Hours and Wages in the Depression: British Engineering, 1926–1938

On their intensive margins, firms in the British engineering industry adjusted to the severe falls in demand during the 1930s Depression by cutting hours of work. This provided an important means of reducing labor input and marginal labor costs through movements from overtime to short-time schedules. Nominal basic wage rates dropped relatively modestly while their real wage equivalents continued to rise throughout the trough years of the recession. This paper provides detailed labor market and empirical analysis of the hours and wage adjustment processes. Quantitative work is based on cell data from a panel of 28 local labor markets for the period 1926–38.