Anomalies: Interindustry Wage Differentials

Firms advertise widely varying wages for jobs that appear to be very similar, such as secretary, data entry clerk, or “tele-marketing representative.” Students who graduate from Cornell's MBA program often receive offers from several firms in the same city with substantially different salaries....

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Bibliographic Details
Published in:The Journal of economic perspectives 1989-04, Vol.3 (2), p.181-193
Main Author: Thaler, Richard H.
Format: Article
Language:English
Subjects:
Automotive industries
Economic models
Economic theory
Efficiency wages
Employment
Hypotheses
Industrial market
Industrial unions
Labor unionization
Leather industry
Manufacturing
MBA programs & graduates
Mining industry
Occupations
Standard deviation
Wage differential
Wages
Wages & salaries
Workers
Working conditions
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Summary:Firms advertise widely varying wages for jobs that appear to be very similar, such as secretary, data entry clerk, or “tele-marketing representative.” Students who graduate from Cornell's MBA program often receive offers from several firms in the same city with substantially different salaries. These observations seem to violate the law of one price, a fundamental component of the theory of competitive markets. The impression created by these casual bits of data is confirmed by more careful investigations. Some industries appear to pay higher wages than others, even when (measurable) labor quality is held constant. These interindustry wage differentials apply across occupations (if one occupation in an industry is high paid, then all other occupations tend to be) and over time. Why?
ISSN:0895-3309
1944-7965
DOI:10.1257/jep.3.2.181