PRODUCTION TECHNOLOGY, JOB SKILLS AND RELATIVE INDUSTRY WAGES: A STUDY OF PRODUCTION WORKER WAGES IN U.S. MANUFACTURING INDUSTRIES

This study explores the relationship between the technology of production, job skills and the relative wages of production workers in manufacturing industries. A model of industry wage differentials is developed that focuses on the implications of the technology used in production for the relative bargaining power of employers and employees. Relative industry wages are determined in this model without reference to levels of worker-financed training. A major portion of this study is concerned with the development of new measures of worker skills and production technology, and with the identification of three segments of manufacturing industries that are defined by fundamentally different kinds of manufacturing production processes. There are four major empirical results of the study. First, differences among industry segments with respect to hourly wages, annual earnings, quit rates, unionization, female share of employment, and general skills are found to be significant. Second, wage differentials among segments are shown to have widened dramatically over the postwar period. Third, the regression results indicate that, holding worker skills constant, industry technology, unionization and female employment are central explanatory factors for relative industry wages. And fourth, the factors that explain most of the variation in wages differ substantially by industry segment, but in none of the three segments are worker skills found to be a significant explanatory factor. These results provide strong empirical support for the bargaining model, and raise doubts concerning the importance worker-financed training has for production worker wages in manufacturing industries.