Data and code for: Wage Stagnation and the Decline of Standardized Pay Rates

We use new establishment-by-occupation microdata to show that the wage stagnation of the 1970s and 80s was linked to a decline in standardized pay. Increasingly, wages for blue-collar workers were not fixed by job title or seniority, but instead subject to managerial discretion. From 1974 to 1991, employers nearly doubled their use of discretionary pay-setting. Panel regressions show that wages fell under the new pay-setting approach, particularly for the lowest-paid workers in a job and for those in establishments that previously paid above market rates. In an era of declining worker bargaining power, increasing employer discretion over pay-setting facilitated wage stagnation.