To read this content please select one of the options below:

$40.00 (excl. tax) 30 days to view and download

On the Interpretation of Labour Market Earnings Dispersion: A Comment

John T. Addison

International Journal of Social Economics

ISSN: 0306-8293

Article publication date: 1 January 1975

63

Abstract

Competitive labour market theory predicts that within a local labour market there will be a tendency for labour of the same quality to obtain parity of earnings irrespective of the employment location. More strictly, the theory posits the equalisation of net advantages through time for homogeneous labour inputs. No plant may, according to the theory, set wages and other conditions of employment independent of the behaviour of its competitors. Wage levels within the market are, then, subject to the equalising forces of competition. Consequently, any differentials enjoyed by one plant over another for a well defined homogeneous labour input must either be transient or reflect efficiency unit (labour supply) differences. In the absence of labour quality differences, then, wage differentials would be a short run phenomenon to be explained by differences in final product demand and productivity variations against a background of short run inelasticity of labour supply. Such disequilibrating forces should, in the long run, tend to be counterbalanced by actual or potential mobility within the labour market which would restore wage equality.

Citation

Addison, J.T. (1975), "On the Interpretation of Labour Market Earnings Dispersion: A Comment", International Journal of Social Economics, Vol. 2 No. 1, pp. 43-51. https://doi.org/10.1108/eb013775

Publisher

:

MCB UP Ltd

Copyright © 1975, MCB UP Limited

Related articles