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Establishment Wage Differentials and Occupational Employment: A Study of Aircraft Parts Manufacturing

Jane G. Osburn


Studies over the last two decades make clear that firms’ attempts to remain competitive in a global economy have taken them in many different directions. The proliferation of strategies has thrown into relief patterns by which differences in the wage structure of establishments appear to be associated with the ways they are organizing work and implementing new technologies. This study investigates these issues using latent variable techniques and a dataset produced by the Bureau of Labor Statistics’ Occupational Employment Statistics Survey. The analyses define a latent variable underlying various measures of the wage structure of the establishment that include 1) a measure designed to gauge establishments’ usage of particular types of wage policies aimed at increasing qualitative flexibility, 2) those occupational wages that are most highly correlated with the wage structure of the establishment, and 3) the employment share of those occupations that have been identified in earlier analyses as “discriminators’ between high and low wage establishments. Data from the Bureau of Labor Statistics’ Occupational Employment Statistics Survey is especially well suited to these analyses due to its collection of wage data for all workers in the establishment, as is required to produce measures of the establishment wage structure, and its large size and high degree of industrial and occupational detail, such that relationships between the wages of detailed occupations and other variables can be examined even within detailed industries. The findings suggest that, in the Aircraft Parts industry, establishments’ employment share of machinists is correlated with a latent construct defined by the inter-correlation of the wages of Inspectors, the wages of Team Assemblers, and a measure of the establishment wage structure that should co-vary with the incidence of worker cross training and/or a pay-for-skills policy in the establishment.