WAGES IN THE STEEL-INDUSTRY - TAKE THE MONEY AND RUN

Sharp increases occurred in the wages paid by integrated steel firms i n the 1970s despite reductions in employment caused by the industry's decline. This article reviews several explanations suggested for this puzzling outcome and evalutes them using information on the size and t iming of wage increases, on investment decisions, and on expectations about future inflation and demand growth. Overly optimistic expectatio ns for demand growth and unexpected inflation appear to explain much o f the data.