National Wage-Rate Claims and Settlements - II. An Exploratory Study of some Possible Determinants of Claims and Settlements

Abstract

What are the determinants of the level of trades unions' wage-rate claims? To answer this question, a range of simplified models is examined. One set of these models pictures bargainers being influenced when setting claims by looking backward to past variations in the cost of living, past changes in general wage-rates, the gap between the union's claims and settlements in previous bargaining rounds, and the time since their last settlement. A second set pictures bargainers looking forward, as some versions of expectation theory suggest, to rationally expected future price increases, expected future wage-rate changes, and the time to the next claim. Another model pictures bargainers tactically setting claims beyond their realistic expectations in anticipation of settlements being forced at a level below their stated claims. Applications of these models to nine groups of workers represented by five large British trades unions over the period 1947 to 1970 shows that claims appear to be more influenced (though only weakly) by retrospective than by prospective price increases (so there is little support for monetarists' rational expectations theory of inflation) though they appear to be more influenced by prospective than by retrospective increases in general wage-rates. Claims are uninfluenced by the gap between past claims and settlements or by time variables, but there is strong support for the bargaining tactics hypothesis.