BPEA | 1989 No. 2

Norm Shifts in Union Wages: Will 1989 be a Replay of 1969?

William H. Carter and
William H. Carter University of Pennsylvania
Michael L. Wachter
Michael L. Wachter University of Pennsylvania

1989, No. 2

THE U.S. economic expansion of the 1980s is frequently compared with that of the 1960s, with the similarities extending to inflation and the labor market. For example, during both the 1980s and the 1960s inflation was lower than predicted, and during both decades low rates of wage increases contributed to the surprisingly low inflation rates. After 1969, however, the core rate of inflation trended higher, with wage gains leading the way, even in the midst of the impending recession. Unions have long been considered inflation’s wild card. They helped lower inflation during the 1960s and 1980s, but played the opposite role during the stagflation of the 1970s. The question that we address in this paper is whether unions are more likely to be a positive or negative wild card over the next few years.