Spatial aspects of wage inflation within the urban system of the United States.

Abstract

The acceleration of inflation and high unemployment have characterized the national economy since the mid-1960's. During this time, the nation's space economy has also experienced a distinct shift in regional growth and development from the Frost Belt to the Sun Belt. Within the context of this regional change this research examines the relation between wages and unemployment in the metropolitan labor market system of the United States. The study covers the period 1964-78 and involves an analysis of 99 labor markets. The specific aims of this study are: (1) to measure the degree and the extent to which the structural, national, and regional components of the excess demand for labor have influenced unemployment trends in U.S. metropolitan areas; (2) to measure the degree and extent to which the structural, national and regional components of the excess demand for labor, together with price inflation, wage spread effects and wage and price controls have influenced changes in wage rates within the metropolitan labor markets of the United States; and (3) to explain differences among labor markets in the wage adjustment mechanism. Using the methods of Cochrane-Orcutt adjusted least squares and a simple correlation analysis, the results indicate that national economic forces are the most important factor in influencing local unemployment. The results, however, provide no evidence of a significant Phillips curve relationship between wages and the various components of unemployment. Wage spread effects appear to be the most significant mechanism of the wage-rate changes. The results also indicate that variations in the wage adjustment process are largely attributable to demographic characteristics of the labor force, although the overall results of this analysis leave much of the variation unexplained.