The cyclical sensitivity of white-collar skill margins
- 9 Downloads
In this paper the authors assess the extent to which white-collar skill margins (SMs) fluctuate over the business cycle. Whether the SM increases (decreases) during economic expansion (recession) or moves in an opposite direction depends on the elasticity of supply of highly skilled and entry level workers and, according to Oi's model of labor as a quasi-fixed factor, the fixed employment costs incurred by firms in hiring each of these categories of labor. Since the effects of supply elasticity and fixed employment costs tend to offset each other, the cyclical sensitivity of the white-collar SM can only be ascertained by recourse to empirical data. Bureau of Labor Statistics data from the Professional, Administrative, Technical, and Clerical Survey covering the period 1962–85 are used for this purpose.
The major finding of the paper is that white-collar SMsnarrow during the expansionary phase of the business cycle andwiden during periods of recession. In accordance with implications that can be drawn from the Oi model, it is also found that over the business cycle the SM of professional workers varies more than the SM of clerical workers; likewise the SM of workers with higher-order skills varies more than the SM of workers with lower-order skills. The primary policy implication of the findings is that, during the period covered by the data, white-collar SMs have moved in such a manner as to dampen price increases during the expansionary phase of the business cycle.
Skill margins are found to narrow when the rate of inflation is high among workers with lower-order skills in the clerical occupations, but to widen among workers in the higher-order skills in the professional and clerical occupations. Overall, however, inflation appears to exert a much smaller influence on white-collar SMs than the unemployment rate.
KeywordsUnemployment Rate Business Cycle Expansionary Phase Professional Worker Economic Expansion
Unable to display preview. Download preview PDF.
- Robert Evans, “Wage Differentials, Excess Demand for Labor, and Inflation,”Review of Economics and Statistics, February 1963, pp. 95–8.Google Scholar
- Richard Freeman,The Over-Educated American, Academic Press, 1976.Google Scholar
- Alan L. Gustman and Martin Segal, “The Skilled-Unskilled Wage Differential in Construction,”Industrial and Labor Relations Review, January 1974, pp. 261–75.Google Scholar
- Sheldon E. Haber, “Wage Structure in Internal Labor Markets and Marginal Productivity Theory,”Atlantic Economic Journal, December 1983, pp. 66–70.Google Scholar
- Robert E. Hall, “The Rigidity of Wages and the Persistence of Unemployment,”Brookings Papers on Economic Activity, No. 2, 1975, pp. 301–35.Google Scholar
- Paul G. Keat, “Long-Run Changes in Occupational Wage Structure, 1900–1956,”Journal of Political Economy, December 1960, pp. 584–600.Google Scholar
- Harry Ober, “Occupational Wage Differentials, 1907–1947,”Monthly Labor Review, August 1948, pp. 127–34.Google Scholar
- Walter Oi, “Labor as a Quasi-Fixed Factor,”Journal of Political Economy, December 1962, pp. 538–55.Google Scholar
- M. W. Reder, “The Theory of Occupational Wage Differentials,”American Economic Review, December 1955, pp. 833–52.Google Scholar
- Tibor Scitovsky, “An International Comparison of the Trend of Professional Earnings,”American Economic Review, March 1966, pp. 25–42.Google Scholar
- Herbert Simon, “The Compensation of Executives,”Sociometry, March 1957, pp. 32–5.Google Scholar
- William D. Walsh, “The Short-Run Behavior of Skilled Wage Differentials,”Industrial and Labor Relations Review, April 1977, pp. 302–13.Google Scholar