The American Wage Structure, 1920-1947

Abstract

Impressed by the sweeping implications of the mind-body problem, the German philosopher Arthur Schopenauer referred to that famous conundrum as the Weltknoten, the "World Knot." Economic history is more prosaic. Yet the economic experience of the United States between World War I and the end of World War II did generate one problem with nearly so sweeping repercussions in its field: the behavior of wages. This period spans the slump following World War I, the Roaring Twenties, the Great Depression, the New Deal and World War II--times of turmoil encompassing every form of economic, technological, political and social change. Studies of wage determination during this time can therefore illuminate many competing hypotheses, perhaps more effectively than studies of the more tranquil post-war period. Such inquiries also have intriguing implications for other fields, including history, political science, and even international relations.

Yet systematic assessments of the relevant empirical evidence are rare; previous studies tend to be monographic. The earliest can be traced back to the thirties, when data collected by the Federal government (and studies by Paul Douglas) became widely available. This wave crested between the end of the World War II and the late fifties. A second and very recent wave followed the decay of the original post-war American wage system. In line with the focus of much recent research on inequality, it emphasizes work-force characteristics, technological change, and the acquisitions of skills.

This paper uses industrial wage data and a systemic of unconventional selection of methods to examine changes in the inter-industry structure of wages between 1920 and 1947.

JEL Classification: J31, N32