Nominal Wage Rigidity Prior to Compulsory Arbitration Evidence from the Victorian Railways 1902-1921

Cliometrica, Vol. 5, No. 1, pp. 53-78, 2009

Posted: 19 Sep 2011

See all articles by Andrew Seltzer

Andrew Seltzer

University of London, Royal Holloway College - Department of Economics

André Sammartino

University of Melbourne - Department of Management and Marketing

Date Written: May 18, 2009

Abstract

Studies across a wide range of countries have shown that relatively few workers have received year-to-year wage cuts since the Second World War. However, there is very little micro-level evidence from earlier years, when lower inflation rates and a less regulated labor market may have led to stronger downwards pressure on wages. This paper examines wage adjustment at the Victorian Railways, Australia, between 1902 and 1921. It is shown that, despite strong downwards pressure on wages, nominal wages were rigid downwards and a high proportion of triennial wage changes were exactly zero. Even for workers with very long tenure and in years when the national price level declined, wage cuts were rare. We also show that the characteristics of workers whose wages were unchanged were very similar to those receiving wage cuts. Finally, we show that unlike the wages of incumbent staff, entry wages for new junior staff frequently declined from year to year.

Keywords: downwards nominal wage rigidity, internal labour markets, Victorian Railways Australia, personnel economics, economic history, labor economics

JEL Classification: N37, J31, J41

Suggested Citation

Seltzer, Andrew and Sammartino, Andre, Nominal Wage Rigidity Prior to Compulsory Arbitration Evidence from the Victorian Railways 1902-1921 (May 18, 2009). Cliometrica, Vol. 5, No. 1, pp. 53-78, 2009, Available at SSRN: https://ssrn.com/abstract=1930007

Andrew Seltzer

University of London, Royal Holloway College - Department of Economics ( email )

Royal Holloway College
Egham
Surrey, Surrey TW20 0EX
United Kingdom

Andre Sammartino (Contact Author)

University of Melbourne - Department of Management and Marketing ( email )

5th Floor Babel Building
Melbourne, Victoria 3010
Australia
61383446880 (Phone)

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