IDEAS home Printed from https://ideas.repec.org/p/pri/indrel/145.html
   My bibliography  Save this paper

Wage Indexation in Labor Contracts and the Measurement of Escalation Elasticities

Author

Listed:
  • David Card

    (Princeton University)

Abstract

It is not widely acknowledged that the process of wage determination in long term labor contracts may be critical to the determination and persistence of inflation and unemployment in North America. This paper uses Canadian contract data to analyse one important feature of long term contracts with cost of living indexation: the responsiveness of contracted vage rates to changes in prices within the contract period. Surprisingly, there is wide variation in this responsiveness across industries and across contracts. In about 15 percent of contracts average wage earners are over-indexed to inflation, receiving cost of living wage adjustments that increase their wages faster than the rate of inflation. On the other hand, in another 30 percent of contracts average wage earners receive cost of living increases that respond to each percentage increase in prices with a .7 percent or smaller increase in wages. Much of this variation is attributable to systematic industry effects, suggesting that industry characteristics may have a major role in determining the degree or indexation.

Suggested Citation

  • David Card, 1981. "Wage Indexation in Labor Contracts and the Measurement of Escalation Elasticities," Working Papers 525, Princeton University, Department of Economics, Industrial Relations Section..
    • Handle: RePEc:pri:indrel:145
    as

    Download full text from publisher

    File URL: https://dataspace.princeton.edu/bitstream/88435/dsp012514nk50h/1/145.pdf
    Download Restriction: no
    ---><---

    More about this item

    JEL classification:

    • M12 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - Personnel Management; Executives; Executive Compensation

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pri:indrel:145. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Bobray Bordelon (email available below). General contact details of provider: https://edirc.repec.org/data/irprius.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.