Wage theories and applications regarding wage conditions in the Turkish manufacturing industry

In this Ph. D. Dissertation, theories of wage determination have been examined; ?Marginal Productivity Theory,? a neo-classical approach and ?Efficiency Wage Theory,? a Keynesian approach, have been investigated using econometric methods. In addition, an in debt study and a comparison of data have been made to start a discussion regarding the structure of the wage formation in the Turkish Manufacturing Industry and to determine the appropriate wage policies for Turkey.The Classical Wage Theory relies on the expression of value by the labour theory of value and the explanation of division by the factors of production. It is assumed that competitive conditions exist in the economy under which the equilibrium real wage is formed at the subsistence level. Marginal Productivity Theory differs from Classical Wage Theory by the expression of value with marginal utility theory. Wage equilibrium is formed where real wage is equal to the marginal product of labour. Increasing workers? bargaining power by unionizing and having the government impose protective policies for workers who do not assent to a wage rate equal to marginal productivity cause indispensable unemployment. For this reason, according to the neo-classical theory, all sorts of intervention conditions in the economy should be prevented. Both the power theory and the bargaining theory emphasize the importance of collective bargaining and workers? being organized in the determination of wages. Keynes differs from orthodox economic thought as he suggests that economies can be in equilibrium below the full employment level. Keynes disagrees with the orthodox economic ideas 1) that the reductions in money wages can lower real wages and increase employment; and 2) that a wage push by workers via increasing their bargaining power by unionizing and having the government impose protective policies can lead to involuntary unemployment. Keynes suggests a rigidness of wages because workers resist even small reductions in the monetary wages they receive. He also does not denounce workers getting organized and acting in unity. The issue that determines the wage in Investment Theory is productivity as it is in the Marginal Productivity Theory. The difference here, however, is that while the Marginal Productivity Theory concentrates on worker?s production, Investment Theory focuses on labor input and investment in it. New Keynesian approaches of the Insider-Outsider Model, Efficiency Wage Theory, and the Model of Implicit Contracts are built by taking into account wage rigidities and imperfect competition. According to the Efficiency Wage Theory, the physical health and productivity of workers are positively related to the wages paid to workers. On this basis, firms ensure that workers are healthier and more productive by paying higher wages.For the total, private, and public sections of the Turkish Manufacturing Industry, the tests in this study indicate that the Marginal Productivity Theory is not explanatory in all sectors of the total and private sections for the period of 1963-1998. However, the Marginal Productivity Theory has explanatory power in the public section of 20: Food; 25: Wood; 27: Paper; 33: Different from Metal; and 34: Metal; and has partial explanatory power in 22: Tobacco; and 37: Electrical machinery sectors of the industry. The Efficiency Wage Theory, on the other hand, is partially explanatory in the Turkish Manufacturing Industry for the 1963-1998 period. In other words, wages cause productivity in a Granger sense. What this really means is that wages allow us to foresee productivity in some sectors. The results support this theory in some sectors and do not support in others. When all the sectors are considered, in the ones with relatively high wages, 31: Manufacture of chemicals; 21: Beverage; 34: Metal; 37: Electrical machinery; 38: Transport equipment; 27: Paper; 36: Machinery; 28: Printing; and 30: Rubber, there exists a statistical causality relationship from wages to productivity. In addition, these same sectors, with the exception of 28: Printing, are ranked among the highest in term of per hour labor productivity growth among all the sectors of the Turkish Manufacturing Industry for the 1964-1998 period.