Wage patterns: An evolutionary perspective

The existence of wage patterns is often cited as evidence that the labor market is affected by institutional forces outside the purview of economic theory. In this paper, it is argued that such patterns can be understood as the result of an information-acquiring activity of labor market participants that enhances their chance of survival. Wage comparisons are selected, sometimes mistakenly, in an effort to cope with the uncertainty of the environment. This evolutionary analysis denies a distinction between market forces and spillovers. Helpful comments on an earlier draft were received from John Pencaval, Melvin Reder, and Stanley Siebert. The usual disclaimer attaches.