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The Eckstein-Wilson Model Of Wage Determination

1334 Words6 Pages

Name- Drishti Priya
Course- 4MAECO
Roll No.- 1422024 The Eckstein-Wilson Model of Wage Determination - An Analysis
Introduction:
The wage determination model by the name of Eckstein-Wilson was propounded by Otto Eckstein, of the German origin along with Thomas A. Wilson, in 1952. The Eckstein-Wilson theory of wage determination is instrumental for the introduction of two notions which may be further helpful in the determination of the consequential regressions pertaining to/of the wage changes on the profit and the rates of unemployment. The two notions are as follows:
• There is an idea of a “key group” which shall constitute of various industries, which were technologically and institutionally similar in nature. As postulated, one of the …show more content…

The original paper was titled “The Determination of Money Wages in American Industry” in the year of 1952. The behaviour of wages in the American scenario of the manufacturing industries was empirically studied by the duo from the year 1948 to 1960. One important aspect or facet of their study was that the focus was given on the money wages rather than the real wages. Eckstein and Wilson tested their endmost choice in the industries selected for the composition of the “key group” industries. According to the duo, the necessity of acquiring the information pertaining to the formation of the key group might be important for shedding light on the nature of wages discernment …show more content…

Though not clearly stated, but can be very subtly be observed. Following are the limitations of the Eckstein-Wilson model of wage determination:
I. One of the initial problems is the identification of the methodology for the reduction of the facets of the population in multivariate scenario.
II. Many industries out of the “key group” exhibited the characteristics of unionization characteristic and are well affected by the decisions of the wages amongst the key group. There is no proper clearance of the inclusion of other industries in the key group.
III. The data given in the studies is instantly evident. The figures for the wages have been already summed to the dual-digits as per the identification to the industry. Policy Implications:
The conclusion to the paper is threefold. They are as follows:
• The rates of profit as studied in the time series analysis is the most important factor recognized for the further classification of the key industries. These industries will be characterized with both high levels of profits along with the profits being volatile as compared to the non key

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