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Cost-of-Living Escalators in Major Union Contracts

Author

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  • David Card

Abstract

This paper analyzes the price-indexation provisions of a sample of major Canadian collective bargaining agreements concluded between 1968 and 1975. Under these contracts, escalated wage increases comprised about one-third of total wage increases and represented a major source of erosion in the relative wages of skilled workers. The author argues that indexation provisions are usefully characterized by the marginal elasticity of the contractual wage rate to increases in prices. Measures of this responsiveness indicate that, on average, contractual wage rates are only slightly less than unit elastic with respect to price increases. There is considerable variation across industries, however, in the extent to which wages respond to price changes.

Suggested Citation

  • David Card, 1983. "Cost-of-Living Escalators in Major Union Contracts," ILR Review, Cornell University, ILR School, vol. 37(1), pages 34-48, October.
    • Handle: RePEc:sae:ilrrev:v:37:y:1983:i:1:p:34-48
    DOI: 10.1177/001979398303700103
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    Cited by:

    1. Graham, Liam & Snower, Dennis J., 2013. "Hyperbolic Discounting And Positive Optimal Inflation," Macroeconomic Dynamics, Cambridge University Press, vol. 17(3), pages 591-620, April.
    2. Christofides, Louis N. & Peng, Chen, 2006. "Contract duration and indexation in a period of real and nominal uncertainty," Labour Economics, Elsevier, vol. 13(1), pages 61-86, February.
    3. Louis N. Christofides & Thanasis Stengos, 2003. "Wage Rigidity in Canadian Collective Bargaining Agreements," ILR Review, Cornell University, ILR School, vol. 56(3), pages 429-448, April.
    4. Louis Christofides & Amy Chen Peng, 2007. "Real Wage Chronologies," CESifo Working Paper Series 2096, CESifo.
    5. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2-3), pages 427-448, March.
    6. Amy Peng & Louis N. Christofides, 2009. "Real Wage Chronology," Working Papers 011, Toronto Metropolitan University, Department of Economics.
    7. Liam Graham & Dennis J. Snower, 2008. "Hyperbolic Discounting and the Phillips Curve," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(2‐3), pages 427-448, March.
    8. David Card, 1988. "Strikes and Wages: A Test of a Signalling Model," NBER Working Papers 2550, National Bureau of Economic Research, Inc.
    9. Rebecca M. Blank & Alan S. Blinder, 1985. "Macroeconomics, Income Distribution, and Poverty," NBER Working Papers 1567, National Bureau of Economic Research, Inc.
    10. Louis N. Christofides & Man Tuen Leung, 2002. "Nominal Wage Rigidity in Contract Data: A Parametric Approach," University of Cyprus Working Papers in Economics 0210, University of Cyprus Department of Economics.
    11. Liam Graham & Dennis Snower, 2011. "Hyperbolic Discounting and Positive Optimal Inflation," CESifo Working Paper Series 3464, CESifo.
    12. Marco Manacorda, 2004. "Can the Scala Mobile Explain the Fall and Rise of Earnings Inequality in Italy? A Semiparametric Analysis, 19771993," Journal of Labor Economics, University of Chicago Press, vol. 22(3), pages 585-614, July.
    13. Louis Christofides & Thanasis Stengos, 2001. "Nominal Wage Rigidity: Non-Parametric Tests Based on Union Data for Canada," CESifo Working Paper Series 535, CESifo.
    14. Card, David, 1986. "An Empirical Model of Wage Indexation Provisions in Union Contracts," Journal of Political Economy, University of Chicago Press, vol. 94(3), pages 144-175, June.
    15. Louis Christofides & Chen Peng, 2006. "Major Provisions of Labour Contracts and their Theoretical Coherence," CESifo Working Paper Series 1700, CESifo.
    16. Joseph S. Tracy, 1986. "Seniority Rules and the Gains from Union Organization," NBER Working Papers 2039, National Bureau of Economic Research, Inc.

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