabry, " R e p l y , " i n Industrial and Labor Review, V o l . 19, No. 3 ( A p r i l , 1966). of  Economic  and Economic  Chapter 57."  Labour  dis-  and The Theory  Relations  13  "It is a commonplace that wage rates are now determined by conscious human decision rather than by impersonal market forces. . . " 17 and concluding: "a trade union i s a p o l i t i c a l agency operating i n an economic environment." 18 Ross recognizes  that while the union operates i n an economic 19  environment, " i t i s probably least  suited to purely economic  analysis."  Dunlopian analysis i s required to regard the union as the maximizer of. some economic goal —- and f i n a l l y s e t t l e s on the t o t a l wage b i l l .  Ross  argues that i f the union is to be assumed to maximize anything, i t should be assumed to maximize the general welfare of the organization.  This i n -  cludes many variables other than purely economic ones. "The economic environment i s important to the unions at the second remove: because i t generates the p o l i t i c a l forces which have to be reckoned with by union l e a d e r s . " 20 It then becomes Ross' central contention that when formulating a model of wage determination, p o l i t i c a l rather than economic relationships should be given primary importance. union i s formed i s p o l i t i c a l :  The very foundation upon which the ,.  i t i s an attempt to offset the power of em-  ployers that was recognized by Adam Smith when he wrote:  1  ^ A . M. Ross, op. cit,,  ^Ibid., ^Ibid, ^Ibid.,  j  p.  12.  p.  7.  p.  14.  p. 4.  14  "Masters are always and everywhere i n a sort of t a c i t , but constant and uniform combination not to raise the wages of labour above t h e i r actual rate." 21 It should also be noted that the r e l a t i v e success and strength of the union w i l l depend to some large extent upon the p o l i t i c a l and s o c i a l homogeneity of the union.  The degree to which union members are able  to unite to form a s o l i d front behind their leaders w i l l influence the success of their demands. such circumstances  Their a b i l i t y to agree i n turn depends upon  as v a r i a b i l i t y i n t h e i r s o c i a l backgrounds.  For a  union to be i n i t i a l l y formed requires some degree of p o l i t i c a l and s o c i a l cohesion; further demonstrations  of unity may often be necessary  as well for some degree of success i n making management respect the union's demands. On  the other hand, the heterogeneity of forces operating with-  in the organization leads to varying pressures to be placed upon the union leaders.  These leaders must i n some way manage to translate the various  member demands (some of which w i l l require definite trade-offs between one another) into a t o t a l wage p o l i c y .  Ross claims that the ultimate  goal of the leadership becomes the s u r v i v a l and growth of the union. is  It  to this that he refers when he states that the leaders' function is  to  maximize the general welfare of the union. This conclusion i s at odds with Dunlop's maximization theory. Instead of attempting to maximize some economic goal or goals, Ross main-  J.  Adam Smith i n T. Dunlop, p. 74.  Wage Determination  Under Trade  Unions,  op.  cit.,  15  tains that unions may make demands of less than the maximum obtainable because the membership i s unwilling to go to the lengths necessary to win  such goals.  At other times the leaders may be required to issue  demands which they know to be impossible to f u l f i l l , the membership demands i t .  simply because  In such an instance s t r i k e action w i l l be  22 inevitable. Melvin Reder has attempted to combine various aspects of the Ross and Dunlop arguments. Reder claims: "The formal theories of union behaviour expounded by Dunlop (income maximization) and Ross ( p o l i t i c a l theory) are not of great h e u r i s t i c value i n explaining union wage behaviour, as both of them are so gene r a l as to be compatible with almost any kind of actual union wage p o l i c y . " 23 Reder demonstrates why the use of "wage patterns" i s useful a general method of wage determination.  It i s useful both to the union  leader — who must constantly compare his settlement in  as  to that of others  an attempt to j u s t i f y his actions — and useful to the management  team who must j u s t i f y  their procedures to the rest of the business commu-  n i t y , and whose p r i c i n g policy i s often one of emulation.  Reder points  out that the theory of competition maintains wage equality i n the longrun;  i n this sense the use of comparison methods i n wage setting are a  p r a c t i c a l application of such a trend.  In addition the objective of  "equity" and " f a i r treatment" i s more easily "determined by comparison  Ross, op.  Economics  M.  cit.,  p. 43.  W. Reder, "The Theory of Union Wage P o l i c y , " Review V o l . XXXIV (February, 1952), p. 45,  and Statistics,  of  16  with the treatment of other parties i n approximately similar  circumstances  In this manner, c r i t e r i a for wage demands and offers are established which while never equal, are s i m i l a r and easily recognized by both sides. Reder then adds a constraint from Dunlop's  analysis:  "Those wage patterns which p e r s i s t w i l l tend to be those which are compatible with the economic surv i v a l conditions of the firms involved, while those which are incompatible with these conditions w i l l be terminated — one way.or another." 25 Thus Reder maintains that short-^run analysis may demonstrate that most c o l l e c t i v e bargaining arguments are pattern-determined, while i n the long-run, i t i s the economic factors:which are r e a l l y important, for  they ultimately determine the s u r v i v a l or death of the firms, and i n  many cases, of unions. Economic forces establish  a wage range within which bargaining  may take place and a wage rate may be determined on any c r i t e r i a whatsoever.  Firms usually earn some amount of economic rent ( i . e . , income over  and above that necessary for operation at a normal rate of return).  It  is the d i s t r i b u t i o n of this rent about which the union and firm bargain. The amount of rent accruing to a firm w i l l depend upon i t s a b i l i t y to compete with other firms.  The a b i l i t y of the firms to pass  on increased labour costs w i l l often be a key factor i n determining how large the bargaining range w i l l be.  Unions may therefore attempt by  p o l i t i c a l and economic means to increase the a b i l i t y of firms to pass on wage increases.  Reder, op. cit., p. 39.  'ibid.,  p. 40.  17  Reder s t r e s s e s t h a t i t i s i n d u s t r i e s i n which l a b o u r are a minor p a r t o f t o t a l c o s t s t h a t the wage b a r g a i n i n g  range i s a p t  to be wide, s i n c e a l a r g e percentage i n c r e a s e i n u n i t l a b o u r can be covered by s m a l l i n c r e a s e s  costs  costs  i n the p r i c e of the p r o d u c t .  F i n a l l y , Reder examines the degree of response o f u n i o n wage demands t o employment c o n d i t i o n s — he  concludes,  an economic determinant.  The response,  w i l l be i n f l u e n c e d by p o l i t i c a l f a c t o r s such as the power  of those w i t h i n the unions who a r e unemployed, or the views o f the l e a d e r s as t o the d i f f i c u l t y  o f r e - e s t a b l i s h i n g the wage s c a l e t o a p r e - r e c e s s i o n  l e v e l a f t e r the r e c e s s i o n i s ended. Thus Reder has begun a . s y n t h e s i s which w i l l be f u r t h e r developed  i n t h i s paper. Ross' a n a l y s i s makes use o f a u t i l i t y  u n i o n and employer, i s regarded as h a v i n g  concept.  a utility  Each u n i t ,  function.  This  func-  t i o n i s composed o f s e v e r a l v a r i a b l e s v i t a l t o the m a x i m i z a t i o n of the welfare  o f each.  The f u n c t i o n w i l l i n c l u d e n o t only economic v a r i a b l e s  such as the change i n output p e r man hour and change i n employment, b u t " p o l i t i c a l " v a r i a b l e s as w e l l .  The p r e v a i l i n g wage r a t e i s the r e s u l t  of i n t e r a c t i o n of these two f u n c t i o n s w i t h i n a b a r g a i n i n g The  difficulty  i n developing  a utility  zone.  f u n c t i o n f o r the p a r t i e s  hinges upon the i m p o s s i b i l i t y of measurement of s e v e r a l o f the v a r i a b l e s : what degree o f p a i n w i l l an employer e x p e r i e n c e degree o f p a i n w i l l utility having  the employees e x p e r i e n c e ?  of l o s s of s a l a r y d u r i n g open c o n f l i c t w i t h  because o f a s t r i k e ? To what e x t e n t w i l l  What  the d i s -  the s t r i k e be o f f s e t by the p l e a s u r e of  the employer?  To what e x t e n t w i l l  of i n c r e a s e d power f o r the u n i o n l e a d e r s h i p add t o u t i l i t y ?  the a c q u i s i t i o n To what  extent  18  i s an employee i n one  industry  comparable to an employee of another,  therefore,  to what e x t e n t a r e t h e i r wages to be  disutility  to be  compared, and  e x p e r i e n c e d when they f o l l o w d i f f e r e n t  In a d d i t i o n to problems of measurement we bility  of the  therefore points  function.  Utility  utility  the u t i l i t y  or  patterns?  encounter a  flexi-  i s v e r y much a p s y c h o l o g i c a l matter  as a t t i t u d e s change, so w i l l  and,  function.  As  and  Ross  out: "At times he [the employee] i s not sure what makes a l e g i t i m a t e comparison, and needs guidance on the p o i n t ; t h i s i s the one source of moral a u t h o r i t y enjoyed by the union leader." 26  Attempts to f o r m u l a t e a theory of b a r g a i n i n g f i e d however, on  the b a s i s  the p r i c e of one  key  of the economy — The uring u t i l i t y , will  are:  basing  f a c t o r of p r o d u c t i o n  t h a t i n f l u e n c e d by  measurement problem may  trade  i s formed i n a l a r g e  justihow  section  unions.  be overcome, i f , i n s t e a d of meas-  an attempt i s made to d i s c o v e r measurable v a r i a b l e s which function.  Examples of such v a r i -  comparisons among employees i n s i m i l a r or i d e n t i c a l j o b s ,  of wage demands on the l e v e l of p r o f i t s ,  and  from the h i s t o r y of s t r i k e a c t i o n i n the i n d u s t r y . measurable and may t i o n s of f i r m and The rates —  terms are  t h a t i t i s e s s e n t i a l to know p r e c i s e l y  enable a p r e d i c t i o n of the u t i l i t y  ables  in utility  be  formed  Each of the  above i s func-  negotiators.  f i r s t v a r i a b l e mentioned —  the  comparison of j o b s  f i t s i n w i t h the a n a l y s i s of a p o l i t i c a l  Ross, op.  expectations  used to g i v e an a p p r o x i m a t i o n of the u t i l i t y  union  the  c i t . j p.  51.  v a r i a b l e being  and wage flexible  19  and  d i f f i c u l t to measure.  It i s Ross' contention that there exist cer-^  tain key industries i n the economy which, because of a certain combination of  various conditions, are able to act as wage leaders.  This results  in a  whole hierarchy of wage rates. Wages become structured,and interdependent, and  as a result move together.  tries'  and the rest of the structure becomes based upon comparability of  jobs across i n d u s t r i e s . any  The relationship between the 'key indus-  In addition, the relationship of the wage rate i n  one industry under examination to the whole economy i s of prime impor-  tance. Thus the demands by unions for wage settlements similar to those settlements In  are found to be  previously received i n comparable industries.  addition, studies find that employers and arbitrators  recognize the wage  structure as w e l l .  Offers by employers and recommendations by a r b i t r a t o r s ,  to a large extent,  r e f l e c t wage settlements which have been made i n the most 27  comparable industry ( i e s ) . The tical. one.  operation of such a variable must be regarded as being p o l i -  The influence exerted upon the wage rate i s not a purely economic In fact i t w i l l often, as i s demonstrated i n Chapter IV, encourage  industry wage movements different than those based on economic conditions alone.  A study by Irving Bernstein discovered that of 395 wage c r i t e r i a c i t e d by unions during 195 a r b i t r a t i o n board meetings, 49.7 per cent referred to wage comparisons. Of 280 c r i t e r i a cited by management, 43.9 per cent were wage comparisons; 59.6 per cent of a r b i t r a t o r decisions i n 114 cases were based upon wage comparisons. (Cited i n Jules Backman, Wage Determination [New York: D. Van Nos tr and Co. I n c . , 1959],pp. 18-19.  20  A l e v e l of p r o f i t s variable i s probably the most d i f f i c u l t to envisage as being a p o l i t i c a l determinant of wages.  There i s some d i f f i -  culty since p r o f i t s are included i n several studies as an indicator of 28 demand.  Edwin Kuh has argued that i n an economic equation of wage 29  determination, p r o f i t s areva proxy for average output per man-hour. In  agreement with Kuh an argument for t h e i r i n c l u s i o n i n a bargaining  theory equation can be made on the basis that the l e v e l of p r o f i t s may serve as more than merely an indicator of demand.  A union i s to some  extent concerned with equity and during i t s operation attempts to r e d i s t r i b u t e income.  Therefore, to the union the l e v e l of p r o f i t s  as some indicator of the c a p i t a l i s t ' s  share.  serves  Upon this concept of equity  union negotiators w i l l argue for an increase i n wages i n order to maintain or  increase labour's share of output. Both Ross and Dunlop developed their analyses with the almost  t o t a l exclusion of that of the other. 25 years each made concessions,  Occasionally throughout the past  allowing that variables other than those  See: Richard Rippe, "Wages, Prices and Imports i n the American Steel Industry," Review of Economics and Statistics, V o l . LII (February, 1970), pp. 34-46; 0. Eckstein and T. A. Wilson, "The Determination of Money Wages i n American Industry," Quarterly Journal of Economics, V o l . LXXIV(August, 1962), pp. 379-414; G. L. Perry, Unemployment, Money Wage Rates and Inflation (Cambridge, Mass.: M . I . T . Press, 1966); R. J . Bhatia, " P r o f i t s and The Rate of Change i n Money Earnings i n the United States, 1953-1959; Economica, V o l . XXIX (August, 1962), pp. 255-62.  Edwin Kuh, "A Productivity Theory of Wage Levels — An A l t e r native to the P h i l l i p ' s Curve," Review of Economic Studies, V o l . XXIV, (October, 1967), pp. 333-60.  21  of  the nature s p e c i f i c a l l y developed by themselves may have a s i g n i f i c a n t  influence upon the wage-determining process.  The truth of the matter  is  that both models are not mutually exclusive. Throughout time Dunlop has introduced wage structure into his 30 model by developing a system of "wage contours." resembles Ross'  Dunlop's argument  "wage leader" analysis presented e a r l i e r .  However, Dun-  lop  continues to emphasize the primary importance of economic determinants  His  argument i s that while p o l i t i c a l variables might seem to determine the  s p e c i f i c wage rate,  the s i g n i f i c a n t variables must be economic i n nature,  since they w i l l influence the general 'health' of the industry and so determine the success of the p o l i t i c a l v a r i a b l e s . Ross conceded that "market forces determine the l e v e l of wages more or less loosely, leaving a l i m i t e d , but sizeable range of d i s c r e t i o n . From the general welfare viewpoint, the two analyses agree i n several respects as w e l l . by tor  The marginal productivity theory, as developed  J.  B. Clark and l a t e r Wicksell and Wicksteed, was an attempt to f i t fac 32 price determination into a general equilibrium theory. This theory J.  T. Dunlop,  The Theory  of Wage Determination,  op.- cit.  31 A.  M, Ross, "The External Wage Structure," i n New Concepts in (ed.) G. W. Taylor and F. C. Pierson (New York: McGraw H i l l Co. I n c . , 1957), pp. 173-205.  Wage Determination 32  See'John Bates Clark, The'Distribution of Wealth (New York: Macmillan C o . , , 1899); ..Wicksell, Knut, Lectures on Political Economy (New York: Routledge and Kegan Paul L t d . ? 1949), pp. 112 f f . ; and P. H. Wicksteed, The Common Sense of Political Economy (London: Macmillan and C o . , 1910), p. 315 f f .  22  developed  from the u t i l i t y  curve f o r a product was curves.  a n a l y s i s of the A u s t r i a n - s c h o o l .  d e r i v e d from the c o l l e c t i o n of i n d i v i d u a l  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 showed how  curve was  t r a n s m i t t e d to the l a b o u r market by The  The demand  the  utility  the product market demand firm.  supply curve of l a b o u r i s the r e s u l t of the c o l l e c t e d  utility  curves of i n d i v i d u a l l a b o u r e r s (a t r a d e - o f f between l e i s u r e and work). i n t e r s e c t i o n of the c o l l e c t i v e demand and supply curves determines  The  the wage  rate. Modern b a r g a i n i n g theory attempts much the same t h i n g . stitutional utility utility  f u n c t i o n i s merely another means of c o l l e c t i v i z i n g  f u n c t i o n s of i n d i v i d u a l s .  those who  The i n -  The  two  the  t h e o r i e s d i f f e r merely because  developed..them tend to r e g a r d c e r t a i n v a r i a b l e s as b e i n g of  g r e a t e r importance.  Students  of the n e o c l a s s i c a l s c h o o l r e g a r d economic  terms as paramount.  Modern b a r g a i n i n g t h e o r i s t s have tended  to s t r e s s  'power' o r ' p o l i t i c a l ' v a r i a b l e s , perhaps because of t h e i r n e g l e c t i n e a r l i e r theory and more p r o b a b l y because o f the, r e c o g n i t i o n t h a t s p e c i f i c s e t t l e m e n t s are o f t e n the r e s u l t . o f c e r t a i n non-economic r e l a t i o n s h i p s . However, b o t h  the union's  and  firm's u t i l i t y  f u n c t i o n s w i t h r e s p e c t to  the s i z e of s e t t l e m e n t s w i l l s h i f t w i t h l o n g - r u n economic c o n d i t i o n s . In a c t u a l i t y e a r l i e r theory c o u l d handle b o t h b u t . l t seems somewhat e a s i e r to c o n t i n u e Using  types of v a r i a b l e s ,  the d i v i s i o n a l r e a d y  developed  the m a r g i n a l p r o d u c t i v i t y approach, the g e n e r a l range of wage s e t t l e -  ment can be determined.  W i t h i n t h i s range b a r g a i n i n g theory can be a p p l i e d  to f i x the wage s e t t l e m e n t more p r e c i s e l y .  23  With this outline of the theoretical basis upon which the analysis of inter-industry wage structure r e s t s , an attempt w i l l now be made to determine how practicable  the theory i s .  A survey of studies  done i n the United States and Canada brings out a variety of conclusions. The r e s u l t i s that neither theory i s disproved, and evidence i s found to support both points of view.  Included i n the examination of studies deal-  ing with the wage determining process i s a b r i e f look at the influence of this process on the inter-industry wage structure, subjects w i l l be intimately r e l a t e d .  Ultimately the two  A discussion of the relationship  i s given i n Chapter V. Intertwined with the s t a t i s t i c a l studies of industry wage determination is this question:  i f Ross' thesis could be conclusively proved  would this not be adequate support for the contention that unions have been able to raise wages beyond the economically-determined level? Attempts have been made to measure the degree of union bargaining power.  These measurements have usually consisted of  comparisons  between unionized and non-unionized firms i n the same industry.  It  is  normally assumed that the working conditions (including wages, fringe benef i t s ) of the non-unionized firms are those which r e s u l t from market forces alone.  There is ignorance of the s p i l l o v e r effect from the unionized to  the non-unionized market.  These studies have estimated that union bar-  gaining power i s capable of r a i s i n g labour wages anywhere from zero  33  to  Milton Friedman, "Some Comments on the Significance of Labour Unions for Economic P o l i c y , ' . i n The Impact of the Union (New York: Kelley  24  25 per cent no  above the l e v e l determined by market forces  alone.  clear answer has emerged which might s e t t l e the debate.  Again,  The results  obtained seem to depend upon the time period i n which the study i s concen35 trated and the type of union involved. * Paul Douglas carried.out a study i n the mid-1920's  i n an  attempt to determine whether unions had been able to r a i s e the wages of members s i g n i f i c a n t l y above that of non-union labourers.  His results  indicated that i n the early years of union a c t i v i t y , wages were often  and Millmaii'i 1956) (ed). David McCord Wright, pp. 204-34. Friedman concluded -in fact that i n boom periods .union contracts have tended to cause unions to 'miss out' on large wage gains. When contracts are negotiated in recession periods, settlements are lower. 34  Albert Rees, Books, 1967), pp. 70-71.  The Economies  of Trade  Unions  (Chicago:  Phoenix  The discussion of the wage s p i l l o v e r effect of union actions into the non-unionized labour markets raises problems. It i s often claimed that the r i s i n g money wages of the unionized sector w i l l be followed by r i s ing wages i n the non-unionized sector. This i s true i f the non-unionized sector has an imperfectly competitive product market structure s i m i l a r to that of the unionized sector. In this case the bargaining range (in Reder's terms of analysis) w i l l be r e l a t i v e l y large. This means that the firms may offer a part of t h e i r ' r e n t ' to the employees as a ' b r i b e ' to prevent union organization. If wage settlements i n the non-unionized sector match those of the unionized sector, then both the firms and employees may be better off without organization, since the costs of bargaining are avoided. In such a case.the claims of large, s p i l l o v e r effects are v a l i d . If, on the other hand, the non-unionized sector i s composed pf firms facing a very e l a s t i c demand urve, then the above claims are no longer v a l i d . The amount of rent that the firm can extract from the product market i s smaller and correspondingly, the bargaining range for wages i s much narrower. The more competitive employer i s unable to match the wage settlements of the unionized sector. In addition, the r e s t r i c t i o n  25  substantially r a i s e d , however, as the age of the union increased, wage 36 settlements  increasingly lagged behind wages i n the non-union sector.  In  an early study Ross concluded that " r e a l hourly earnings  have advanced more sharply i n highly organized industries than i n less unionized i n d u s t r i e s , i n periods of stable or declining union membership 37 as w e l l as periods of rapid organization." A l a t e r study by Ross and Goldner brought modification of this statement.  Conclusions reached are much s i m i l a r to those found by Doug-  las . ' "Among the industries which were substantially unorganized i n 1933, subsequent increases i n earnings were associated with changes i n the degree of organization. ' However, those which were already substant* i a l l y organized i n 1933 have lagged.behind a l l other groups." 38 In  addition they tested for an association between the rate of wage i n -  crease and employment change and degree of concentration of firms i n the industry.  It i s normally assumed that the greater the degree of concen-  of entry which unions are normally able to enforce increases the supply of labour to the non-unionized sector. In this case economic theory predicts that the wages of the non-unionized labour w i l l f a l l . Thus the discovery that wages have risen i n a competitive non-unionized sector indicates that demand increases have been greater, than labour supply, increases. Paul Douglas, (Boston - 1930), p. 562.  terly  37 A.  Journal  Quarterly  A.  Real Wages in the United  States,  1890 - 1926  M. Ross, "The Influence of Unionism Upon Earnings," QuarV o l . LXII, No. 2 (February, 1948), p. 284.  of Economics,  M. Ross and W. Goldner, "The Inter-Industry Wage Structure," of Economics, V o l . LXIV, No. 2 (May, 1950), p. 280.  Journal  26  tration, i . e . ,  the fewer number of firms sharing the majority of the i n -  dustry market, the more imperfect the market w i l l be.  Their  results  concluded that there was a relationship between wage change and market structure and employment change.  The strength of t h e i r results  weakened, however, because s i m i l a r characteristics  is  are found i n the  same i n d u s t r i e s , making i t impossible to determine to what degree unioni z a t i o n , market structure, or employment change alone i s responsible for wage change. 39 J.  Garbarino  attempted to explain inter-industry wage move-  ments by comparing the rank order of percentage wage changes of various manufacturing industries with the respective percentage movements of prod u c t i v i t y and employment, and with the respective degrees of concentrat i o n and unionization.  Garbarino concludes that a p o s i t i v e relationship  does exist between productivity and wage change (although perhaps i t  is  not as strong as Dunlop claims) and, i n addition, finds that employment change,.degree of firm concentration and degree of unionization are able, singly or i n combination, to make the explanation of wage movement more comprehensive.  Again, however, i t must be emphasized that a high degree  of c o r r e l a t i o n may exist between the degree of firm concentration i n the market and degree of unionization.  In this event i t i s impossible to  separate the two and determine t h e i r single importance i n explaining wage movements.  Quarterly  J.  Journal  Garbarino, "Inter-Industry Wage Structure V a r i a t i o n , " of Economics, V o l . LXIV, No. 2 (May, 1950), pp. 281.  27  Meyers and Bowlby s p e c i f i c a l l y attempt to r e l a t e the percentage change i n output;per man-hour to the percentage change i n wages.  Their  results lead to the conclusion that: "in the present i n s t i t u t i o n a l s e t t i n g , one needs to look to factors other than changes i n output per man-hour to explain r e l a t i v e wage changes between i n d u s t r i e s . " 40 L.  Weiss hypothesized that a p o s i t i v e relationship w i l l exist  between the degree of concentration of f i r m s . i n the industry and the bargaining power of the unions.  Weiss postulates that monopoly rents  more l i k e l y to be greater i n a highly concentrated industry. terms of analysis  are  In Reder's  this meant that the bargaining range would widen and  the opportunities of the union to secure higher wages would increase.• Or,  as Weiss puts  it:  "Industries with high p r o f i t s , whether due to monopoly or other causes, might attract trade unionism since they offer large prizes to the successful organizer." 41 Empirical results  indicated that generally a p o s i t i v e relationship does  exist between labour earnings and the degree of concentration. cludes, therefore,  Weiss con-  that unionism or the threat of unionism produces high  wages i n concentrated i n d u s t r i e s .  F. Meyers and R . - L . Bowlby, "The Inter-Industry Wage Structure and P r o d u c t i v i t y , " Industrial and Labour Relations Review, V o l . V I I , No. 1 (October, 1953), p. 99.  Economic  41 L.  Review,  W. Weiss, "Concentration and Labour Earnings," V o l . LVI, No. 1 (March, 1966), p. 97.  American  28  In  Ross' o r i g i n a l analyses,  Trade  Union Wage Policy,  cluded that wage comparisons w i l l be independent of s p a t i a l  he-conrelation-  42 ships.  A study done by Harold .Levinson" would seem to y i e l d r e s u l t s  counter to Ross' contention, ing  Levinson,'concluded that i n industries  hav-  a comparable degree of concentration, a union's bargaining power i s  l i a b l e to be l a r g e r ,  the greater the degree of s p a t i a l  concentration.  This conclusion results from the observation that the greater the concentration of a l l members of an industry within a small geographic area, the easier i t i s for a union to organize?, and the greater i t s  strength w i l l  be per degree of organization, Levinson writes: "The key to the relationship between product market and wage movements l i e s primarily i n the effects of the former on the easevvof entry of new firms into production outside the j u r i s d i c t i o n a l control of the u n i o n . " 43 If there exists a s p a t i a l l i m i t a t i o n on the area i n which new entrants  can e f f e c t i v e l y  produce,  "Then the union need only achieve a high degree of organizational strength within the l i m i t e d strategic areas involved i n order to be protected against the underirdning influence of new non-union entrants or of run-away shops, irrespective of how easy entry into the industry i t s e l f might b e . " 44  A. 43 (New York: 44  M. Ross,  Trade  Union Wage Policy,  H, Levinson, Determining Forces John Wiley and Sons, 1966), p.  op. cit.,  in Collective  265.  p. 53.  Wage  Bargaining,  H, Levinson, "Concentration and Wage Changes: Toward A Unif i e d Theory," Industrial and Labour Relations Review, V o l . XX, No. 2 (January, 1967), p. 201.  29  Conversely, Levinson points out that given a s i m i l a r l y high degree of union organizational strength, employers i n . a more concentrated industry w i l l be better able to r e s i s t union pressure than those i n a more competitive industry. a two-edged effect;  Concentrated industries w i l l , however, have  they w i l l provide the. union with greater protection  against the entry of non-union competitors, which helps to maintain the union's j u r i s d i c t i o n a l strength,  and at the same time, they provide  fewer firms of larger size and greater f i n a n c i a l resources which are more e f f e c t i v e l y The  able to r e s i s t union pressure.  nub. of Levinson's study i s that greater wage increases  are to be expected over time i n the less-concentrated a high degree of s p a t i a l ing  centralization.  industries with  Outstanding examples are b u i l d -  construction, longshorihg and coal mining i n the United States.  Levin-  son's findings become very important i n an interpretation of the B r i t i s h Columbia economy. The  most notable study attempting to handle these problems with 45  Canadian data was done by H. D. Woods and S y l v i a Ostry, included 88 manufacturing industries.  They found a very stable wage  structure over time (a rank correlation coefficient comparing industry ranks i n 1917 and 1956). that the inter-industry.structure to c y c l i c a l fluctuations  H.  mics In Canada  Their analysis  of .65 was found i n  A test of the hypothesis  should.widen and narrow i n response  i n the economy yielded results contrary to those  D. Woods and S y l v i a Ostry, Labour Policy and Labour (Toronto: Macmillan and C o . , 1962), Chapter 16.  Econo-  30  expected.  Further investigation caused them to conclude that there ex-  i s t s a closer relationship between the wage structure and s k i l l differ— 46 entials and economic conditions. Woods and Ostry test other variables as w e l l i n an attempt to explain the pattern of wage change.. Variables tested include"  changes  i n employment (as a crude measure of labour demand), percentage change i n output per man-hour, market structure, r e l a t i v e labour cost and impact of unionism.  They conclude that the best explanation of wage change  i s given by the change i n employment.  No conclusive results were achieved  by tests of market structure, impact of unionism and r e l a t i v e labour cost variables.  No relationship could be established between the change i n out-  put per man-hour and the change i n wages.  They conclude that demand for  labour i s a significant,determinant of. wage change among the manufacturing industries examined. Parts of these tests relevant to the B r i t i s h Columbia economy w i l l be reproduced i n this study using s l i g h t l y different methods.  statistical  Because only six industries are studied, i t i s possible to ex-  amine each separately and attempt to determine i n a more precise manner the forces acting upon the wage determination process.  Woods and Ostry, op. ait.,  pp. 450-56.  CHAPTER III THE  MODEL  The analysis now turns to an examination of the B r i t i s h Columbia  economy i n an attempt to discover the forces which play a role i n  the wage determining process and which consequently cause a d i s t i n c t wage structure for this economy.  The data for the analysis covers six major  industries i n the B r i t i s h Columbia economy:  construction, coast logging,  pulp and paper, sawmilling (coast and i n t e r i o r ) , mining (excluding petroleum and natural gas)  and coast and inland water transportation (excluding  longshoring and warehouse workers).  The time period covered was from  1948-1968 for a l l industries except pulp and paper and sawmilling i n which data were available only to 1967. production i n the B.C. economy.  These industries comprise the bulk of Indeed, 52 cents of every d o l l a r of out-  put comes from'the forest industries  alone.1  The model developed borrows heavily from the various studies of Kuh, Lipsey, Vanderkamp, Perry and Eckstein and Wilson which were previously mentioned.  These studies attempt to determine the causality and strength  of a relationship between wages and prices at a national aggregate l e v e l . The examination here i s to determine the variables that contribute most to an explanation of wage movements among i n d i v i d u a l i n d u s t r i e s .  "Report on Business," p,  1.  Globe and Mail 31  (Toronto:  To a large  July 7, 1970),  32  extent this analysis follows the procedure of Richard Rippe who has attempted to adapt these macroeconomic models to a microeconomic analy2 sis  applicable, i n his case, to the American s t e e l industry. Eight independent variables were f i n a l l y chosen i n this study  to be entered into a stepwise regression equation as an explanation of the movement of wages i n each examined industry.  The variables  are  broadly c l a s s i f i e d as being either economic or p o l i t i c a l i n nature. The  dependent v a r i a b l e , annual rate of wage change i n the ex-  amined industry (W^)  , was derived from annual negotiated wage rates per  job c l a s s i f i c a t i o n i n the industry as given i n the Canadian Department of  Labour p u b l i c a t i o n ,  Wage Rates,  Salaries  aiid Average  Hours  of  Employ-  3  ment. of  These hourly rates are base rates weighted by the average number  workers i n each category.  The result is a wage rate adjusted for r e l a -  t i v e employment size which excludes overtime payments, piece rates, bonus pay and commissions. Variables c l a s s i f i e d as being purely economic i n nature include percentage change i n money value-added output per man-hour and percentage change i n employment. of  Variables which may act as p o l i t i c a l determinants  the wage settlement include present p r o f i t - s a l e s  profit-sales  Richard Rippe, "Wages, Prices and Imports i n the American Steel of Economics and Statistics, V o l . L I I , (February, 1970),  Review  Industry," pp. 34-46. 3  Hours  ratio,  Canadian Department of Labour, Wages, salaries and Average Annual Report (Ottawa, Canada: 1948-1968);  of Employment,  33  ratio lagged one year, the wage settlement i n the most closely-related industry, and some measure of militancy used to determine whether the threat of strikes influenced the wage settlement. Two  other variables are included i n the model as w e l l :  the  percentage change i n the regional cost of l i v i n g index and a dummy variable used to determine whether contract negotiations happened to coincide with changes i n demand for output. are d i f f i c u l t to c l a s s i f y  Both of these variables  as either purely economic or purely p o l i t i c a l .  Indeed, the dummy variable i s probably neither. Each of these variables w i l l require substantial as to t h e i r c l a s s i f i c a t i o n since i t i s e a s i l y forseeable may  explanation  that confusion  attend the interpretation of a variable measured i n d o l l a r terms as  being p o l i t i c a l . Since the i n i t i a l use of output per man-hour as a measure of productivity by Dunlop i n 1948, there has been much further research done upon how productivity should be measured.  A National Bureau of 4  Economic Research study done by J . W. Kendrick the knowledge of this concept.  has especially furthered  Kendrick argues that the normal measure-  ment of productivity — dividing output by the number of man-hours worked —  i s not a relevant concept when one is attempting to gain some measure  of  the change i n labour efficiency over time.  In addition this measure-  ment makes no allowance for changes i n s k i l l nor is i t able to account -  J . W. Kendrick, Productivity Trends in the United States, National Bureau of Economic Research (Princeton, N . J . : Princeton Univers i t y Press,-1961).  34 for factor substitution.  The  l a t t e r i s particularly relevant i n l i g h t  of t h i s study s i n c e t h e r e i s some q u e s t i o n whether wage change w i l l r e s u l t from p r o d u c t i v i t y changes, or whether wage change w i l l factor substitution  (an i n c r e a s e d c a p i t a l i n t e n s i t y ) and r e s u l t i n  output per man-hour changes. to determine  cause  K e n d r i c k t h e r e f o r e suggests  changes i n output due  that i n order  t o e f f i c i e n c y improvement a l o n e , a  time s e r i e s s h o u l d be s e t up which compares the change o f the r a t i o r e a l output d i v i d e d by a measure o f l a b o u r and by t h e i r r e l a t i v e  c a p i t a l i n p u t s , weighted  contributions.  U n f o r t u n a t e l y , d a t a g i v i n g the i n t e n s i t y of c a p i t a l not r e a d i l y a v a i l a b l e f o r Canadian productivity.  of  industries  usage are  to a l l o w such a measure of  I t i s n e c e s s a r y to r e v e r t to the o l d e r method o f measure-  ment, k e e p i n g i t s shortcomings  i n mind.  Solomon F a b r i c a n t w r i t e s t h a t :  " p h y s i c a l output per man-hour i s a u s e f u l index i f i t s l i m i t a t i o n s are r e c o g n i z e d . Because i n the economy at l a r g e and i n most i n d i v i d u a l i n d u s t r i e s , l a b o u r i n p u t i s by f a r the most important type o f i n p u t , the index based on man-hours alone i s not often i n serious'error. I t i s a f a i r approximation to a more comprehensive index of e f f i c i e n c y . " 5 The  r e s u l t i n g b i a s i s upward caused by the o m i s s i o n of the c a p i t a l i n p u t  as w e l l as the f a i l u r e t o take i n t o account  the change i n the  composition  or q u a l i t y o f l a b o u r . In the model f o r m u l a t e d i n t h i s study a measure of output  value-added  per man-hour i s used r a t h e r than the t r a d i t i o n a l r e a l output per  ^Solomon F a b r i c a n t , i n K e n d r i c k , op.  o i t . , p. x i .  Money output was measured by the d o l l a r v a l u e added •— gross output l e s s m a t e r i a l s purchased.  35  man-hour.  Justification  of this stems from the e a r l i e r discussion of  marginal productivity theory. earlier,  Using Cartter's  approach, as discussed  the money value demand curve for labour i s represented by the  marginal revenue product curve, and i n the case of pure competition this curve w i l l not d i f f e r substantially  from the average value product curve.  Exclusive of the construction industry a l l the industries this analysis of wage movements i n B.C. are, or very nearly are, t i t i v e i n nature.  in  compe-  Competitiveness arises from the fact that firms i n  the industry can exercise l i t t l e or no control over the market i n which their goods are sold.  The markets are, i n f a c t , i n t e r n a t i o n a l ; i t  is  this dependence upon outside factors by the greater part of the B r i t i s h Columbia economy which causes economic trends i n this province to d i f f e r from those of the rest of Canada. Only the construction industry faces a s i t u a t i o n i n which large firms may be claimed to face a demand curve which i s substantially than perfectly e l a s t i c .  less  This s h a l l be explained further i n Chapter IV.  Another economic variable used i s the percentage rate of change of  employment.  This, i n addition to the percentage rate of change of  output per man-hour, should y i e l d an approximate estimate of changes i n the demand for labour.  The use of both a measure of output change and  employment change may seem redundant.  However, studies have shown a  marked tendency for firms to over employ during recessions and to be slow  In addition see Edwin Kuh, "A Productivity Theory of Wage Levels — An Alternative to the P h i l l i p ' s Curve," Review of Economic Studies, V o l . XXIV (October, 1967), p. 337.  36  in  acquiring additional labour during boom periods.  Thus these two measure-  ments are expected to temper one another and the mixture i s expected to provide a measure of demand.  Use of the rate of change of employment should  capture expectations of the future trends for the industry that were e x i s tent during the bargaining period. In of  several of the above-mentioned wage-price studies the rate  change i n unemployment has been used as a measure of change i n excess  demand.  The switch from an unemployment to employment measure was  tated by the regional nature of the study.  necessi-  Former studies were for a  national economy and the unemployment measure (a stock output) serves well in  a setting where the labour force i s generally immobile and may be r e -  garded as a stock.  However, the results of a study by Montague and Vander-  g kamp  reveal that for B r i t i s h Columbia the unemployment measure i s a flow  concept.  They discover that the p a r t i c i p a t i o n rate i s d i r e c t l y related  to the demand for labour, and state that: "it does not make very good economic sense to talk about the B r i t i s h Columbia labour force as a stock concept, as a fixed number of people for whom jobs w i l l have to be created, because the rate at which jobs are created i t s e l f partly determines the size of the labour f o r c e . " 9 This finding is attributed to the high degree of mobility into the B r i t i s h Columbia economy and the age-makeup of the population.  Adjustment  J . T. Montague and John Vanderkamp, A Study (University of B r i t i s h . Columbia, 1966).  ^Ibid.,  p. 43.  in Labour  As  Market  the employment rate r i s e s so does the p a r t i c i p a t i o n rate of the semir e t i r e d B r i t i s h Columbians and the unskilled from neighbouring provinces. This leads to the seemingly paradoxical statement, "Surveys of anticipated demand of employers over the next few years stress shortages. Union groups have countered with reports of s i g n i f i c a n t oversupply at h i r i n g h a l l s . " 10 The use of unemployment change as a measure of demand change would give us an incorrect picture for industries requiring high degrees of s k i l l  (as do those examined).  The unemployment rate w i l l  reflect  those with few s k i l l s who are just on the periphery of p a r t i c i p a t i o n . Meanwhile the s k i l l e d vacancy rate might be extremely high.  As was  e a r l i e r stated the economic determination of wages should stem from a supply-demand r e l a t i o n s h i p .  If,  i n spite of Montague and Vanderkamp's  findings of a large inflow of labour as job opportunities increase^  the  labour required by the industries examined need be highly s k i l l e d , then i t may well be that each industry finds i t s e l f  faced with a very i n e l a s -  t i c labour supply function.  It should not be s u r p r i s i n g , therefore,  find that union negotiators,  faced with a trade-off between employment  and wage goals, more often favour the l a t t e r .  to  This w i l l especially be  observed i f i t is the s k i l l e d labour force which forms a majority of union membership.  Wage increases may not be accompanied by l a y o f f s ,  rather a curtailment of the increase i n employment.  Union negotiators  w i l l be w i l l i n g to largely ignore the employment effect  Montague and Vanderkamp, op. ait.,  but  p. 43.  of wage goals  38  especially i f bargaining occurs during a period of expansion i n the. ".industry. All  of the industries dealt with i n this study are ones which  require large amounts of s k i l l e d labour.  In contradiction to e a r l i e r  studies done on the question of labour m o b i l i t y , Lansing and Mueller"'"'''  immobile.-  The  reason for this i s the length of time needed to acquire the s k i l l .  Once  conclude that workers with a high l e v e l of s k i l l are very  it  i s gained, the worker i s usually beyond the years of his greatest  mobility.  The s k i l l i s usually acquired on-the-job and wages are paid  during the training perioB.. This allows the worker to acquire a home, family and other s o c i a l amenities which detract from his m o b i l i t y .  The  result i s a r e l a t i v e l y fixed s k i l l e d labour supply. It i s not possible or necessary to assume unskilled labour f i x e d , for  the question of actual supply no longer matters.  It has been the cus-  tom  of unions with unskilled members to consider only present and not poten-  t i a l members when making wage demands — for as long as present members are satisfied,  the leadership i s secure.  These unions do not need control of  the unskilled labour supply, instead they r e l y upon the support of s k i l l e d labour.  Even should the supply of unskilled labour be i n f i n i t e (as i t may  well be i n the B r i t i s h Columbia context), and 'scabbing' r e s u l t during a s t r i k e of u n s k i l l e d labourers,  our  J. (Chicago:  the s t r i k e would be effective  B. Lansing and Eva Mueller, The Geographic Institute Research Centre, 1967).  to the extent  Mobility  of Lab-  39  that s k i l l e d workmen refused to cross picket l i n e s .  Thus unions repre-  senting unskilled labour are able to control the s k i l l e d labour supply and need not be concerned with the supply of unskilled labour when making wage demands. Unskilled labour is represented examined.  i n two ways i n the industries  In the construction industry the unskilled belong to unions  separate'from the s k i l l e d — notably the Common Labourers Union. t i a t o r s have made effective  Nego-  use of the willingness of the s k i l l e d unions  to co-operate during a s t r i k e .  In the other industries  s k i l l e d labour are a l l members of the same unions.  Similar results are  obtained to those i n the construction industry, however. volve both the s k i l l e d and u n s k i l l e d .  s k i l l e d and un-  Strikes i n -  The result is that firms i n these  industries regard the supply of unskilled labour to be much less elast i c for the industry than for the economy generally. In addition, a dummy variable is included which i s neither economic nor p o l i t i c a l i n nature.  Its purpose is to determine whether  the wage settlement may be partly attributed to the timing of the contract.  D i s set equal to 1 i f a contract i s signed i n a year of output  expansion.  If there was no contract signed or the year of signing was  B.C. Labour seems to p a r t i c u l a r l y favour the sympathetic (secondary) s t r i k e and declaration of "hot" goods, despite t h e i r illegality. See, "Report on Business," Globe and Mail (Toronto: July .7, 1970) , p. 1.  40  a r e c e s s i o n p e r i o d , D i s e q u a l to 0. would show t h a t s e t t l e m e n t s  The  s i g n i f i c a n c e of t h i s v a r i a b l e  a r e , to an e x t e n t ,  i n f l u e n c e d by  the random  13 chance of when the c o n t r a c t was P o l i t i c a l variables — closely associated p l a i n e d e a r l i e r and should  the r a t e of wage change i n the most  i n d u s t r y and no  signed.  the p r o f i t - s a l e s r a t i o s have been  f u r t h e r j u s t i f i c a t i o n should  be mentioned, however, t h a t the present  and  ex-  be n e c e s s a r y . lagged r a t i o  It  of  p r o f i t - s a l e s were used because i t i s h y p o t h e s i z e d t h a t the u n i o n w i l l base claims  on the company's or i n d u s t r y ' s . l a s t p u b l i s h e d  w h i l e the company w i l l make o f f e r s based upon p r e s e n t ditions.  The  combination of past  and  present  annual  report(s)  or a n t i c i p a t e d con-  p r o f i t s may  yield  some  ex-  p l a n a t i o n of wage movements. A r e s i d u a l method of c a l c u l a t i n g gross p r o f i t s was t o t a l value i n p u t has  of s a l e s l e s s payments f o r m a t e r i a l s purchased and  been used to e s t i m a t e p r o f i t .  for depreciation. to be  •pviovi be  used.  Returns to other  counted as p r o f i t . i t might be  attempt was  labour  made to account  f a c t o r s were assumed n e g l i g i b l e or  T h i s method i s v e r y u n s a t i s f a c t o r y s i n c e a  expected that the movements of r e s i d u a l p r o f i t s  such a g r o s s measure t h a t no  quired, i f p r o f i t s  No  The  are to be  measure of the net p r o f i t  relationship w i l l obtain.  considered  will  What i s r e -  a p o l i t i c a l variable, is a  to c a p i t a l e x p e n d i t u r e r a t i o .  T h i s would  The n a t u r e i n which the dummy v a r i a b l e i s computed, u n f o r t u n a t e l y , may cause c o l l i n e a r i t y between the demand v a r i a b l e s and D i f the c o n t r a c t s were signed a n n u a l l y . I f , on the other hand, two or three y e a r c o n t r a c t s were more f r e q u e n t l y i n f o r c e , then the problem of c o l l i n e a r i t y may be escaped. I t i s t h e r e f o r e n e c e s s a r y to pay p a r t i c u l a r a t t e n t i o n to the c o r r e l a t i o n c o e f f i c i e n t s r e l a t i n g D to the demand v a r i a b l e s i n each industry.  41  allow a comparison of the change i n wage rates to the change i n the rate of return on c a p i t a l .  Again, lack of data prevented such an analysis.  The t h i r d p o l i t i c a l variable considered is the rate of militancy of the union.  It i s hypothesized that the threat of a s t r i k e when b u s i -  ness a c t i v i t y i s high w i l l cause firms to s e t t l e more quickly than normal since the cost of a shutdown w i l l outweigh the cost of meeting demands. pected. correct.  labour's  During a business recession the opposite action would be exA negative correlation would be expected i f this hypothesis  is  Wage increases would be larger during boom periods and s t r i k e  a c t i v i t y should be lower.  Strike action i s the attempt to use an econo-  mic t o o l as a p o l i t i c a l weapon.  It has been termed a p o l i t i c a l variable  here because i t s use i s not automatic;  i t i s used only as the result of  conscious decision. The test of the hypotheses  ran ratios of annual man-hours l o s t  due to strikes to t o t a l man-hours of employment expressed i n percentage terms against the rate of wage change.  In every industry the s t r i k e  variable was found to be i n s i g n i f i c a n t at the f i v e per cent l e v e l .  For  this reason the variable was excluded from the empirical analysis which 14 follows.  (See Appendix A ) .  A study done by John Vanderkamp  concluded  that for the Canadian economy as a whole, a positive relationship does John Vanderkamp, "The Time Pattern of Industrial C o n f l i c t i n Canada, 1901 - 1966," unpublished manuscript (University of B r i t i s h C o l umbia, 1968). Other studies conducted i n the United States, notably by Albert Rees, The Economics of Trade Unions (University of Chicago: Phoenix Books, 1967), p.,216 have been unable to find any correlation between s t r i k e a c t i v i t y and wage change.  42  e x i s t between b u s i n e s s c y c l e and s t r i k e a c t i v i t y . the h y p o t h e s i s t e s t e d above.  T h i s i s counter to  The d i f f e r e n t n a t u r e of the m a j o r i t y of  B r i t i s h Columbia i n d u s t r i e s causes t h i s d i v e r g e n c e .  The B r i t i s h  Colum-  b i a economy, to a l a r g e e x t e n t , i s of a primary n a t u r e e x c l u d i n g c o n s t r u c t i o n ; s a l e s a r e l a r g e l y d e s t i n e d to be exported. correct  I t would t h e r e f o r e seem  to conclude t h a t c o n d i t i o n s i n the B r i t i s h Columbia economy w i l l  largely reflect  those of the world market —  i n p a r t i c u l a r t h o s e ' o f our  neighbour  to the south —  r a t h e r than those of the r e s t of the Canadian  economy.  In a d d i t i o n , the v e r y n a t u r e of primary p r o d u c t i o n makes these  i n d u s t r i e s : : p a r t i c u l a r l y s e n s i t i v e to the r i s e and f a l l of the b u s i n e s s cycle.  The h i g h c o n c e n t r a t i o n of i n d u s t r i e s of t h i s n a t u r e w i t h i n a  single region w i l l  cause the c y c l i c a l  instability.  The i n c l u s i o n of a r a t e of i n f l a t i o n v a r i a b l e stems from the emphasis of t h i s v a r i a b l e by b o t h unions and management.  I t should be  noted, however, t h a t the two s i d e s have emphasized the v a r i a b l e ' s n i f i c a n c e at d i f f e r e n t it  times i n the b u s i n e s s c y c l e :  unions  sig-  r e f e r to  at the peak of the c y c l e when the change i n the r a t e of i n f l a t i o n  i s h i g h e s t , and management r e f e r s to i t d u r i n g r e c e s s i o n y e a r s . I t i s i m p o s s i b l e to a s s i g n to t h i s v a r i a b l e the n a t u r e of b e i n g economic o r p o l i t i c :  i t s o p e r a t i o n i n the wage d e t e r m i n i n g p r o c e s s i n -  v o l v e s b o t h of these c o n c e p t s . Unions w i l l v e r y o f t e n demand a wage s e t t l e m e n t i n l i n e w i t h changes i n output per man-hour, employment  change o r p r o f i t  w e l l as some adjustment  change i n the c o s t of l i v i n g .  f o r the percentage  change as  During p e r i o d s of r e c e s s i o n when the g e n e r a l r a t e of change of t h e c o s t  43  of l i v i n g i s smaller, employers w i l l refer more often to a settlement i n l i n e with, this v a r i a b l e . Dunlop has argued that wage increases out of l i n e with the i n crease of productivity or employment change for an industry w i l l be reflected i n a price increase for that industry's product. i s a v a l i d one.  This argument  Movements of this kind, however, may not be captured  i n the change of the cost of l i v i n g index i f this occurrence i s an i s o lated one.  The price of the industry's output w i l l form such a small  part of the cost of l i v i n g index that no relationship between the rate of wage change and the rate of change i n the cost of l i v i n g index could be expected.  On the other hand, i f there are many unions able to force  wage increases greater than those j u s t i f i e d i n economic terms, these price r i s e s may be captured by the rate of change i n the regional cost of l i v i n g index. Further grounds for expecting a relationship between wage changes and the rate of i n f l a t i o n exist i f periods of general excess demand across industries are observed. expected to move together.  Money demand for output and money wages would be S i m i l a r l y , when excess demand for output dimi-  nished, the rate of i n f l a t i o n would be expected to f a l l , and the rate of change i n money wages would be expected to decrease. In an economy such as B r i t i s h Columbia's where the demand curve for many of the i n d u s t r i e s ' products i s formed i n t e r n a t i o n a l l y , there is no reason to expect the demand for the output of a l l industries to move together.  In addition, as explained i n Chapter IV CSections A and B) con-  siderable lags are experienced i n the demands for output of the two largest industries — forest products and construction.  44  Despite  t h e economic b a s i s f o r e x p e c t i n g  a r e l a t i o n s h i p to be  found between the r a t e o f i n f l a t i o n and wage changes, i n t e r v i e w s b o t h union  and management o f f i c i a l s have r e p e a t e d l y emphasized t h a t  this, v a r i a b l e i s c o n s i d e r e d by e i t h e r s i d e o n l y when i t s u i t s purpose.  their  In o t h e r words, o n l y when the use o f the cost o f l i v i n g  i a b l e approximates t h e wage s e t t l e m e n t v a r i a b l e invoked and  with  demanded o r o f f e r e d , i s t h e  by e i t h e r s i d e d u r i n g b a r g a i n i n g .  economic arguments l e a d .to  var-  Thus, both p o l i t i c a l  an e x p e c t a t i o n t h a t t h i s v a r i a b l e may  be a b l e to e x p l a i n a p a r t of the movement o f wages. These v a r i a b l e s then form the model o f the wage process  determination  f o r each i n d u s t r y : W. = a + bP + cE + dK + eK, + f C + gWx + hD 1 now then where W. = percentage change i n h o u r l y wage i n i n d u s t r y w  t  " V i W  P ••- percentage change i n output  p e r man-hour  (  P _t  - P P  E  t-1  = p e r c e n t a g e change i n employment  t-1  . 1^)  45  K  K  now  then  = p r o f i t - s a l e s ( r e s i d u a l ) r a t i o of present  = profit-sales ratio  year  lagged one year  C  = p e r c e n t a g e change of c o s t of l i v i n g  index  Wx  = percentage change i n wage r a t e of most comparable i n d u s t r y Wx^ - Wx  (A l l r e l a t i o n s h i p s found are expected t o be p o s i t i v e .  t-1,15  Each independent  v a r i a b l e i s assumed t o move i n the same d i r e c t i o n as t h e dependent able.  T h i s e q u a t i o n w i l l now be examined on an  vari-  industry-by-industry  basis. I t i s n o t t o be i n t e r p r e t e d from t h e above model t h a t a p e r centage r a t e of change i s the o n l y method t h a t can be used i n measuring the r e l a t e d movements of the v a r i a b l e s .  Percentage r a t e s a r e used here  because i t i s h y p o t h e s i z e d t h a t u n i o n and management n e g o t i a t o r s bargain  i n p e r c e n t a g e terms.  after a l l ,  very  centage p o i n t s  easy.  tend to  The use of the percentage measurement i s ,  One hearswthat the c o s t of l i v i n g rose so many p e r -  l a s t month, or t h a t p r o d u c t i o n  has i n c r e a s e d by a c e r t a i n  p e r c e n t a g e , o r t h a t t h e employees i n another i n d u s t r y have j u s t won a wage i n c r e a s e o f so much per c e n t .  The b a s i n g  o f wage demands o r o f f e r s i n  The c h o i c e o f the r a t e o f wage change i n the most comparable i n d u s t r y i s by h y p o t h e s i s .  percentage terms therefore comes n a t u r a l l y . This may indicate the deception that units of measurement can cause for those who c l i n g to them r i g i d l y . a slave to his system of measurement.  The bargainer has become  As various writers have pointed  16 out,  the use of the percentage measurement, e x c l u s i v e l y , means that  the d i f f e r e n t i a l between high-,and low-wage industries i s growing at an  increasing absolute rate.  The weaker unions are at an even greater  disadvantage because of their system of measurement!  See Richard Perlman, "Forces Widening the Occupational Wage D i f f e r e n t i a l s , " Review of Economics and Statistics, V o l . LX 0-958), pp. 107-115, and A, M. Ross, "The Influence of Unionism Upon Earnings," Quarterly Journal of Economicsy V o l . LXIV (February, 1948).  CHAPTER IV EMPIRICAL RESULTS  An examination of Chart II gives a general impression of the wage structure i n B r i t i s h Columbia during the years 1949-1968. archy has been remarkably stable.  The wage h i e r -  Wages i n the construction industry have  consistently been higher than those i n the other f i v e .  Pulp and paper  wages have generally led those for the rest of the forest products try,  indus-  except i n the years 1951-52, and 1965 when coast logging wages were  equal.  Sawmilling has generally ranked fourth i n the structure while  water transport  and mining wages have alternated i n the lowest  positions.  The remaining analysis of this chapter w i l l deal with the charact e r i s t i c s found i n each industry that largely account for i t s rank i n the regional structure. characteristics  A.  F i n a l l y , Chapter V attempts to determine some general  of the B r i t i s h Columbia economy.  The Construction Industry The construction industry i s assumed to be the "key industry" or  "pace s e t t e r " i n terms of Ross' analysis. play the role of wage leader, from the other  The industry i s well-suited to  for i t has several characteristics  different  industries.  Unlike the other industries examined, the construction industry i s comparatively sheltered from foreign competition. 47  Firms do not compete i n  48  the world market; instead they face a large and growing domestic market. To  a large extent, the demand curve for construction output  p r i c e - i n e l a s t i c i n the short-run, representing other i n d u s t r i e s ' needs for expansion work during boom periods.  is  immediate  M. K. Evans reports  that  empirical tests have found l i t t l e or no relationship between r e s i d e n t i a l construction investment and the r e l a t i v e price of output as w e l l . 1 the other hand, demand i s income-elastic i n the long-run.  On  Therefore, as  incomes i n B r i t i s h Columbia have r i s e n , so has the demand for housing and other construction. in  The result has been a more-than-proportional growth  demand for output as incomes rose. The  construction industry i n B r i t i s h Columbia i s p a r t i c u l a r l y de-  pendent upon the investment spending of the other i n d u s t r i e s .  To this  extent then, we would expect that i f the other industries are p a r t i c u l a r l y sensitive to the business c y c l e , then construction a c t i v i t y should be so as w e l l .  One could reasonably expect the construction industry to be  c y c l i c a l l y unstable since the demands of each industry w i l l r i s e and f a l l together. This introducers an accelerator the various industries vity.  trol  concept.  The interdependence of  increases the s i z e of fluctuation of economic a c t i -  Decreased a c t i v i t y i n the forest products industry i s followed by a  K. Evans, Macroeconomic Activity: Theory, (New York: Harper and Row, 1969), p. 187.  Forecasting  and Con-  49  f a l l i n forest products demanded by the construction industry.  Similarly  when economic a c t i v i t y is increasing, the demand for construction output by the primary resource industries w i l l create additional demand for t h e i r own output. Movements of construction a c t i v i t y , therefore; might be reasonably expected to exaggerate the movements of the other five i n d u s t r i e s . I supports this expectation with large downturns i n project  Chart  completions  occurring i n 1954 and again i n 1958-1962. The "lumpiness" of investment i n construction projects by public u t i l i t i e s i n this province must be noted as w e l l .  P e r i o d i c a l l y , projects  involving hundreds of m i l l i o n s of d o l l a r s each and requiring a r e l a t i v e l y small labour force have added to the i n s t a b i l i t y of this industry,  Pro-  j e c t s such as the Kitimat and Kemano plants undertaken i n 1950-52, the o i l and gas pipeline development of 1955-57, and the recent Columbia and Peace River projects of the 1960's have played s i g n i f i c a n t a l l y when most have been undertaken during expansion  roles,  especi-  periods.  Government projects have also contributed to this  instability.  Rather than time such projects according to the methods recommended by modern f i s c a l p o l i c y , the present B r i t i s h Columbia government has  almost  consistently followed a p o l i c y of expansion that coincides with growth i n the private sector. Thus the combination of public investment projects) and private investment  ( e . g . , power, highway  C e . g . , pulp and paper plants,  sawmills)  has: led to extreme c y c l i c a l fluctuation i n the construction industry. i n s t a b i l i t y has had important effects upon wage demands made by unions.  This  50  It should be noted that the recessions and expansions i n construct i o n usually lag the movements i n other industries by one - two years. i s to be expected since contracts completion.  This  are awarded one to two years i n advance of  Thus, while the other industries  are i n the depths of a reces-  s i o n , construction may be booming; later as the other industries construction output may s t i l l be f a l l i n g .  revive,  This c y c l i c a l timing difference  between construction and other large industries has led to widespread unrest i n labour relations  i n B r i t i s h Columbia.  Stuart Jamieson writes: "In a highly specialized resource-based economy with a limited population of only a l i t t l e over one m i l l i o n £ 1 9 5 7 ] , and lacking a d i v e r s i f i e d base of secondary industries.? such projects by themselves are of s u f f i c i e n t magnitude to create substantial cycles of growth and decline within the construction industry and indeed, throughout the economy as a whole. . . It becomes d i f f i c u l t to separate seasonal from c a p i t a l factors contributing to the extreme fluctuations i n employment i n the construction'industry of B.C." 2 This fluctuation has led building trade unions to demand immediate gains i n wages or equivalent fringe benefits  since they believe  the employment goal of long-run job security to be highly impractical. A recession w i l l mean lay-offs The  i n any event.  result has been a union leadership whose wage demands  generally sensitive to demand conditions i n the product market.  are One or  two unions have consistently managed to secure large wage increases during  Stuart M. Jamieson, B r i t i s h . Columbia.  unpublished  manuscript,  1959, University of  51  boom periods.  The result has been the mimicry of these settlements i n  the demands of other construction unions whose contracts expire the peak of a c t i v i t y .  after  This has created a great deal of turbulence i n  labour relations i n this industry.  The incidence of s t r i k e a c t i v i t y  has been high as w e l l , as unions have fought to match the preceding settlements.  Short-run i n e l a s t i c i t y i n . t h e labour and product markets  allows both unions and firms to raise wages and prices above any sustainable longer term l e v e l .  The result i s larger swings i n construction  a c t i v i t y than the acceleration p r i n c i p l e alone would cause. As was e a r l i e r hinted, the construction industry i s p e c u l i a r l y suited to the forwarding of labour costs into the product market.  Dur-  ing expansion periods the demand for construction output i s very i n e l a s tic.  If wages r i s e simultaneously across the industry, then a l l construc-  tion bids are merely increased by that amount plus some allowance for expectations of future settlements which might occur while the project  is  in progress. As mentioned e a r l i e r ,  certain trades such as the labourers and  truck drivers have had greater success i n demands won than might have been expected due to the support of the s k i l l e d unions. "The Building Trades Council i n effect underwrites agreements i n each trade and strengthens the hand of i n dividual locals i n negotiation by the threat of sympat h e t i c , industry-wide s t r i k e s . " 3 There e x i s t s , as w e l l , an extreme job-consciousness workers.  Although wage negotiations  Jamieson, op. ait.  among construction  are carried out on a  trade-by-trade  52  b a s i s , there i s extreme pressure upon the leadership to make bargains which w i l l maintain the wage hierarchy.  Thus i t has often occurred that  wages demanded a short time after the cycle has begun to turn down, w i l l be based on a settlement  i n another trade just at the peak of the c y c l e .  Strike action i s especially marked i n this industry i n the immediate postpeak period. Technological change, the "bug-bear" of many unions, has had a very limited impact upon the construction trades at least as regards t o t a l employment.  Unlike the more competitive, primary resource-based 4  industries,  o v e r - a l l labour displacement has remained s l i g h t .  This  means that a rapid r i s e i n construction demand i s l i k e l y to be d i r e c t l y passed into the labour market. Levinson's s p a t i a l concentration concept has also had a r o l e to play.  To a large extent negotiations are carried out on the basis of  Vancouver conditions.  These conditions d i f f e r from those of the i n t e r i o r  of the province, especially with regard to the degree of unionization. The result has been an increase i n bargaining power for i n t e r i o r unions above that based upon their degree of organization alone.  In addition  the use of Vancouver h i r i n g h a l l s to f i l l  requirements  i n t e r i o r project  has occasionally caused a shortage of labour necessary for Vancouver proj e c t s during l e v e l l i n g - o f f periods.  This creation of an  'artificial'  shortage has aided union wage demands. Stuart Jamieson, "Multi-employer Bargaining: The Case of the B.C. Coast Lumber Industry," paper presented to the Annual Conference of the Canadian Industrial Relations Research Association, Ottawa, June 16, 1970, p. 10.  S3  Thus the building trade unions to a large extent have been required to control only the membership i n a small area — the Lower Mainland of  B r i t i s h Columbia.  In addition the employers are normally greatly  and r e l a t i v e l y competitive.^  segmented  As Levinson pointed out, the degree of union  bargaining power w i l l be greater for segmented — rather than i n d u s t r i a l l y — concentrated industries due to the greater i n a b i l i t y of employers to work together. of  The formation in 1970 of the Construction Labour Relations Association  B r i t i s h Columbia as a bargaining agent for the more than 600 construction  firms i n B r i t i s h Columbia, i s an attempt to overcome the employer's handicap. The fact that i t has d i f f i c u l t y i n maintaining i t s membership and does not represent a l l B r i t i s h Columbia construction firms would seem to support Levinson's  analysis. The hypothesis proposed i s that the rate of wage change i n the con- .  struction industry (W_^) should vary d i r e c t l y with changes i n the demand for construction output (Q).  It i s expected that as construction a c t i v i t y changes,  union negotiators w i l l adopt this change as t h e i r future expectation of demand change for employee's services. indicates settle.  The rate of construction output change also  thetrelative pressure that w i l l be exerted on i n d i v i d u a l firms to If demand i s r i s i n g the firm w i l l be anxious to complete projects i n  order to compete for more jobs.  If demand i s f a l l i n g , the firm may not be  very adverse to the complete shutdown of a strike as layoffs anyway.  may be occurring  F a l l i n g demand w i l l c e r t a i n l y make firms adverse to any increase i n  labour costs.  Jamieson, "Multi-employer B a r g a i n i n g : Coast Lumber I n d u s t r y , " op. c i t . , p. 9.  The Case of the B.C.  54  The change In output demanded i s more predictable for construction than resource-based  industries since construction contracts  awarded i n advance of production.  are  In other industries large volumes of  inventories may be maintained and future sales are rarely known i n advance.  To the basic wage determination equation developed i n Chapter  a percentage change i n d o l l a r output term has been added.  III  The Wx term  has been removed due to the assumption that the construction industry i s a "wage l e a d e r . "  The equation tested then i s : W = a + bP + cE + dK + eK ^ + fc + gD + hQ c now then  The results after  testing by a stepwise regression method are: W = 1.2705 + 0.8624 Q C (1.1499) (0.1784) [0.0002]  R 2 = .5439  (1)  Numbers i n round brackets below the equation represent the standard errors.  Those i n square brackets are the F - p r o b a b i l i t i e s . This equation shows the change i n d o l l a r output variable to be  s i g n i f i c a n t at the f i v e per cent l e v e l .  Other variables  tested were not  found to be s i g n i f i c a n t at the five per cent l e v e l using the stepwise method; the constant as well i s close to being i n s i g n i f i c a n t .  This hypo-  thesis explains more than 50 per cent of the v a r i a t i o n of the rate of wage change during the time period.  6, 7  6 2 Part of the reason for the lowness of the R probably results from the amount of aggregation that was: necessary i n order to find an industry wage rate. Although there i s pressure for the i n d i v i d u a l trades to achieve similar wage settlements, there are naturally deviations. Our analysis i s here concerned with only inter-industry movements. ^There i s . a . s t r o n g p o s s i b i l i t y that the introduction of the change i n output v a r i a b l e , Q, w i l l cause c o l l i n e a r i t y to appear between i t and the other  p  B.  Logging  (Coast) Industry  Unfortunately, i t was found impossible to produce a more complete a n a l y s i s of the logging industry i n B r i t i s h Columbia:  l a c k of data, or  i n many cases, data which were g r e a t l y suspect as to accuracy, required the e n t i r e exclusion of the logging industry of the B r i t i s h Columbia i n t e r i o r and allows an examination of c o a s t a l logging operations only. The two regions (coast and i n t e r i o r ) operate as almost e n t i r e l y d i f f e r e n t i n d u s t r i e s , except f o r the f a c t , of course, that many of the l a r g e r companies operate i n both of them. The c o a s t a l operation was the f i r s t to be developed, and during the l a t e 1940's and e a r l y 1950's i t s production exceeded that of the i n terior.  As the t r a c t s of mature timber on the coast diminished, the i n -  t e r i o r became more and more developed.  Because of the d i f f e r e n t climate  demand v a r i a b l e s . The c o r r e l a t i o n c o e f f i c i e n t s expressing the r e l a t i o n of Q to E and P are 0.0519 and 0.7487, r e s p e c t i v e l y . In a d d i t i o n , a very high c o r r e l a t i o n c o e f f i c i e n t of 0.8312 was found to e x i s t between the rate of i n f l a t i o n , t, and Q. Strong m u l t i - c o l l i n e a r i t y therefore e x i s t s . Running the equation without the Q v a r i a b l e y i e l d e d the equation: W  = 3.0717 + 1.1909 C ° (0.9998) (0.3213) [0.0018]  R  2  = 0.4470  Normal s t a t i s t i c a l procedure would require that the r e l a t i o n s h i p between C;, P, and C be established i n order that the separate influences of each be discovered. In t h i s case the r e l a t i o n s h i p i s simply unknown. The above equation t h e r e f o r e , cannot be considered a good explanation of the wage determining process i n the construction i n d u s t r y . Strong c o l l i n e a r i t y e x i s t s as w e l l between the dummy v a r i a b l e and the rate of employment change. The c o r r e l a t i o n c o e f f i c i e n t i s 0,6515. This, i s probably due to the fact that contracts are signed by some segment of t h i s industry every year.  56  and t e r r a i n of the i n t e r i o r industry, operations are different to those on the coast. of timber.  Equipment used must be more intense to permit the extraction  Different trends and forces are therefore expected to operate  upon the bargaining process.  Unfortunately, while the forest industry i s  B r i t i s h Columbia's largest and most important industry, i t i s also the most devoid of reputable s t a t i s t i c s .  Government s t a t i s t i c s at both the  federal and p r o v i n c i a l levels have not yet been able to summon the courage to break down the wall of protection surrounding the B r i t i s h Columbia 'lumber barons.'  No doubt this  'estates' of  'data gap'-has--served  to. increase the turbulence of i n d u s t r i a l relations i n this industry. The data obtained on coast logging operations can therefore be viewed as approximate only. Like other natural resource industries i n B r i t i s h Columbia, logging must be considered r e l a t i v e l y competitive.  Three-quarters of  i t s production i s sold i n the world market where prices are set by market forces due to the high e l a s t i c i t y of lumber demand.  And l i k e the  mineral industry (discussed l a t e r ) the logging industry i s well-suited for the replacement of labour by labour-saving equipment as labour costs rise.  The fact that output over the 1949-1968 period has risen by 89 per  cent, while labour employed has f a l l e n by 21 per cent, with money wages r i s i n g by 168 per cent, demonstrates this fact very w e l l .  Developments  of the power saw and more e f f i c i e n t methods of timber transportation have especially contributed to labour replacement. However, more than i n the mineral industry and c e r t a i n l y more than i n construction, logging operations are suited to a high degree of i n d u s t r i a l  57  concentration.  While there are several logging companies operating i n  this industry, the manner i n which timber lands are licensed has permitted six or seven very large firms to exercise an i n d i r e c t control over the industry.  Recently the power of these firms has become more  direct as they have d i v e r s i f i e d within the context of other forest product g operations  ( e . g . , pulp and paper, hardboard, rayon and synthetics).  This trend has led to a need for greater union co-operation across industries.  Often, however, there has been more misunderstanding and mistrust  than co-operation due to the fear by unions of the loss of control i n certain jurisdictions. lack of co-operation. (F.I.R.)  To a large extent the employers have encouraged this The recent experience of Forest Industrial Relations  (negotiators for 116 logging companies) walking out of a bargain-  ing session i n March 1970 due to the presence of multi-union negotiators seems ample proof of this  attitude.  This emphasizes Levinson's contention that the greater the degree of i n d u s t r i a l concentration and the smaller the degree of s p a t i a l zation, the smaller the degree of union bargaining power w i l l be;  centraliChart  II demonstrates that logging wages have lagged considerably behind those of the construction industry. The fact that p r o v i n c i a l government regulations concerning union c e r t i f i c a t i o n do not allow c e n t r a l i z a t i o n of union bargaining, but  insist  on l o c a l - b y - l o c a l c e r t i f i c a t i o n has helped to create union weakness.  The  l i n k between union negotiators  The  and the union membership i s weakened.  Jamieson, "Multi-employer Bargaining: Lumber Industry," op. ait., p. 7.  The Case of the B.C. Coast  58  negotiators are members of the International Woodworkers of; America (I.W.A.) regional o f f i c e .  Conditions vary from l o c a l to l o c a l and the defeat of a  s t r i k e vote by any l o c a l considerably weakens the bargaining position of the negotiators.  The result has been the use of a memorandum of agreement  9 policy,  whereby mutually acceptable wage rates, hours of work, working  conditions are set up between F . I . R . and the I.W.A. which must be r a t i fied l o c a l by l o c a l and company by-company. In addition, the constitution and i n t e r n a l p o l i t i c s of the I.W.A. has not helped to offset this decentralization.  Stuart Jamieson sums i t  up this way: "The union i s too democratic i n structure and procedures to function e f f e c t i v e l y i n a multi-employer bargaining system, i n an industry that i s becoming i n creasingly centralized i n i t s operation." 10 When t h i s i s coupled with the i d e o l o g i c a l differences of various l o c a l s ,  between the leaders  the result i s a r e l a t i v e l y weak bargaining u n i t .  The history of the union movement i n B r i t i s h Columbia's logging industry has been characterized by unrest and i n s t a b i l i t y ;  tremendous  pressure has been exerted upon the leadership to compete with various wage settlements i n other i n d u s t r i e s . are most l i k e l y to compare themselves  The industry with which loggers i s that of construction.  dustries are p a r t i c u l a r l y subject to seasonal unemployment less so i n m^re .r-eceht; years).  ^Tbid.  3  p.  11.  (construction  In addition, c y c l i c a l adjustment of i n -  9 Jamieson, "Multi-employer Bargaining: Lumber Industry," op. e i t . p. 14. 3  Both i n -  The Case of the B.C. Coast  59  vestment, output, and employment are s i m i l a r between the i n d u s t r i e s .  Skill  requirements, p a r t i c u l a r l y i n mechanical work and maintenance, are s i m i l a r or i d e n t i c a l i n many cases, y i e l d i n g yet another source of j u r i s d i c t i o n a l dispute.  Control over the same workers-has long been a 'bone  of contention' between the unions of these two industries.  Intense 11  b i t t e r r i v a l r y for leadership and prestige has naturally been the r e s u l t . Testing of the wage determination model for coast logging therefore included the hypothesis that the rate of wage change i n the construction industry CWc) i s expected to have considerable influence on the IiW.A.'s wage demands. W g  Results found were:  = 2.1620 CI.0832)  when a simple regression of W  + 0.5242 W (0.1554) C [0.0034]  was run against W  1  -l-Og  C  change i n logging.  R 2 = .3874  (2)  the rate of wage  The complete model gives us: W 8  W g  = 2.3915' (0.5974)  + 1.2539 C (0.1889) [0.0000]  R 2 = .7099  = 1.7702 (0.59.41)  + 0.0844 E + 1.2241 C + 1.9981 D (0.0386) (0.1640) (0.7422) [0.0422] [0.0000] [0.0154] R 2 = .8320  The results show that while Wc i s able, by i t s e l f ,  (3)  (4)  to explain  almost 40 per cent of the movement of W., , when combined with the other log'  Jamieson, "Multi-employer Bargaining:, Coast Lumber Industry," op. oi-t., p. 9.  The Case of the B.C.  60  variables i t no longer remains s i g n i f i c a n t .  Employment change, cost  of l i v i n g change, and contract timing are together able to account for over 80 per cent of the variance of the rate of wage change i n the coast logging industry. The significance of the employment variable is rather s u r p r i s ing, since as was e a r l i e r pointed out, wages have generally risen while employment has f a l l e n .  The relationship between the two stems, however,  from short-run adjustments.  An expansion i n labour demand has been  accompanied by a r i s e i n wages.  On the other hand, i t is safe to con-  clude that the o v e r a l l contraction of the labour demand has contributed to the lower wage rate prevalent i n logging, as compared to the construct i o n industry.  This is: i n general agreement with e a r l i e r conclusions  that the rate of technological displacement has been greater for logging than for construction.' The significance of C lends support to the conclusion that p o l i t i c a l forces are very important.  On the other hand, the suspicion ex-  i s t s that there may be a strong p o s i t i v e relationship between C and Wx. This arises p a r t i c u l a r l y because wage changes are measured i n money terms. An examination of the c o r r e l a t i o n matrix for this industry shows a correl a t i o n coefficient of only .6756 between Wx and C.  Using the general  " r u l e of thumb" of accepting an equation i f the c o r r e l a t i o n coefficients 2 are lower than the R , the above results  are v a l i d .  12  Because E and D are variables determined In the logging,industry, there i s no a priori reason for expecting a relationship between Wc and these variables to e x i s t . The c o r r e l a t i o n matrix gives c o r r e l a t i o n coefficients of 0.1391 and -0.1280 for E and D against W .  61  In addition, the r e l a t i v e l y large increase i n money wages observed  (168 per cent), despite the degree of employment contraction  (21  per cent) leads to the conclusion that independent union bargaining power i s effective  over and above the constraint of the forestry  On the other hand, the significance  labour.market.  of the dummy variable  indicates  that general economic conditions may exert some influence on the wage settlement.  Because the timing of I.W.A. contracts has tended to occur  more often during rececession periods,  the rate of wage increase has been  13 less than i t otherwise might have. Of p a r t i c u l a r importance here i s . t h e fact that while the I.W.A. has often based wage demands upon current or past construction demands and settlements, economic conditions surrounding the two are often very different.  The construction business cycle tends 1 to lag one or more  years behind other industries.'  While construction a c t i v i t y may be at a  peak and wage settlements high, other industries may already be i n a severe slump. considerations,  Thus wage demands, while based on a series of p o l i t i c a l w i l l be tempered by the general economic conditions of  the industry. It i s concluded that the logging' settlement two forces —economic and p o l i t i c a l .  i s a mixture of the  While wages seem to be higher than  a l e v e l that economic forces would cause i n the absence of unions, at the same time,, they seem to f a l l short of a l e v e l based on p o l i t i c a l considerations alone. 13 • As was pointed out i n Chapter III (Footnote 13),, the dummy v a r i able may be c o l l i n e a r with the demand variables and this would weaken,the significance of the above equation. The correlation matrix y i e l d s c o e f f i cients of 0.4251 and -0.0988 for D against P and'E, respectively. The relationship does not seem to be p a r t i c u l a r l y strong.  62  C  Sawmilling In many respects the analysis of sawmilling and logging should  be combined and carried out together.  The relationship becomes rather  complicated, however, since some union locals represent  both^loggers  and sawmill workers, while others represent only one group or the other. Wage negotiations same.time,  for the two industries are often carried out at the  and yet a few locals provide an exception by being more U  specialized.  Firms with whom the negotiations  are made are,  to a  large degree, i d e n t i c a l . Because data are more complete (D.B.S. sawmilling operations, t e r i o r operations.  i t is possible  The Lumber Industry)  for  to include both the coast and i n -  However,, i t is impossible to treat them as separate  industries which would have been preferable, were not available.  since separate wage data*  The results given are an average of the two:>— hence,  a second reason for the separation of the logging and sawmilling indust r i e s into two parts. To some extent the sawmilling industry, both on the i n t e r i o r and coast,.has differed from coast logging i n trends. rose by more than 140 per cent from 1949 - 1968.  Output i n sawmilling Employment has risen  generally by approximately 17 per cent and wages have risen by 150 per cent.  These figures  are biased to a degree by the aggregation of coast  and i n t e r i o r industries.  Coast sawmilling has suffered a  substantial  decline i n employment, nearly 30 per cent greater than that i n coast  Jamieson, "Multi-employer Bargaining: Coast Lumber Industry," op. oit.3 p. 12. .  The Case of the B.C.  63  l o g g i n g accompanied by a 50 per cent output  increase.  the other hand -- the more r e c e n t l y developed  The i n t e r i o r , on  region —  has had output and  employment d u r i n g t h i s p e r i o d r i s e ' by 400 and 67 per cent, I t i s r a t h e r obvious  respectively.  from b o t h cases t h a t s u b s t a n t i a l  s u b s t i t u t i o n f o r l a b o u r has o c c u r r e d .  The product market f o r s a w m i l l  p r o d u c t s i s s i m i l a r to t h a t f o r l o g g i n g . w o r l d markets, w i t h an almost  capital-  I t i s v e r y c o m p e t i t i v e i n the  i n f i n i t e l y e l a s t i c demand curve.  Because  of the s i m i l a r i t y between companies and unions i n v o l v e d i n b a r g a i n i n g , the problems r e g a r d i n g s p a t i a l and i n d u s t r i a l c o n c e n t r a t i o n e a r l i e r mentioned f o r l o g g i n g are the same. The h y p o t h e s i s then i s t h a t the r a t e o f change o f wages i n the s a w m i l l i n g i n d u s t r y -(W ) w i l l be determined g  o f wage change i n the l o g g i n g i n d u s t r y . W S  No cent l e v e l .  =0.1998 (1.1258)  +  The e q u a t i o n becomes:  0.8864 W (0.1861) [0.0002]  other v a r i a b l e s were found  to a l a r g e extent by the r a t e  R  2  = .5715  (5)  8  t o be s i g n i f i c a n t a t the f i v e per  U s i n g a stepwise r e g r e s s i o n method the h y p o t h e s i s i s  ted by the e m p i r i c a l r e s u l t s .  The c o n s t a n t i s a l s o i n s i g n i f i c a n t .  supporThe  e q u a t i o n p r e d i c t s t h a t an i n c r e a s e o f f i v e p e r cent i n the l o g g i n g wage r a t e w i l l be matched by a 4.4 per. cent i n c r e a s e i n s a w m i l l workers' wages. T h e - r e s u l t s seem t o support R o s s  1  " o r b i t o f c o e r c i v e comparison"  hypo-  thesis . S i n c e s a w m i l l i n g i s a secondary  p r o c e s s i n the f o r e s t  products  i n d u s t r y , t h e r e i s some q u e s t i o n as t o whether the r e l a t i o n s h i p found b e tween wage movements o f s a w m i l l i n g a n d . l o g g i n g might not be the r e s u l t of  :  64  similar, demand forces  i n both, industries.  It has already been pointed  out that the markets faced by each are s i m i l a r .  To determine i f  this  is the case c o r r e l a t i o n matrices were set up which show the relationship between output per man-hour i n each industry and the rate of change i n . employment i n each industry.  (These .are shown i n Tables VII and V I I I ) . •  »  •  •  Correlation coefficients were found between P and P.. . , and E and E.. s log • s log of 0.1679 and 0.4774 respectively.  These values indicate that the re-  l a t i o n s h i p , i f i t e x i s t s , i s r e l a t i v e l y weak. D.  Pulp and Paper Pulp and paper is the l a s t member of the industries which are  generally c l a s s i f i e d as the "forest products" industry. pulp and paper resembles those c h a r a c t e r i s t i c s other two:  In many respects  already described for the  i t s markets are i n t e r n a t i o n a l , there is a high degree 8f  competition, demand is price and income e l a s t i c , i t s production i s exported.  and the major part t>f  Several of the largest companies operate  in a l l three industries, and thus settlements made by a company in"one sector are emphasized i n negotiations dealing with other sectors.. These s i m i l a r i t i e s as noted e a r l i e r have created pressures for co-operation and possibly amalgamation of the I.W.A.  (servicing logging  and sawmilling) and the International Brotherhood of Pulp, Sulphite and Papermill Workers and the Pulp and Paper Workers of Canada.  The Pulp  and Paper Workers of Canada' Q?PW.C') has been only recently formed. represents  a group of workers who were d i s s a t i s f i e d  It  with the p o l i c i e s of  the older International Brotherhood of Pulp, Sulphite and Papermill Workers.  65  The emergence' of this new-union has seen increased militancy i n . t h e pulp and paper industry.. Strikes have occurred twice i n the past three years whereas previous h i s t o r y had seen only..one s t r i k e i n over 40 years.  The  result has been increased competition between unions for j u r i s d i c t i o n , with a lessening of the degree of co-operation between unions of the same industry and other industries as-well. At the same time there exists a wide divergence between pulp and paper and the other two forest  industries.  Pulp and paper is the most  c a p i t a l - i n t e n s i v e industry with no small independent operators.  Demand  for ouput has grown at a phenomenal r a t e — by 1967 r e a l output had expanded nearly five times above the 1949 l e v e l .  Employment increased  nearly three-fold during the same period, while wages rose by more than 150 per cent.  The increase i n employment of this industry, of course,  stemmed mainly from the rapid r i s e i n output.  The industry also has been  highly mechanized and, while certain jobs have been replaced by machines over a period of several years,  i t is perhaps safe to say that the re-  placement rate has-not been as high i n this industry as i n a number of others. The militancy of B.C. pulp and paper workers generally has been low.  Only i n 1957-58 and 1966-67 have strikes occurred.  The bargaining  p o l i c y has usually been to wait u n t i l coast lumber negotiations have been completed and then s e t t l e for approximately equal percentage  increases.  Thus pulp and paper workers have l a r g e l y avoided the costs of s t r i k e action.' These costs a r e . l a r g e l y borne by members o f the logging industry, whose settlement is then imitated.  Professor Jamiesbn points to the differences  66  of job security and employment conditions as being a major obstacle to t h e i r amalgamation.1"""'  This high degree job security i n pulp and paper  has resulted c h i e f l y from the rapid expansion of the industry.  Logging  and sawmilling have experienced no comparable expansion. The hypothesis for pulp and paper Is similar to that of the sawmilling industry. ble to logging.  Pulp and paper, l i k e sawn lumber, i s most compara-  Both are secondary stages of production.  W  =  p  W P  =  -0.3122  CI.6095)  -0.4648 CI.2690)  + 1.1045 W-  CO.2661)  i  0  R  = .5034  (6)  g  [0.0007]  + 0.3173 E CO.0941) f0.0039]  + 0.7844 W (0.2302) [0.0036]  8  R 2 = .7097  (7)  In both the equations the constant is i n s i g n i f i c a n t , as are a l l other unmentioned variables,  at the five per.cent l e v e l .  The rate of  wage change iri logging can explain 50 per cent of the variance i n the rate of pulp and paper wage change.  When the change i n employment i s  added the equation explains over' 70 per cent of the wage variance.  The  results, indicate that given a f i v e per cent increase' i n wages In logging wages, one can expect almost a four'per cent increase i n pulp and paper wages, i f employment is constant; . The finding that there i s less than a one-to-one relationship between wage movements i n the two industries appears  ""'Jamieson, "Multi-employer Bargaining: Coast Lumber Industry," op-ait., pp. 7-10. 1  The Case of the B.C.  67  correct, for while wages' i n pulp and paper tend to be higher than those i n logging,  the movement of wage levels  mately coincides i n  absolute  terms.  (as given i n Chart II)  approxi-  In other words, each industry must  receive approximately equal money increases with the absolute d i f f e r e n t i a l being maintained.  (See Chart I I ) .  The results for this industry would  seem to show that the wage change i s the result of a mixture of economic and p o l i t i c a l  forces.  Again, similar to the sawmilling industry, there exists the question of whether the demand for the products of the pulp and paper and logging industries might be so closely t i e d that i t i s the movement of demand which causes the s i m i l a r i t y of wage movements i n the two indust r i e s rather than p o l i t i c a l forces as outlined above.  Again, however,  Tables VII and VIII indicate that this demand relationship i s not strong.  E.  Mining The B r i t i s h Columbia mineral industry, l i k e other, primary-based  industries i n any way,  and unlike construction, cannot be considered a price-maker Much l i k e the proverbial 'farmer'  i n introductory economics  coursesj mining firms are forced to take prices as they are determined i n the international market. For this reason,  emphasis upon wage increases i n union demands  unaccompanied by large increases i n demand for output would result i n substantial  employment adjustment'.  Real output, i n fact, remained r e -  markably stable from 1949-1960, and during this period labour demand f e l l by approximately 35 per cent.  Mineral wages, although they rose by approxi-  mately 80 per cent, remained near the bottom of the wage hierarchy examined.  68  A high degree of c a p i t a l - s u b s t i t u t i o n  for labour must have occurred  during this period. During the expansion which followed i n the 1960's, one would expect a further wage increase, employment contraction.  but at the same time, a lesser degree of  Management i s expected to maintain the c a p i t a l -  substitution trend since a large increase i n labour demand would merely stimulate wage increases.  Labour can be expected to be i n short supply  since i t has been known that employment opportunities have been few i n the industry for several years.  Mining wages have also been consider-  ably lower than other i n d u s t r i e s . Of primary importance also is* the fact that ore grades are f a l l i n g . As mines of lower and lower mineral concentration are put into production, emphasis i s placed on larger and larger production volume. requires producers to use more and more heavy equipment.  This naturally The c a p i t a l -  intensive nature of the mineral industry is probably the result of both increasing labour costs and the need for mass volume due to mineral exhaustion. During the period 1961 - 1968, r e a l output increased by more than 70 per cent; labour employed rose by approximately 25 per cent, while wages rose by 50 per cent.  Throughout the entire period examined (1949-1968)  r e a l output rose by more than 75 per cent accompanied by a wage increase of 169 per cent.  Overall employment change was a decline of 16 per cent.  Wage goals seem to have been emphasized'over employment objectives.  Des-  p i t e this the union has remained at the bottom of the wage structure under examination.  69  An phasized  official  few  A s s o c i a t i o n o f B r i t i s h Columbia  em-  i n an i n t e r v i e w t h a t t h e n a t u r e o f the b a r g a i n i n g procedure i n  the m i n e r a l basis.  o f the M i n i n g  i n d u s t r y i n t h i s p r o v i n c e has always been on an i n d i v i d u a l  Industry-wide b a r g a i n i n g has never been encouraged except by a  i n t e r n a t i o n a l union  leaders.  The n a t u r e  o f the i n d u s t r y v a r i e s so  g r e a t l y from l o c a t i o n to l o c a t i o n that i s s u e s o f prime importance in.one area may be v e r y much 'dead' i n a n o t h e r . on  f i r m and l o c a l b a r g a i n i n g —  wide b a s i s . ity  Emphasis has always been p l a c e d  or a t most b a r g a i n i n g on a narrow a r e a -  At the same t i m e - i t was mentioned t h a t a p a t t e r n o f s i m i l a r -  i n wage s e t t l e m e n t s  aggregation  necessary  was e v o l v i n g .  To some extent  then the degree o f  t o perform a r e g i o n a l a n a l y s i s may d i s t o r t the r e -  sults i n this industry. It  i s hypothesized  t h a t the m i n e r a l  i n d u s t r y , because o f c e r t a i n  s i m i l a r i t i e s w i t h the f o r e s t i n d u s t r y , tends t o seek comparable wage settlements.  A management o f f i c i a l  s t a t e d that coast l o g g i n g , i n p a r -  t i c u l a r , p l a y e d a l a r g e r o l e i n wage o f f e r s .  Both i n d u s t r i e s a r e r e s o u r c e -  based,' the markets i n which .the products  a r e s o l d a r e s i m i l a r i n t h a t both  a r e i n t e r n a t i o n a l and the demand curves  f a c e d by each a r e r e l a t i v e l y e l a s -  tic. T h e - l o g g e r s have•normally been much more m i l i t a n t than mining unions, a t l e a s t i n B r i t i s h Columbia and, s i m i l a r t o t h e s i t u a t i o n  described  for  the" pulp and paper i n d u s t r y , l o g g i n g has been used to 'break the i c e '  for  wage  settlements. R e s u l t s o f t e s t i n g were:  * W = 0.2277 + 0.9849 W Q.5913) (0.2583) ° [0.0013]  2 R = .4468 8  (8)  70  W = M  32.0371 - 53.8848 K CIO.6225) (17.5152) t t [0.0071]  + i e n  0.9692 W (0.2268) X O [0.0006]  g  + 3.34482 D Cl.5669) [0.04632  R 2 = .6793  (9)  Logging alone is able to explain nearly 45 per cent of the variance i n the rate of change of mining wages.  The addition of lagged p r o f i t s an  the dummy variable increase this explanation to nearly 70 per cent. sign of the lagged' p r o f i t - s a l e s ted.  The  r a t i o i s , however, opposite to that expec-  The obtained result indicates that the higher the l e v e l of p r o f i t s  i n the past year, the lower w i l l be the rate of present wage increase. This decreases the r e l i a b i l i t y of this equation. The significance of the dummy v a r i a b l e , D, indicates that the timing of the-contract expiry date ( i . e . , whether i t occurs during expansion or recession) may play a role i n determining the size of the wage. 16 increase. An interview with a mining management o f f i c i a l l e f t the impression that while coast logging may play a role i n t h e i r offer,  the s e t t l e -  ment made i n the forest products industry as a whole would influence bargains reached.  Settlements made i n pulp and paper were often mentioned  during the discussion.  This led to a test of the wage equation with the  average rate of wage change i n a l l forest products substituted for that of coast logging alone.'  The results proved the  impression correct.  Correlation coefficients r e l a t i n g D to E and P are 0.4688 and -0.0373, respectively. This seems to indicate that the relationship between the variables used to estimate demand and the dummy variable is not p a r t i c u l a r l y strong, at least for this industry.  71  w- = -1.1447 + 1.2024 W C1.0615) (0.1647) [0.00000]  R = .7476  (10)  M  Seventy^-five per cent of the variance of the rate of change i n mineral wages can be explained by the movement of wages in forest product industries.  A l l other variables are i n s i g n i f i c a n t at the five  per cent l e v e l , the constant is close to being i n s i g n i f i c a n t as w e l l . Equation (10) shows that a five per cent increase i n wages i n forest products results in a six per cent increase i n mineral wages.  This may.,  indicate that mining wages have tended to follow forest product movements by ; equal increases i n absolute terms.  F.  Chart II supports this conclusion.  Water Transportation A regional analysis  attempting to deal with the water transpor-  tation industry encounters several problems.  There are  essentially  three divisions of workers i n • t h e industry: (1) vessel crews of international vessels; (2) shore workers  mainly warehousemen and longshoremen;  and (3) vessel crews of l o c a l vessels which work along the B r i t i s h Columbia coast and on the rivers of the Mainland. This l a s t group includes mostly tugboat and barge crews. The f i r s t group cannot be examined i n this study since the factors  influencing the wage determining process obviously l i e outside  the range of this analysis.  For this group international forces  play a large role i n the determination of the wage rate.  will  72  The  second group, shoreworkers, a r e very  t h e i r American c o u n t e r p a r t s influence of external The  closely a f f i l i a t e d  through t h e i r u n i o n .  with  The r e s u l t i s a l a r g e  forces.  third division,  coast  and i n l a n d v e s s e l crews, a r e more i n -  f l u e n c e d by r e g i o n a l f a c t o r s than the o t h e r s because t h e i r t i e w i t h the i n t e r n a t i o n a l u n i o n i s n o t as s t r o n g as t h a t o f shore workers; and i n a d d i t i o n the p r o d u c t s they handle a r e , c h i e f l y those o f the f o r e s t p r o d u c t s  to a l a r g e e x t e n t ,  local  products,  industry.  Beyond the i n t e r n a t i o n a l t i e s t h a t e x i s t among the union lies  leaders,  the f a c t t h a t water t r a n s p o r t a t i o n i s w i t h i n the j u r i s d i c t i o n o f the  f e d e r a l government.  A r b i t r a t o r s and m e d i a t i o n commissions appointed t o  deal with c o l l e c t i v e bargaining from areas o u t s i d e  agreements i n t h i s area w i l l o f t e n be  the B r i t i s h Columbia economy and w i l l tend t o i n t r o d u c e  i n f l u e n c e s e x t e r n a l t o the B r i t i s h Columbia s e t t i n g . I t i s not t o be concluded from the above d i s c u s s i o n s  t h a t the  B r i t i s h Columbia economy i s assumed i s o l a t e d from the w o r l d around i t , but  r a t h e r t h a t the B r i t i s h Columbia economy c o n t a i n s many c h a r a c t e r i s t i c s  that d i f f e r  from those i n the r e s t of Canada. ' T h i s a n a l y s i s i s an attempt  to i s o l a t e these r e g i o n a l c h a r a c t e r i s t i c s i n o r d e r  t o determine t h e i r i n -  f l u e n c e on the wage p a t t e r n . For a l l o f the above reasons t h i s a n a l y s i s i s l i m i t e d t o an exa m i n a t i o n o f the wage d e t e r m i n a t i o n crews.  p r o c e s s f o r coast  and i n l a n d v e s s e l  I n a d d i t i o n t o the above arguments some o f the l a r g e  companies m a i n t a i n t h e i r own water v e s s e l s n a t u r a l t o suspect  logging  to handle l o g booms.  t h a t members o f the Merchant Seamen's G u i l d  It is will  73  align themselves most closely with workers in the forest products i n dsutry. In Levinson's terms of analysis differ.  the two industries do, however,  While lumber i s dominated by a few very large firms, water  trans-  poration i s composed of many small firms which must be considered highly competitive for contracts.  In addition, i t may be safely stated that the  majority of these firms are concentrated i n a few key areas - - mainly Vancouver, V i c t o r i a and Prince Rupert.  The result i s that bargaining  power i s expected to be r e l a t i v e l y greater for unions i n water  transpor-  tation than for those i n logging. The results of the wage determination equation are:  W w t  =  2 R = .5210  0.0156 + 1.1165 W p (1.6268) (0.2523) [0.0004]  The constant i s obviously i n s i g n i f i c a n t , as are a l l variables  (11)  other than  the rate of wage change i n the forest product industries as a whole (sawm i l l i n g , logging, and pulp and paper).  According to the results ithis var-  iable i s able to explain over 50 per cent of the. variance i n water  trans-  port wage change. The coefficient of W  , 1.1165, can be interpreted to show that  a five per cent increase i n forest product wages w i l l be followed by a 5.6 per cent increase i n water transport wages.  The fact  that the co-  e f f i c i e n t i s greater than one lends support to Levinson's hypothesis  that  union bargaining power for l e s s ^ i n d u s t r i a l l y concentrated, more s p a t i a l l y centralized industries i s greater.  The difference between wages i n these  industries i s narrowing, at least i n percentage terms.  (See Chart II  for  74  a b s o l u t e movements).  While  f o r e s t product i n d u s t r i e s pay h o u r l y wages  t h a t a r e , i n a b s o l u t e terms, h i g h e r than those i n the water t r a n s p o r t i n d u s t r y , the percentage ceeded the percentage cause a narrowing  r a t e o f wage change i n water t r a n s p o r t has ex-  r a t e o f change i n f o r e s t product i n d u s t r i e s t o  of the wage d i f f e r e n t i a l i n a b s o l u t e terms.  The q u e s t i o n o f whether the movement o f wages i n the t h r e e f o r e s t product i n d u s t r i e s and water t r a n s p o r t i s due t o the r e l a t i o n s h i p i n demands i s a g a i n encountered. T a b l e s V I I and V I I I do not support  G.  The c o r r e l a t i o n m a t r i c e s g i v e n i n this.  Summary T a b l e VI r a i s e s s u s p i c i o n s t h a t the e m p i r i c a l r e s u l t s o f the  p r e c e d i n g s e c t i o n s cannot be r e l i e d upon t o support ships that are hypothesized various industries.  the c a u s a l r e l a t i o n -  to e x i s t between wage s e t t l e m e n t s i n the  T a b l e VI shows t h a t a h i g h c o r r e l a t i o n  e x i s t s between the r a t e o f wage change i n each i n d u s t r y . the s e t t l e m e n t s i n almost  coefficient  T h i s means t h a t  any i n d u s t r y c o u l d be found t o be as s i g n i f i c a n t  as t h a t o f the h y p o t h e s i z e d i n d u s t r y i n e x p l a i n i n g the wage movements of another. T h i s r e s u l t , however, s h o u l d n o t be s u r p r i s i n g i f ,  as was  p o i n t e d out a t the b e g i n n i n g o f t h i s c h a p t e r , the wage h i e a r c h y has r e mained c o n s t a n t over the p e r i o d o f a n a l y s i s .  I f emulation  i s the c h i e f  f a c t o r i n d e t e r m i n i n g wage s e t t l e m e n t s , then s i m i l a r wage movements a r e to be expected The  i n a l l industries.  r e s u l t i s t h a t the student of i n d u s t r i a l r e l a t i o n s  cannot  75  r e l y on e m p i r i c a l models alone t o demonstrate c a u s a l i t y .  First-hand  knowledge o f i n d i v i d u a l l a b o u r market r e l a t i o n s h i p s w i l l p r o b a b l y be the more r e l i a b l e t o o l of a n a l y s i s . I t must be emphasized t h a t the  findings  there i s no attempt here t o g e n e r a l i z e  f o r the B r i t i s h Columbia economy t o o t h e r r e g i o n s .  study i s to be i n t e r p r e t e d  The  as an examination o f the c h a r a c t e r i s t i c s o f  s i x B r i t i s h Columbia i n d u s t r i e s  only.  CHAPTER V THE The  INTER-INDUSTRY WAGE STRUCTURE  results show that both. Dunlop's wage 'contours' and Ross'  wage ' o r b i t s ' seem f a i r l y r e a l i s t i c i n t h e i r description of the wagedetermining proces.  Both of these concepts represent a relaxing of the  e a r l i e r hypotheses of each..  Indeed the comparison method of wage deter-  mination would seem to be very much present i n the B r i t i s h Columbia economy.  This chapter takes a close look at the wage structure which exists  between these six  industries.  Chart II shows that a definite wage structure does exist i n B r i t i s h Columbia and that, similar to Sylvia Ostry's findings for the whole of Canada,''" the wage hierarchy has been generally maintained over the 21-year period. This study does not conclude, as S y l v i a Ostry does, however, that employment change has been the most important variable determining the movement of wages. two industries,  Employment change was found s i g n i f i c a n t i n only  and even then, the causality was very weak i n one of  these . C a change of one per cent i n logging employment w i l l cause a wage change i n that industry of only .084 per cent, assuming a l l other factors fixed).  in Canada  In pulp and paper, where tremendous expansion has occurred, em-  H. D. Woods and Sylvia Ostry, Labour Policy (Toronto: Macmillan, 1962), Chapter 16. 76  and Labour  Economics  77  ployment has r i s e n to a large degree and played a role i n explaining wage movements.  On the other hand, while there has been a much larger expan-  sion i n construction r e a l output over the same period ( c o n s t r u c t i o n - r e a l output has r i s e n by 426 per cent and pulp and paper increased by 386 per cent i n the 1949-1967 period), employment change does not seem to have played the role that i t has i n pulp and paper.  Employment change was  not found to be s i g n i f i c a n t i n tests of the construction industry. Again i n agreement with Sylvia Ostry's findings, i t i s concluded that the measure of output per man-hour does l i t t l e or nothing to ex2 p l a i n the movement of wages i n the various i n d u s t r i e s . The hypothesis that the l e v e l of p r o f i t s should represent the a b i l i t y of the firms i n the industry to pay was not proven.  Conclusions  concerning the significance of the change i n the cost of l i v i n g index must be considered only tentative as there i s a strong suspicion that the relationship discovered might be spurious due to the presence of multi-collinearity.  The discovery of this v a r i a b l e ' s significance i n  the logging industry may, however, lend support to Reder's analysis i n which he argues that within the bargaining range the two sides w i l l use any variable to support a wage settlement i n their favour.  That the dummy.var-  iable was found to be s i g n i f i c a n t i n two industries indicates that signing a contract during a boom period may influence the wage settlement that results.  However, the l a t t e r variable i s highly suspected of c o l l i n e a r i t y  with the demand variables. This contradicts the trends found i n Jamieson's paper on the coast lumber industry discussed i n Chapter IV. He tentatively concluded that there seems to be a relationship between the movement of r e a l output per man-hour and wage changes. The measurements of output per man-hour i n his paper and this one are not i d e n t i c a l ; this may cause the divergence. It i s more probable, however, that the use of a stepwise regression method caused this variable to be rejected when others were found to be a much better f i t .  78  Various studies have examined other variables that have not, as y e t , been examined here.  Dunlop suggests that the r a t i o of labour  costs to t o t a l costs may serve to determine the union's bargaining power. This test has been adapted somewhat by using instead the r a t i o of labour costs to t o t a l value output.  This i s analogous to Dunlop's argument i n  that industries i n which, the share of the t o t a l output going to labour i s lowest, i t i s also expected w i l l have the greatest bargaining power. As was explained i n Chapter I I ,  those industries i n which labour costs  form a very small part of the t o t a l value of production w i l l be more able to pass on wage increases.  The formation of a union i n these indus-  t r i e s w i l l often bring wage settlements above those which would have been expected i n the absence of unions.  Table III gives a summary of these  average ratios for the six industries during the period 1949-1967 along with the percentage increase i n wages for the same period.  No c o r r e l a t i o n  can be found between the two v a r i a b l e s . There would seem to exist substantial evidence that within a range, at l e a s t , unions do exert considerable bargaining power.  Wages  have consistently increased throughout the 21 years despite f a l l i n g employment i n several industries and large fluctuations i n output per manhour.  Wage rates have often moved counter to the d i r e c t i o n i n which econo-  mic conditions are expected to cause them to move.  It i s safe to state  that i n the industries examined, wages are generally above that which one would expect them to be i f unions were absent. As an i n d i v i d u a l test to determine whether the hypothesis that the construction industry settlements represent  'key bargains,'  a simple  79  regression equation was run using the rate of wage change i n construction as an independent variable to explain the average rate of wage change i n the five other industries. W 1  Results were:  => 2.181 + 0.5385 W Cl.209) CO.1734) ° [0.0060]  R 2 = .3489  (12)  This indicates that construction wage settlements are able to explain more than one-third of the variance i n the movement of wages i n other i n dustries.  Given the f a i r l y complex wage structure which has already been  described to exist i n B r i t i s h Columbia, i t may be concluded that s e t t l e ments i n the key industry do have a significant impact on the rest of the economy.  In addition the results show that an increase of f i v e per cent  i n the construction settlement would be followed by a 2.7 per cent average increase i n the otherffive i n d u s t r i e s .  This reflects  the r e l a t i v e l y  weaker bargaining position of unions i n the other i n d u s t r i e s . Table IV shows that during the 21-year period studied the wage d i f f e r e n t i a l between the highest-and lowest-paid industries increased i n absolute terms from 36 to 115 cents (a more than threefold increase). This increase i s attributed to the emphasis that unions place on equality of increases i n  percentage  terms.  The result i s that approximately equal  percentage increases for a l l industries w i l l mean an absolute  increase  greater fbrathe more highly-paid industries than the resulting absolute increase i n the lower-paid i n d u s t r i e s .  Widening of the i n d u s t r i a l d i f -  f e r e n t i a l occurs i n increasing absolute amounts. During the period examined there have been occasional tightenings  80  of the d i f f e r e n t i a l i n certain periods.  This tightening has occurred  especially among the various members of the forest products Tradition states that d i f f e r e n t i a l s  industry.  should narrow during boom periods  because low-wage industries are forced to raise wages i n order to maint a i n or recruit workers i n a tight labour market. that for the forest product i n d u s t r i e s , substantially  indicates  at l e a s t , the d i f f e r e n t i a l narrowed  i n the boom years 1951-,1957 and widened during the slacker  years i n between. trends.  Chart II  The 1960's, however, seem to show l i t t l e of these  The other industries show a n e g l i g i b l e trend i n movement of  differentials. While Sylvia Ostry was unable to f i t her data for the whole of Canada with the above hypothesis,  i t would seem that i n the B r i t i s h Colum-  b i a economy, the forest products industry has exhibited these trends. The widening of the d i f f e r e n t i a l during the 1960's may be the result of wages being increased i n those industries most able to pass labour costs forward into the product market (construction).  The resource-based indus-  t r i e s are always constrained i n bargaining by an e l a s t i c international demand curve. It i s concluded that wage d i f f e r e n t i a l s , as c l a s s i c a l  instead of being narrowed  theory hypothesizes, have, due to the comparison of wage s e t t l e -  ments across industries which place emphasis on percentage rather than ab-. solute wage changes, increased with. time.  As Melvin Reder has pointed out:  "In economic theory, the forces of competition are supposed i n the long run to eliminate, or i n the event of imperfection, to curb wage differences that"firms or indust r i e s i n the labour market can pay. But these forces r e -  81  quire time to operate and can be costly to those who f a i l to judge market forces c o r r e c t l y ; conse-. quently, to insure that he does not depart too far from his wage target, an employer can do far worse than to simply emulate others." 3 F i n a l l y , i t must be conceded that the a p p l i c a b i l i t y of the above findings i s l i m i t e d because the study has been confined e n t i r e l y to the B r i t i s h Columbia economy.  Certainly outside factors w i l l play a s i g n i f i -  cant role i n certain bargains.  The fact that the wage equation for the  construction and water transportation industries i s able to explain j u s t s l i g h t l y more than 50 per cent of t h e i r respective wage movements i n d i cates that some explanatory variables are missing.  This should not be  surprising } f o r as mentioned i n the sections on each industry, there are external wage comparisons to be made as well as internal factors  to be  considered that enter from industries omitted.  Economics  M.  and  W. Reder, "The Theory of Trade Union Wage P o l i c y , " V o l . XXXIV (February, 1952), p. 37.  Statistics,  Review  of  CHAPTER VI A CONCLUDING SYNTHESIS Empirical results support on the whole, the e a r l i e r claim that the Ross-Dunlop debate i s not an either-or problem.  Both arguments may  be incorporated into a t o t a l analysis which gives a much better tion of wage-determining  explana-  forces.  It was found that i n certain industries  employment and output  per man-hour changes, which represent economic determinants cant i n explaining wage movements.  are  signifi-  Meanwhile, i n the same industries,  p o l i t i c a l variables such as the rate of wage change i n the most comparable industry or the cost of l i v i n g change were found to be significant  as w e l l .  This a l l adds support to the contention that the c o l l e c t i v e bargaining process i s a p o l i t i c a l procedure carried out i n an economic environment.  The firm i s b a s i c a l l y an economic i n s t i t u t i o n .  Unlike t r a d i t i o n a l  theory however, i t can no longer maintain that the assumption of the firm being s t r i c t l y profit-maximizing i s correct; instead some compromise must be made. offer, iables.  It i s more reasonable to think that management, i n making a wage  must make a trade-off  between certain economically-constrained  var-  That these variables are purely economic and that the wage s e t t l e -  ment offered w i l l be uniquely determined does not necessarily  follow.  The union, a b a s i c a l l y p o l i t i c a l i n s t i t u t i o n , i s also forced to make trade-offs between economically-constrained variables when making a wage demand.  In addition neither i n s t i t u t i o n w i l l be above attempting  p o l i t i c a l l y distort  to  the view that i t s opponent has of prevalent economic  82  83  conditions.  Ultimately both organizations attempt to maximize t h e i r  respective general welfares power, the t o t a l wage b i l l ,  Whether p r o f i t s ,  employment, p o l i t i c a l  or some other variable is emphasized i n  bargaining w i l l be the result of trade-offs made by the leaders of either side along their respective indifference curves as to the respective p r i o r i t i e s of each v a r i a b l e . The  wage-decision process eventually approximates  the analysis  given by Pen or Mabry i n which both unions and management r e a l i z e the economic constraints  and attempt to p o l i t i c a l l y manoeuvre the wage rate  within the existing range. counter-bluffs,  The end settlement i s a series of bluffs and  appeals before arbitrators  refer to economic ' j u s t i f i c a t i o n '  and mediators which vaguely  for their demands or offers,  but which  place no s o l i d f a i t h upon such j u s t i f i c a t i o n . 1 Reder has attempted to explain the range i n which non-economic factors can affect the equilibrium value of the wage rate as varying d i r e c t l y with the r a t i o of labour to t o t a l cost for the firm, and i n versely with the a b i l i t y of the firm to pass on increased wage costs 2 to i t s  customers. Except i n construction, the power of firms to pass on wage costs  i s limited for the six industries examined.  This may mean that the bar-  One trade union o f f i c i a l stated i n an interview that any;-economic c r i t e r i a which are derived by unions as j u s t i f i c a t i o n of t h e i r wage demands were derived after the amount of the demand had been decided. He was certain that management did the same.  Economics  M.  and  W. Reder, "The Theory of Trade Union Wage P o l i c y , " Statistics, V o l . XXXIV (February, 1952), p. 45.  Review  of  84  g a i n i n g range i s more s e v e r e l y to i m i t a t e the s e t t l e m e n t s economically  possible.  f r u s t r a t i o n i n bargaining  and t u r b u l e n t  to occur.  a d e f i n i t e wage s t r u c t u r e i s found t o e x i s t between  B r i t i s h Columbia's most important i n d u s t r i e s . be worked i n t o w i t h the s y n t h e s i s l i n e d above.  Attempts  made i n the c o n s t r u c t i o n i n d u s t r y w i l l n o t be  Increased  s t r i k e a c t i v i t y are l i k e l y  In c o n c l u s i o n ,  l i m i t e d i n those f i v e i n d u s t r i e s .  The s t r u c t u a l concept can  o f the e c o n o m i c - p o l i t i c a l arguments out-  I t i s hoped t h a t t h i s s y n t h e s i s w i l l prove b e n e f i c i a l i n  f u r t h e r a n a l y s i s o f the wage d e t e r m i n a t i o n  process.  B I B L I O G R A P H Y Backman, Jules. Bhatla, R. J , 1935-59,"  Wage Determination.  (New York:  D. Van Nostrand, 1959).  " P r o f i t s and Rate of Change of Money Earnings i n the U . S . , V o l . XXIX (August, 1962), pp. 255-62.  Economica,  Chamberlin, Edward. Theory of Monopolistic Competition. Mass.: Harvard University Press, 1931).  The Distribution  Clark, J . B. 1899). Douglas, Paul. 1930). Dunlop, J . T.  Real  Wages in the United  (New York:  States,  Macmillan C o . ,  1890-1926'.  (Boston:  Income, H. Hansen.  "Productivity and the Wage Structure," i n  ment and Public don:  of Wealth.  (Cambridge,  Policy:  Essays  in Honour of Alvin  W. W. Morton and C o . , 1948), pp. 341-62.  Employ-  (Lon-  "The Task of Contemporary Wage Theory," i n The Theory of Wage Determination, (ed.) J . T. Dunlop (London: Macmillan and C o . , 1964). .  Wage Determination  tus M. K e l l y , reprinted 1966).  Under Trade  Unions.  (New York:  Augus-  Eckstein, 0. and T. A. Wilson. "The Determination of Money Wages i n American Industry," Quarterly Journal of Economics, V o l . LXXIV (August, 1962), pp. 379-414. "Introduction," i n J . W. Kendrick, Productivity States. (National Bureau of Economic Research, Princeton University Press, Princeton, N . J . , 1961).  Fabricant,  Trends  Solomon.  in the United  Friedman, Milton. "Some Comments on the Significance of Labour Unions for Economic P o l i c y , " i n The Impact of the Union (ed.) D. M. Wright, (New York: Kelley and Macmillan, 1956), pp. 204-34. 85  Garbarino, J . "Inter-industry Wage Structure," mics, V o l . LXIV (May, 1950), pp. 282-305.  Globe  and Mail.  Quarterly  Journal  of  "Report on Business," (Toronto: July 7, 1970), p.  Econo-  1.  Jamieson, Stuart M. General Characteristics of the B.C. Construction Industry, unpublished manuscript, The University of B r i t i s h Columbia. "Multi-employer Bargaining: The Case of the B.C. Coast Lumber Industry," paper presented to the Annual Conference of the Canadian Industrial Relations Research Association, Ottawa, June 16, 1970. . "Regional Factors i n Industrial C o n f l i c t : B r i t i s h Columbia," Canadian Journal of Economics and Science, V o l . 28 (August, 1962), pp. 405-16. of  The Case  Political  Kendrick, J . W. Productivity Trends in the United States. (National Bureau of Economic Research, Princeton University Press, Princeton, N . J . , 1961). "The Impact of Unions on the Level of Wages," i n Wages, and Productivity (The American Assembly, Columbia U n i v e r s i t y , June 1959).  Kerr, Clark.  Prices,  Profits  . "Wage Relationships: The Comparative Impact of Market and Power Forces," i n The Theory of Wage Determination (ed.) J . T. Dunlop (London: Macmillan, 1964), pp. 173-93. Kuh,  Edwin. "A Productivity Theory of Wage Levels: the P h i l l i p ' s Curve," Review of Economic Studies, 1967), pp. 333-60.  Lansing, J . B . , and Eva Mueller. The Geographic (Chicago: I n s t i t u t e Research Centre, 1967). Levinson, H.  Industrial  198-206.  An Alternative to V o l . XXIV (October,  Mobility  of  Labour.  "Concentration and Wage Changes: Toward A Unified Theory," and Labour Relations Review, V o l . 20 (January, 1967), pp.  Levinson, H. • Determining Forces in Collective York: John Wiley and Sons, 1966),  Wage Bargaining.  Lewis, E. Gregg. Unionism and Relative Wages in the (Chicago: University of Chicago Press, 1963).  United  (New  States.  Lipsey, R. G. "The Relation Between Unemployment and the Rate of Change in Money Wage Rates i n the United Kingdom, 1861-1957: A Further A n a l y s i s , " Economica, V o l . XVII (January, 1960). Mabry, B. D.  Relations  "The Price Theory of Bargaining," Industrial V o l . 18 (July, 1965), pp. 479-502.  and  Review,  Labour  Marshall, F. R. and A. Cartter. Labour Economics: Wages, Employment and Trade Unionism. (Homewood, 111.: Richard D. Irwin, 1967). McKersie, R. B. and R. E. Walton. "Communications: Bargaining," i n Industrial and Labour Relations ( A p r i l , 1966), pp. 414-24.  The Theory of V o l . 19,  Review,  Meyers, F. and R. L . Bowlby. "The Inter-Industry Wage Structure and P r o d u c t i v i t y , " Industrial and Labour Relations Review, V o l . 7, (October, 1953), pp. 93-102. Pen,  J. Vol.  "A General Theory of Bargaining," XLII (March, 1952), pp. 24-42.  Perlman, Richard.  Review  Economic  Review,  "Forces Widening the Occupational Wage D i f f e r e n t i a l s , and Statistics, V o l . LX (1958), pp. 107-115.  of Economics  Perry, G. L. Unemployment, M . I . T . Press, 1966). Reder, M. W.  Economic  .  Statistics,  American  Money Wages and Inflation.  (Cambridge, Mass  "The Theory of Occupational Wage D i f f e r e n t i a l s , " V o l . LV (December, 1965), pp. 833-52.  Review,  "The Theory of Union Wage P o l i c y , " Review V o l . XXXIV (February, 1952), pp. 34-45.  American  of Economics  and  88  Rees, A l b e r t . The Economics Chicago Press, 1967).  of' Trade Unions.  (Chicago:  Reynolds, L. G . , and C. H. Taft. The Evolution of Haven, Conn.: Yale University Press, 1956). Rippe, R.  University of  Wage Structure.  (New  "Wages, Prices and Imports i n the American Steel Industry." and Statistics, V o l . LII (February, 1970), pp.  Review of Economics 34-46.  Robinson, Joan. The m i l l a n , 1933.  Economics  of Imperfect  Competition.  (London:  Mac-  "The External Wage S t r u c t u r e , " i n New Concepts in Wage (eds.) G. W. Taylor and F . C. Pierson (New York: McGraw-Hill Co. I n c . , 1957).  Ross, A. M.  Determination  .  Journal  "The Influences of Unionism Upon Earnings," of Economics, V o l . LXII (February, 1948).  '.'  Quarterly  "The Inter-Industry Wage Structure," with W. Goldner, Journal of Economics, V o l . LXIV (May, 1950), pp. 254-81.  Quarterly  . Trade Union Wage Policy.  (Berkeley:  University of  Califor-  Press, 1948). Sweezy, Paul.  "Demand Under Conditions of O l i g o p o l y , " i n A. E. A. Theory (Chicago: R. D. Irwin, 1952), pp. 404-09.  ings in Price  Read-  Vanderkamp, John. "The Time Pattern of Industrial Conflict i n Canada, 1901-1966," unpublished manuscript (University of B r i t i s h Columbia, 1968). . "Wage and Price-Level Determination: An Empirical Model for Canada," Economica, V o l . XXXIIT (May, 1966), pp. 194-212.  ment.  , and J . T. M o n t a g u e . S t u d y  (Vancouver:  in Labour  Market  University of B r i t i s h Columbia, 1966).  Adjust-  89 Weiss, L. W. "Concentration and Labour Earnings," Review., V o l . LVI (March, 1966), pp. 96-117. W i c k s e l l , K. Lectures on Political Kegan Paul L t d . , 1949). Wicksteed, P. H. The m i l l a n , 1910).  Economy.  American  (New York:  Common Sense of Political  Woods, H. D . , and Sylvia Ostry. Labour Policy Canada. (Toronto: Macmillan, 1962). Zeuthen, F. Economic reprinted 1968).  Theory  and Method.  Routledge and  Economy.  Wolf, J. de. Wage Movements and Wage Determination (Vancouver: Broadway P r i n t e r s , 1966).  Economic  (London:  in British  and Labour  (New York:  Mac-  Columbia.  Economics  in  Augustus D. K e l l e y ,  STATISTICAL SOURCES B r i t i s h Columbia Department of Labour. 1948-1968).  Annual  Report.  B r i t i s h Columbia Department of Labour. Region. ( V i c t o r i a , B . C . : 1968).  The Logging  (Victoria, B . C . :  Labour  Force  B r i t i s h Columbia Department of Mines and Petroleum Resources. port. ( V i c t o r i a , B . C . : 1948-1968). Canadian Department of Labour. S t a t i s t i c a l Sections.  Labour  Gazette.  Canadian Department of Labour. Employment. (Ottawa, O n t . :  Wage Rates,  Annual  '(Ottawa, O n t . :  Salaries  and Average  Queen's P r i n t e r , 1948-1968).  Dominion Bureau of S t a t i s t i c s . Annual Review of Mdn-Hours and Earnings. (Ottawa, O n t . : Queen's P r i n t e r , 1948-1968).  (Coastal  Re-  1948-1968),  Hours of  Hourly  Dominion Bureau of S t a t i s t i c s . The Lumber Industry (also known as mills). (Ottawa, O n t . : The Queen's P r i n t e r , 1948-1967). Dominion Bureau of S t a t i s t i c s . Operations The Queen's P r i n t e r , 1948-1967).  in the Woods.  Dominion Bureau of S t a t i s t i c s . The Pulp and Ont.: The Queen's Printer 1948-1967).  Paper Industry.  Dominion Bureau of S t a t i s t i c s . The Water Transportation (Ottawa, O n t . : The Queen's P r i n t e r , 1948-1968).  Saw  (Ottawa, Ont  (Ottawa,  Industry.  91  APPENDIX A In addition to the simple regression of s t r i k e a c t i v i t y that was run on wage changes alone, a further test was made using the model which i s developed at the end of Chapter I I I .  The s t r i k e variable was  again found to be i n s i g n i f i c a n t i n each industry. The equations found were:  i)  W C  ii)  = 1.0301 + 0.8310 Q + 2.2975 STRIKE (1.2152) (0.1810) (3.2609) 0.0003 0.4970  W  = 1.6629 + 0.0877 E (0.6310) (0.0397) 0.0416  g  R = .5568  + 1.2219 C + 2.1049 D + 0.0260 STRIKE (0.1674) (0.7771) (0.0426) 0.0000 0.0156 0.5566 R 2 = 0.8361  iii)  W = S  iv)  0.1648 + 0.8853 W.. (1.1914) (0.1920) 0.0003)  + g  0.0730 STRIKE (0.5689) 0.8677  W = -0.3219 + 0.3018 E. + 0.8051 W P (1.3156) (0.0993) (0.2373) 0.0081 0.0040  8  2 R = .5720  + -0.1426 STRIKE (0.2337) 0.5572 R 2 = .7168  v)  W = m  vi)  W W  =  -1.1544 + 1.2014 W (1.1353) (0.1721) f p 0.0000  0.4267 + 1.0893 W (1.6942) (0.2552) t p 0.0006  + 0.0790 STRIKE (1.8103) 0.9177  - 0.8322 STRIKE (0.9066) 0.3748  R = .7477  2 R = .5436  92 CHART I REAL VALUE-ADDED OUTPUT PER INDUSTRY  -_ .-Construction  Source:  Table I  Pulp and Paper — Coast Logging w ter Transportation  .  a  ;  • ••••• Sawmilling •  HQ  -mill  So  "  in  srt  .  Mining  S3  si SS"  &  5"?  SB  «<  &  tl  t i 4d  id-  Is  <cb b7  &  TABLE I INDEX OF REAL VALUE-ADDED OUTPUT PER INDUSTRY (1949 = 100)  YEAR 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968  CONSTRUCTION 87 100 98 161 200 234 191 237 342 413 311 315 291 286 276 292 340 439 514 562 531 Source:  MINERALS 122 100 103 117 107 98 99 113 121 103 87 84 99 99 125 135 132 130 159 174 176  COAST LOGGING 116 100 111 106 106 118 128 126 124 113 96 110 134 126 150 156 159 164 174 172 189  Industry publications of D.B.S.  SAWMILLING  PULP AND PAPER  118 100 119 126 134 137 148 133 160 150 152 169 180 178 197 215 237 247 241 248  101 100 112 126 128 150 172 183 191 186 184 270 333 298 317 329 367 423 471 486  —  —  WATER TRANSPORTATION 115 100 80 84 85 98 83 94 105 123 110 113 123 125 109 106 84 116 123 139 143  TABLE II AVERAGE ANNUAL HOURLY WAGE RATES IN SIX BRITISH COLUMBIA INDUSTRIES  YEAR 1948 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963' 1964 1965 1966 1967 1968  CONSTRUCTION $1.42 1.58 1.68 1.93 1.95 2.08 2.14 2.16 2.23 2.38 2.59 2.82 2.82 2.86 2.93 3.03 3.08 3.34 3.68 3.96 4.29 Source:  COAST LOGGING  SAWMILLING  PULP AND V PAPER  $1.29 1.35 1.46 1.69 1.77 1.82 1.81 1.86 1.93 2.07 2.13 2.23 2.35 2.34 2.44 2.53 2.63 2.80 3.00 3.21 3.46  $1.30 1.34 1.48 1.69 1.70 1.71 1.77 1.77 1.81 2.03 2.03 2.08 2.15 2.19 2.27 2.35 2.47 2.57 2.82 3.01 3.25  $1.34 1.33 1.41 1.71 1.80 1.86 1.89 1.97 2.07 2.09 2.18 2.21 2.47 2.47 2.52 2.66 2.78 2.83 3.25 3.43 3.52  Wages, Salaries  and Average  Hours of Earnings,  WATER TRANSPORTATION $1.06 1.12 1.21 1.40 1.49 1.59 1.60 1.69 1.79 1.83 1.83 1.98 2.03 2.04 2.12 2.13 2.20 2.43 2.55 3.14 3.26  MINING $1.14 1.10 1.21 1.45 1.48 1.52 1.63 1.67 1.75 1.82 1.94 1.97 2.08 2.08 2.11 2.18 2.29 2.40 2.72 2.96 3.14  Canada, Department of Labour, 1948-1968  Industry wage rates are unemployment — weighted averages of base rate for each job tion. These rates are for straight-time hourly earnings only.  classifica-  Ul  TABLE III COMPARISON OF WAGE BILL (PRODUCTION WORKERS) TOTAL OUTPUT RATIO AND AVERAGE PERCENTAGE HOURLY WAGE INCREASES FOR SIX BRITISH COLUMBIA INDUSTRIES 1949 -  1967  RATIO  PERCENTAGE INCREASE  .38  138 %  Mining  .38  169 %  Construction Sawmilling  .35 .27  151 % 125 %  Water  .20  180 %  .15  158 %  INDUSTRY  Coast Logging  A  Transportation  Pulp and Paper  Computed from one observation only (1967)  TABLE IV WAGE DIFFERENTIAL BETWEEN TOP AND BOTTOM INDUSTRIES 1948  YEAR  -  1968  DIFFERENTIAL  1948  36  1949  48  1950  47  1951  53  1952  47  1953  56  1954  54  1955  49  1956  48  1957  56  1958  76  1959  85  1960  79  1961  82  1962  82  1963  90  1964  88  1965  94  1966  113  1967  100  1968  115  TABLE V ANNUAL PERCENTAGE RATE OF WAGE CHANGE PER INDUSTRY 1949 - 1968  YEAR 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968  CONSTRUCTION 11 6 15 1 7 3 1 3 7 9 9 0 1 2 3 2 8 10 8 8  COAST LOGGING 3 10 14 1 1 4 0 2 12 0 2 3 2 4 4 5 4 10 7 8  SAWMILLING 5 8 16] 5 3 - 1 3 4 7 3 5 5 0 4 4 4 6 7 7 8  PULP AND PAPER - 1 6 21 5 3 2 4 5 1 4 1 12 0 2 6 5 2 15 6 3  WATER TRANSPORTATION -..4  10 20 2 3 7 2 5 4 7 2 6 1 0 3 5 5 13 9 6  MINING 6 8 16 6 7 1 6 6 2 0 8 3 1 4 0 3 10 5 24 4  00  99  TABLE VI CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN INDUSTRY RATE OF WAGE CHANGES*  W  w  c  w  ilog  W s  W P  W m  •  *  W wt  W, fp  1.000  c 0.6666  1.0000  W s  0.5282  0.7647  1.0000  W P  0.3161  0.6751  0.5321  1.0000  w  0.4797  0.6684  0.6905  0.8428  1.000  0.4654  0.5766  0.3352  0.3359  0.4258  1.0000  0.7343  0.8777  0.7632  0.7542  0.8538  0.7281  w  ilog  m  w wt W, fp  1948 - 1967 only.  1.0000  100  TABLE VII CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN INDUSTRY VALUE-ADDED OUTPUT PER MAN-HOUR CHANGE *  p c  p  P, log  P  P s  P  P m  P wt  1.0000 c  p,  -0,0667  1.0000  p  -0.1527  0.1679  1.0000  0.1697  0.0347  0.2277  1.0000  0.1467  0.4356  0.1945  0.2309  1.0000  0.2675  -0.4045  -0.3602  -0.5200  -0.3321  1.0000  0.0082  0.5446  0.6431  0.6842  0.3758  -0.6949  log s  p P p m  fp  1948 - 1967 only.  1.0000  101  TABLE VIII CORRELATION MATRIX DEMONSTRATING RELATIONSHIP BETWEEN EMPLOYMENT CHANGE PER INDUSTRY*  E. log  E c E  E  E s  E P  m  E wt  %  1.0000 c log  •  E  0.3962  1.0000  0.0362  0.4774  1.0000  - .10000  0.3371  0.1281  1.0000  0.0456  0.1457  0.0529  0.2751  1.0000  -0.0049  -0.0211  0.2716  0.1011  -0.3869  1.0000  0.0875  0.6155  0.5966  0.6602  0.1171  0.2755  1948  - 1967 only.  s •  E P *  E m  1.0000  TABLE IX ANNUAL PERCENTAGE CHANGE IN EMPLOYMENT FOR SIX BRITISH COLUMBIA INDUSTRIES 1949 - 1968  YEAR 1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968  CONSTRUCTION 24 10 7 10 9 -17 20 33 4 -19 0 -10 - 4 0 0 6 17 - 4 4 5  COAST LOGGING 0 0 21 -12 -12 - 1 14 14 20 8 2 - 4 0 - 1 1 1 4 - 4 —8 10  SAWMILLING - 8 16 13 0 - 1 3 9 - 3 - 5 2 2 - 4 - 8 2 7 7 2 - 5 - 8  PULP AND PAPER - 9 0 26 5 6 7 - 3 11 0 0 4 14 9 -11 4 14 9 12 7  WATER TRANSPORTATION -23 8 7 -20 39 5 22 - 9 13 - 7 14 -12 - 1 - 5 5 5 5 0 12 - 1  MINING 1 0 6 7 19 10 0 4 - 8 -15 - 4 47 -31 2 - 5 7 1 17 - 6 7  o ho  TABLE X ANNUAL PER CENT CHANGE IN VALUE-ADDED OUTPUT PER MAN-HOUR 1948 - 1968  YEAR  CONSTRUCTION  1949 1950 1951 1952 1953 1954 1955 1956 1957 1958 1959 1960 1961 1962 1963 1964 1965 1966 1967 1968  - 5 - 8 70 16 6 - 1 4 10 19 - 5 3 3 3 - 4 8 11 12 25 9 3  COAST LOGGING -11  32  -2 -1 20 -6-, .7 -7' 10 -30 16 30 1 26, 8 32 -16 20 35  •k  SAWMILLING - 2 29 7 0 0 5 13 5 - 5 7 4 - 2 32 5 7 6 2 9 12  Change i n DBS method of data comparison.  PULP AND PAPER 13 29 43 -27 10 3 6 - 5 - 9 17 32 - 7 3 20 4 0 - 4 -12 - 6  WATER TRANSPORTATION 17 -24 9 43 -18 -18 - 7 24  - 7  - 1 -10 25 4 - 9 - 5 -24 34 8 5 7  MINING -16 7 16 - 8 5 20 14 8 8 - 8 6 11 5 22 14 - 6 - 6 3 23 0  

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