This paper examines trends in the earnings of engineering workers in a local labour market since 1979. Despite the strong presumption that skilled differentials have widened during the 1980s, the paper reveals that there has been marked stability in overall relativities. This pattern is probed by means of variance component analysis—a new technique that explicitly allows for the clustered nature of the sample of data on earnings. The analysis indicates that there is a strong and complex relationship between the size of the firm and the relative pay of all manual workers in this locality.
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