Price contingent wage contracts British coal and iron and steel: Theory and evidence, 1860-1913

This thesis examines the use of price contingent wage contracts in the coal and iron and steel industries of nineteenth century Britain. The introduction poses two critical questions: (1) why did only the coal and iron and steel industries use price contingent wage contracts, and (2) why were these contracts used primarily in the nineteenth century. In the first two Chapters of the thesis, the contemporary literature is surveyed to determine the incidence and effects of price contingent wage contracts. Those who have studied this form of labour contract assert that price contingent wage contracts were particularly suited to use in the coal and iron and steel industry because these two industries possessed the characteristics of: (1) volatile prices; (2) homogeneous output; and (3) fixed costs associated with adjusting the capital stock. The last characteristic receives less attention in the literature. Because of these characteristics, firms sought a means of having wages respond rapidly to price changes without bearing the costs of altering the labour force either temporarily through strikes or lockouts, or permanently through layoffs. Adoption of the contracts had the effect, shown in Chapter Two, of increasing the strength of the relation between wages and prices. Analysis of employment fluctuations is limited because of data constraints.;After a brief historical background is presented in Chapter Five, Chapters Six and Seven provide answers to the two critical questions. Those who have previously examined price contingent wage contracts have not explicitly linked the presence of the three characteristics with the adoption of the contracts only in the coal and iron and steel industries. In Chapter Six, such data as are available are examined to determine whether the coal and iron and steel industries had more volatile prices, more homogeneous output, and larger costs associated with changing the labour force than did other industries. It appears that they did, although the paucity of data limits the strength of the argument. Chapter Seven addresses the timing of price contingent wage contracts. It appears that the strength of organised labour was a key factor in determining when price contingent wage contracts were adopted. For the demise, the answer is not as clear. Again, organised labour plays a significant role.;The thesis concludes by discussing the limits of the analysis and suggesting areas for further research.;The third and fourth Chapters establish the theoretical framework necessary to answer the two questions posed in the introduction. Chapter Three surveys the labour contract literature for the purpose of finding a model which incorporates the three characteristics and predicts flexible wages and stable employment. The most appropriate model is extended to include all characteristics in Chapter Four.