Wage-Fixing (Routledge Revivals)

Stagflation - Volume 1

J. E. Meade

• Publisher: Routledge
• Year: 2013
• Print ISBN: 9780415670487
• eBook ISBN: 9781136708619
• Edition: 1
• Topic: Business
• Subtopic: Business General
• Index: Business

This reissue, first published in 1982, is the first of two volumes on the causes and cure of Stagflation - the two-headed monster that combines mass unemployment with rapid inflation, which affected contemporary economies across the industrially developped world in the 1970s.

Professor Meade outlines the nature of the problem, contrasting the Great Slump of the 1930s with the Great Stagflation of the 1970s and comparing the Orthodox Keynesian and Monetarist approaches with the New Keynesian strategy. Various proposals for the reform of wage-fixing institutions are discussed, including the limitation of trade-union bargaining powers, an official incomes policy, labour management and ownership in business, and tax or subsidy measures to discourage inflationary rises in wages and prices.

The book will be essential reading for all concerned with both the theory and policy of contemporary macroeconomics, industrial relations, labour economics and labour law. It has been written so that the general argument in the main text is accessible to the general reader as well as of interest to the professional economist.

APPENDIX B

The Effect of New Keynesian Demand Management Combined with WageSettlements Aimed at (1) an Over-Ambitious Standard of Living or (2) the Promotion of Employment

Throughout this appendix we assume that there is a New Keynesian demand-management policy which keeps the total money demand for labour on a fixed annual growth path. (1) In Section I we combine this with the type of wage-fixing arrangements that we described in Appendix A, namely, money wage claims aimed at the achievement of a certain level of real wage income. (2) In Section II we combine it with wage-fixing arrangements under which wage rates are set so as to maintain levels of employment.

A major result of the simple models examined in this appendix is that there is a danger of instability in the case of combination (1) which does not occur in the case of combination (2).

However, in this appendix we are making the very unrealistic assumption that the New Keynesian demand-management policies are one hundred per cent effective in keeping total money earnings precisely and exactly on the predetermined growth path. In reality, of course, such a demand-management policy could take the form only of financial-policy adjustments to total money expenditures, which are made with some delay in response to deviations of total money expenditures and so of the money demand for labour off the planned growth path. The basic instability problem arising with combination (1) could not, therefore, occur in the crude form described in Section I of this appendix. It points however to a problem which will be investigated with more realistic assumptions in Volume II of this work.

I

We start with the wage-fixing and price-fixing equations (31) of Appendix A, namely:

and

(1)

so that

We now assume that ρ_t/λ (i.e. the quart-out-of-a-pint-pot factor measuring the excess of the real-wage-aspiration factor over the labour-productivity factor) depends on the level of employment in the manner of an inflation-adjusted Phillips ...

Table of contents

• Cover
• Half Title
• Full Title
• Copyright
• Contents
• Preface
• Dedication
• I Stagflation, or Making the Worst of Both Worlds
• II Effects of Wage-Fixing on Unemployment and Inflation
• III Other Criteria for Fixing Rates of Pay
• IV Imperfect Competition and the Case for Wage-Fixing Institutions
• V The Existing Monopolistic Powers of Labour Organisation in the UK
• VI The Role of Competition in the Labour Market
• VII A Centralised Incomes Policy
• VIII Not-Quite-Compulsory Arbitration
• IX Labour Co-operatives, Labour—Capital Partnerships, and Profit-Sharing Schemes
• X Fiscal Devices for the Control of Inflation
• XI Summary of Conclusions: The Way Ahead
• Appendix A The Inflationary Implications of Orthodox Keynesian Demand Management for Full Employment Combined with Wage Settlements Designed to Achieve an Over-Ambitious Real Wage
• Appendix B The Effect of New Keynesian Demand Management Combined with Wage Settlements Aimed at (1) an Over-Ambitious Standard of Living or (2) the Promotion of Employment
• Appendix C Two Models of Fiscal Devices for the Control of Cost-Push Inflation
• Appendix D The Legal Background to the Restraint of Monopolistic Behaviour in the UK
• Appendix E Further Problems of Labour Co-operatives and Capital—Labour Partnerships
• Index