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CEPA Research Projects Project on the U.S. Wage Collapse David Howell and Will Milberg of CEPA received funding from the Rockefeller Foundation to support their research on wage restructuring in the US since the early 1970s. As a result of the dominance of the conventional demand-shift hypothesis, little research effort has been devoted to exploring alternative explanations of wage restructuring in the US, manifested in the dramatic growth in wage inequality. Howell and Milberg propose to take seriously the possibility that the wage restructuring of the 1980s was largely independent of skill restructuring. In their alternative "institutionalist" perspective, the forces of demand and supply set only the limits of the space within which wage-setting occurs and labor market institutions, management strategies and social norms all play central roles in determining the levels at which the wages of particular groups of workers are actually set. From this point of view, fundamental changes in these institutions, strategies and norms began to take place in the late 1970s, reflecting both a broader, national shift towards laissez-faire values and policies and an increase in competitive pressures. Further, these two sources of the wage collapse are argued to be closely related, since the rise in competitiveness has reflected the growing importance of foreign trade, the effects of deregulation, and the increasing demands of the financial sector - all of which reflect or were strongly influenced by the shift to pro-market government policies since the late 1970s. Within this larger context of increasing market competition and the increasing dominance of market ideology, the bargaining power of low-skill workers fell precipitously. By moving beyond a simple demand and supply shift vision, Howell and Milberg’s approach makes possible an explanation of different groups of jobs with similar cognitive skill requirements having different wage and employment trends. Results of this project were presented in the paper "Demand Shifts and Earnings Inequality: Wage and Hours Growth by Occupation in the US, 1970-97" by David Howell, Ellen Houston and Will Milberg. The paper summarizes the research results and suggests implications for alternative explanations of the growth in US wage inequality and for policy interventions. Links
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