Wage change and trade performance in US manufacturing industries

This paper presents empirical measurement of wage contours in US industry, 1959-1988, applying cluster analysis to the path of change of average hourly wages. We define six principal industrial clusters and present simple wage-change equations for each cluster. A series of tests shows that the 'rules of the economic game' differ across our industrial groups: industrial structure matters to wage outcomes. Finally, we present the evolving relationship between relative wage levels and the comparative trade performance of the clusters. The results suggest a strong association between trade performance and the evolving industrial wage structure, contrary to the findings of some other recent studies. We conclude that the reclassification of industrial data along lines specific to the problem being studied is an important analytical step, whose neglect in previous work has led some researchers to understate the influence of industrial structure and trade pressures on wages. (C) 1996 Academic Press Limited.