SOME EVIDENCE ON THE WAGE LEADERSHIP HYPOTHESIS
| Author | J. A. TREVITHICK,C. MULVEY |
| Date | 01 February 1974 |
| DOI | http://doi.org/10.1111/j.1467-9485.1974.tb00172.x |
| Published date | 01 February 1974 |
Scottish Journal
of
Political
Economy
Vol.
XXI,
No.
1,
February
1974
SCOTTISH
JOURNAL
OF
POLITICAL ECONOMY
February
1974
SOME EVIDENCE
ON
THE WAGE LEADERSHIP HYPOTHESIS
c.
MULVBY
AND
J.
A.
TREVITHICK
A
number of recent articles have advanced the hypothesis
that
wage changes
in
particular employment sectors may be significantly influenced by wage
changes which have
occurred
in other employment
sectors.
In
particular
Sargan
(1971)
and Phelps Brown
(1971)
have advanced such a hypothesis in
general form while Hines
(1971)
and Brechling
(1972)
have advanced specific
versions
of
it which
take
account
of
a
‘
wage leadership
’
effect.
Sargan
and
Brechling have tested their hypotheses but neither has obtained very satis-
factory results. This paper is intended to formulate
a
particular version
of
the
wage leadership hypothesis
and
to report the results
of
a simple test.
The paper is in four sections.
In
Section
I
it is hypothesised that there is
in the Republic of Ireland,
a
‘
key” group of skilled manual occupations,
which
is
enabled, by virtue of a persistent excess demand for their services, to
strike wage bargains
in
advance
of
the remainder of the labour force and that
these bargains are
of
a
magnitude which reflects the economic circumstances
of the key group. It is further hypothesized that, because of the existence of
an effective
‘
earnings transfer mchanism
’
based on the widespread accep-
tance
of
vertical and horizontal equity, the key group serve
as
wage leaders.
In Saction
I1
we explain how a simple test
of
this hypothesis
was
devised
and in Section
I11
we present the results of that test. In
Section
JV
we consider
what conclusions for economic policy are
to
be
drawn from our findings.
I
THE
HYPOTHESIS
The hypothesis advanced in this paper is simple and extreme. Where a
powerful earnings transfer mechanism exists between employment sectors
there will
be
a tendency
for
sectoral earnings to rise
in
sympathy with each
other.
In
the extreme case, in which we are mainly interested, the transfer
mechanism will be
so
powerful
as
to ensure complete uniformity in the
rate
1
1
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