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This article comments on the article Wage Concessions and Long-Term Union Wage Flexibility, by Robert J. Flanagan which was published in the January 1984 issue of the journal Brookings Papers on Economic Activity. It is clear that widespread union wage concessions and contract renegotiations during the past few years were unusual developments in collective bargaining and that these developments produced unusually small average union wage increases last year. It is much less clear, however, what these recent developments mean for future wage flexibility in the union sectors and at the macroeconomic level. It is possible to make the case that little in the way of increased wage flexibility over the business cycle should be expected on the basis of developments we have seen so far. Flanagan's focus in this paper is primarily on union wage flexibility over the business cycle in response to cyclical changes in demand. His judgment that no marked changes in union wage flexibility should be expected is based primarily on his examination of the extent to which changes in contract provisions have been introduced that would more or less automatically provide more wage flexibility in response to demand changes.

This article presents the authors' comments on a study by Daniel J. B. Mitchell about evidence on factors that influence rates of wage change. Some of the results provide new insights into wage behavior by indicating that differences in responsiveness to prices and unemployment are related to factors such as contract duration, escalators and other characteristics of wage setting. By working with data at levels of aggregation that take into account differences in institutional arrangements for wage setting, Mitchell's approach gives some insight into how the timing of wage change is affected. Mitchell is to be commended for his careful inspection of the data on union wage contracts. The analysis of the first-year and life-of-contract wage increases and the differences between escalated and nonescalated contracts yields interesting sights. Mitchell also adopts a simple wage equation consisting of the Bureau of Labor Statistics' unemployment rate and rate of change of prices to explain these data. Although I believe that the inclusion of variables in a wage equation can be counterproductive, Mitchell's equations may be too simple. Much of the current debate on wage equations involves differences in unemployment constructs, the dynamics of the wage-wage, wage-price, or wage-money supply spiral, and the issue of shifting coefficients over time.

The article discusses the issues related to the increase in income inequality in the U.S. It was suggested that the primary contributor of increased inequality is skill-biased technological change. According to a survey, the share of employees belonging to unions declined rapidly from 27% in 1979 to 19% in 1986, and then more slowly to 14% in 2005. David Card, Thomas Lemieux and Craig Ridell explained that the decline in unionization presents a 14% of growth in the variance of male wages between 1973 and 2001. The survey also indicate that half of the total increase in equality since 1966 reflects the 90th percentile gaining relative to the 10th percentile, and that the other half has occurred within the top 10th percentile.

The article focuses on the high-pressure U.S. labor market of the 1990s. The recent performance of the U.S. economy has been nothing short of extraordinary. In 1998 inflation and unemployment reached their lowest levels since 1965 and 1969, respectively. Although estimates of the nonaccelerating-inflation rate of unemployment (NAIRU), are imprecise, the actual unemployment rate has been below 5 percent for more than twenty consecutive months. Moreover, the rate of price inflation declined in 1997 and 1998. It is unclear whether the unusual combination of low unemployment and low inflation in the 1990s is due to fortuitous developments originating in the labor market or to changes in product and financial markets. If labor market developments are responsible, they may represent lasting structural changes that could permanently lower the NAIRU. If instead they are due to developments outside the labor market, they are more likely to represent favorable transitory shocks that will only temporarily allow low inflation and unemployment.

This article examines the impact of immigration and trade on the U.S. labor market. Trade has had small effects on the overall implicit labor supply of the less skilled. However, the trade effect is larger if one assumes that economic activities displaced by imports employ technologies comparable to the least skilled plants in U.S. manufacturing industries. The effect of immigration on native labor depends critically on the distribution of skills between immigrants and natives. If the skill distribution of immigrants matches that of natives, immigration will not affect the relative supply of skills and thus will not change the structure of wages.

Discusses the causes and implications of growing world trade. World trade as an outcome of a process that determines trade flows, world prices, wages and employment; Trends in world trade; Effects of exports on manufactures from the third world on wages and employment in the first; Assumptions to assess the impact of the phenomenon of low-wage exports.

This article looks at the role of trade in labor market developments in the U.S. during 1978-1990. The authors find that internationalization has contributed to the labor market trends. However, they agree with trade economists Paul Krugman and Robert Lawrence that increased internationaluzation cannot, by itself, account for most of the observed labor market trends. Moreover, it is likely that technological change is playing a role independent of internationalization. Meanwhile, Krugman and Lawrence point out that the fall in the manufacturing share of GDP has been a secular trend since well before the internationalization of the economy that started in 1970. They argue that the decline is due mainly to a secular decline in the relative price of manufactures compared with nonmanufactures, which in turn is due to the relatively rapid growth of productivity in manufacturing. They explain the decline in the employment share the same way. On the other hand, Krugman and Lawrence discount the importance of the rising trade with low-wage countries on the ostensible grounds that the new low-wage competition has merely replaced the former low-wage competition from Europe and Japan, which in turn has become high-wage competition.

Shows the basic trend in American manufacturing industries in the 1980s regarding the employment of nonproduction workers relative to the employment of production workers. Excessive accumulation by companies of nonproduction workers; White collar employment in successful companies.

Discusses the effect of foreign trade on wage growth in the United States. Gap between wage growth and productivity; Differences in price movements for products that workers produce and consume; Assessment of international trade as the shifter in labor demand.

The article focuses on various aspects of the economic recovery. The most puzzling aspect of the current economic recovery is its failure to create jobs. While payroll employment in seven previous recessions increased a full 7 percent in the first twenty-three months following the NBER business cycle trough, such employment increased by only 0.8 percent. Part of the explanation of negligible job growth lies in the recovery's relatively slow pace of output growth, which has been little more than one-third the usual postwar pace. The remaining part of the job puzzle stems from the ebullient performance of productivity, that is, output per hour in the nonfarm business sector, which registered a growth rate of 3.2 percent in the four quarters ending in 1992, the most rapid rate recorded in any similar period for more than sixteen years. Productivity-led growth is nothing but good news. In the two decades ending in mid-1992, the nonfarm business sector registered an average annual productivity growth rate of less than 1 percent.

This article examines union wage determination in the U.S. and their policy implications. Some economists would espouse the view that wage determination is the fundamental cause of inflation. But many economists and policymakers believe that the wage determination process contributes to the difficulty in checking the current inflation. In general, policymakers' concern about the labor market does not extend equally to all sectors. It is believed that, in the absence of legal constraints or threat effects of potential union organization, nonunion employers will make their wage decisions according to the behavior of the labor market. But it is not clear that demand restraint would have the same impact on the unionized portion of the labor market. If union wages are at a premium above what employers would unilaterally offer, union employers should have a queue of workers available to fill their vacancies, even in periods of high demand. The demand for labor by a specific bargaining unit is likely to be quite inelastic, especially in the short run, so that wage moderation would have little influence in opening job opportunities or preventing layoffs. However, both the union and nonunion sectors exhibit some sensitivity to business conditions. Even in the nonunion sector, the magnitude of the sensitivity is not large. Thus the short-run impact of recession on inflation through its direct impact on the wage-setting process is not likely to be great.