Can incomes policies reduce real wages? Micro-evidence from the 1931 Australian award wage cut

Industry-specific minimum wages in Australia have long been set by government tribunals. Although creating microeconomic inefficiency, the system may facilitate incomes policies, such as the 10% wage cut in 1931. This paper uses personnel records from the Union Bank of Australia to examine the effectiveness of the 1931 policy. It is shown that the bank responded to the cut by increasing the frequency of payments over the minimum rates, and that between 1924–1934 tenure-adjusted real wages were essentially constant. Finally, it is shown that the bank maintained a policy of real wage shielding as part of its internal labor market.