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Abstract

A wage stabilization program encounters many of the fundamental wage measurement problems that also face the Bureau of Labor Statistics as well as researchers who use wage data. Because millions of dollars are at stake in the stabilization program administrator's decisions, enormous pressure is brought to bear to find solutions to these problems that are precise and simple, yet consistent. The record of such a program, then, provides an interesting perspective on wage measurement issues. In this paper I describe some of the wage measurement questions that arose during the Carter stabilization program of 1978-80 and the solutions to those questions that were adopted by the Council on Wage and Price Stability. Lessons for wage measurement are drawn, where appropriate, though many of the questions remain unanswered to this day. Specific problems discussed include those of how to value incentive pay, future value compensation, pay increases accompanying promotions or seniority and changes in the weights of a wage index. In the absence of precise answers to the measurement questions raised here no concrete answers will be available to questions about the nature of wage change over the business cycle or of the level of productivity growth over time. Wage measurement is at the heart of these fundamental macroeconomic issues.

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