The development of nominal wage rigidity in the late 19th century

Wage, price, and output indexes suitable for comparing cyclical movements across decades show a decrease in nominal wage flexibility (the change in wage inflation associated with output fluctuations) after the 1880s, following an increase in strike frequency linked to the spread of large-scale manufacturing. Cross-sectional data show that firms in US industries experiencing more strikes in the 1880s were less likely to cut nominal wages in the depression of 1893. This and other evidence suggest that the 19th century decrease in wage flexibility was caused by an increase in workers' bargaining power in the absence of binding wage contracts. -Author