Fear, Unemployment and Pay Flexibility.

The paper uses newly available cross-section data to study wage determination in the United Kingdom in the 1980s. The main results are as follows: (1) fear of unemployment substantially depresses pay; (2) there is some evidence of a wage ratchet whereby rates of pay are more flexible upwards than downwards; (3) the unemployment elasticity of pay averages -0.1; and (4) wages are much more flexible in nonunion workplaces than they are in union workplaces. Copyright 1991 by Royal Economic Society.