The structure of wages in what should be a competitive labour market

Machin, Stephen and Manning, Alan (2002) The structure of wages in what should be a competitive labour market. CEPDP, 532. Centre for Economic Performance, London School of Economics and Political Science, London, UK. ISBN 0753015536

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Abstract

This paper examines the structure of wages in a very specific labour market, for care assistants in residential homes for the elderly on England''s "sunshine coast". This sector corresponds closely to economists'' notion of what should be a competitive labour market as: (i) there are a large number of small firms undertaking a very homogeneous activity in concentrated geographical areas; and (ii) the workers they employ are not unionized, nor are they covered by any minimum wage legislation so that there are effectively no external constraints on the wage-setting process. We find that the structure of wages does not, in important respects, resemble what we would expect in a competitive labour market. We find there is a small amount of wage dispersion within firms and a correspondingly large amount between firms. And, the wage dispersion that is present does not seem to be closely related to the productivity related characteristics of workers. We propose a test of the hypothesis that unobserved labour quality can explain our findings and reject it. The paper concludes with a discussion of other possible explanations of the patterns in our data.

Item Type:	Monograph (Discussion Paper)
Official URL:	http://cep.lse.ac.uk
Additional Information:	© 2002 the authors
Library of Congress subject classification:	H Social Sciences > HD Industries. Land use. Labor
Journal of Economic Literature Classification System:	J - Labor and Demographic Economics > J5 - Labor-Management Relations, Trade Unions, and Collective Bargaining
Sets:	Research centres and groups > Centre for the Economics of Education (CEE) Collections > Economists Online Research centres and groups > Centre for Economic Performance (CEP) Departments > Economics
Identification Number:	532
Date Deposited:	29 Jul 2008 09:49
URL:	http://eprints.lse.ac.uk/20080/

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