The cyclical conditions prevailing in an industry may also influence the percentage of workers with escalator clauses.
Part-time employees, by virtue of their shorter job horizon, are likely to place a lower value on escalator clauses than do full-time employees.
The percentage of union workers with escalator clauses also depends on regulatory and economic conditions in the industry.
The determination of escalator clauses in collective agreements.
The presence of an escalator clause in the contract at least partially insulates the union from losses in real wages due to inflation and should, therefore, make the union more willing to consent to a contract of greater duration.
Because the rate of increase in pay and whether or ot a contract contains an escalator clause are simultaneously determined with contract duration in the bargaining process, the estimation treats these two variables as endogenous.
17) Controlling for cross-industry differences in the rate of wage increase and in the likelihood that a contract contains an escalator clause (specification 2) reduces the impact of the wage change variable.
Joint interpretation of the results from the two F tests therefore suggests that virtually all of the gain from controlling for industry occurs at the level of the wage change and escalator clause prediction equations and not at the level of the duration equation.