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The Setting for the Discussion


Chapter 1. The Task of Contemporary Wage Theory

The high purpose of these sessions is symbolized by a passage from Michael Polanyi:
Science is not conducted by isolated efforts like those of the chess players or shellers of peas and could make no progress that way. If one day all communications were cut between scientists, that day science would practically come to a standstill. … The co-ordinative principle of science … consists in the adjustment of each scientist’s activities to the results hitherto achieved by others. In adjusting himself to the others each scientist acts independently, yet by virtue of these several adjustments scientists keep extending together with a maximum efficiency the achievements of science as a whole.1
John T. Dunlop

The General Level of Wages


Chapter 2. The Determination of the General Level of Wage Rates

Monetary theorists have not taken much explicit interest in the determination of the general level of wage rates. By and large, the ‘ classical ‘ monetary theorists were concerned with the determination of the price level, taken to be the focal point of analysis of the trade cycle and the mechanism of international adjustment. Money wage rates, like the prices of particular goods, were left to be inferred from the price level by the application of value and distribution theory. On the other hand, modern theorists, following Keynes, have been chiefly concerned with the determination of the level of output and employment, and of the rate of interest. In their analysis, the money wage level has tended to be placed outside the range of economic analysis, being treated either as a datum or as an exogenous variable.
Harry G. Johnson

Chapter 3. Approaches to the Determination of the General Level of Wage Rates

Three approaches can be adopted towards the formulation of a theory of wages: (1) distribution theory; (2) employment theory; and (3) noneconomic theories such as those of the German historical school, Commons, the Webbs, and some recent American labour economists. Only theories of the first and the second types will be considered in this discussion.
Innocenzo Gasparini

Chapter 4. The Long-Term Movement of Real Wages

The following pages present some provisional hypotheses to account for apparent features of the movement of real wages in the past eighty years.2 They await the test of critical discussion, and also of the production of more evidence, for though in part they rest upon estimates of wages and income in five Western economies, the explanation of shifts in distribution has been worked out for the United Kingdom alone.
E. H. Phelps Brown

Chapter 5. Full Employment and Wage Stability

In the discussion of the problems of a full employment economy many more-or-less different definitions of the precise content of ‘full employment’ have been given. Of these definitions, the following deserve special attention.
Bent Hansen

Chapter 6. Wage Policy and Full Employment

A fundamental problem in the theory of employment is whether inflation is inevitable under full employment and whether there is any definite theoretical and practical criterion for judging where the borderline of inflation lies. An associated question is whether wages can be kept stable under full employment and what measures are appropriate in the field of wage policy.
Valentin F. Wagner

Chapter 7. Wage Rates in a Model of the System

In the analysis of the general wage level there are two problems which must be distinguished. The first is the determination of the money wage rate. Ordinarily there is a ‘world of monopolies’ in the labour market — trade unions, trade associations, and big companies — and the average money wage rate finally agreed upon by all parties to a wage dispute is a function of the prevailing aims of the trade unions, their relative financial and cohesive strength, the fixed cost burden of the economic sector in question, public support of either side, government intervention, and many other things. This is the special field of labour economists, and has been analysed by Professor Dunlop in his study of wage determination under trade unions.1
Wilhelm Krelle

The Impact of the Labour Union


Chapter 8. Trade Union Behaviour and Wage Determination in Great Britain

Economists have sought to fit a trade union into the framework of economic analysis by considering it as a form of institution analogous to the firm. They have assumed it to be a monopolistic seller of labour seeking to maximize the incomes of its total membership. This view of a trade union has been severely assailed by Professor Ross 1 on the grounds that it bears little relation to reality. The central proposition of the Californian School is that a trade union is a political institution dominated by the primary motive of survival and operating in an economic environment. Formally its objectives are to maximize the economic welfare of its members, but the attainment of these objectives will be constantly modified by institutional necessities, so that it cannot be assumed that a union will behave automatically in the same manner as a business enterprise whose primary object is to maximize profit.
B. C. Roberts

Chapter 9. Inflation and Wage Differentials in Great Britain

The relative antiquity of collective bargaining in Britain may give custom and convention a greater influence on the fixing of wages there than is general. What follows is an interpretation of British experience, particularly that of the period of full employment since 1940, but much of it may have an application to other ‘high employment’ economies of the Western type. There seems to be a dual relation between the inflationary trend characteristic of such economies and the system of wage differentials. Attention has been largely concentrated upon the effects of inflation on relative wages. Wage relationships, however, may also play a more positive rle in sustaining the inflation and determining its form.
H. A. Turner

Chapter 10. An Analysis of Union Models as Illustrated by French Experience

The incorporation of the extraneous element represented by unionism into wage theory, which has remained characterized by marginal analysis, is bound to give rise to difficulties.2 To what kind of analytical treatment is union behaviour to be submitted? What assumptions should be formulated about it? To what factors is it to be linked? At the present moment, two currents of thought can be discerned in English and American literature. The first, in its attempt to preserve a certain homogeneity of wage theory, tries to use the analytical apparatus created for the firm and puts forward a purely economic explanation of union behaviour, namely one based on the maximization of a certain monetary value. The other trend of thought considers the trade union as an essentially political body and stresses the irrationality of union behaviour, which is said to derive from the mechanism of arriving at decisions within the union organization.
Hubert Brochier

Chapter 11. Wage Theory and Social Groups

Economic reality, unlike physical reality, differs in different parts of the world, and is subject to constant change. If an area enclosed by three straight lines is termed a triangle, this is a proposition which is valid without reference to time or space. By contrast, a proposition such as ‘wages are the price of work’ has significance only in an economic system where there are prices in the precise sense which economists attach to the word, and where work is considered a merchandise in the sense that it is a marketable thing capable of having a price. The very existence of the definition, with all the mechanisms and correlations it implies, depends upon a set of beliefs, behaviours, and institutions. It is linked to an economic system and changes with it, whether this is a matter of cause or effect.2
Jean Marchal

The Wage Structure


Chapter 12. Wage Relationships —The Comparative Impact of Market and Power Forces

One modern version of Adam Smith’s famous observation (Book I, Chapter 8) might read: ‘Workmen are always in constant and uniform combination to raise the wages of labour above their actual rate’. Now this version would not be so true as Smith’s about ‘masters’ (as Smith himself noted), for their combination is less the ‘natural state of things’. Workers, being more numerous and diverse, have less of a community of interest than masters and a greater need for formal bonds. These formal bonds, over the past century, have been supplied by labour unions in many trades and industries in those industrialized nations which are organized into pluralistic systems, and a major purpose of most of these unions has been to modify ‘market forces’ by group decisions and organized power in setting wages.
Clark Kerr

Chapter 13. The Impact of Collective Bargaining on the Wage Structure in the United States

The impact of trade unionism on relative wage rates and on the allocation of resources has been a standard subject of theoretical economic discussion for decades. Trade unions were presumed to be analogous to business monopolies in intent and general strategy and their behaviour deducible from first principles, whereby the economic consequences could be predicted from the established body of value theory.
Lloyd G. Reynolds

Chapter 14. Unionism and the Wage Structure in Sweden

Using the background of empirical evidence at hand, we shall now analyse the basic trends of unionism and examine the question whether the rigidity and equalization which unions tend to introduce in the wage structure should be looked upon as distorting influences, in the sense that they hamper the adaptation of the economy towards the best allocation of productive resources.
Gösta Rehn

Chapter 15. The Evolution of Wage Differentials: A Study of British Data

Wage differentials in the British economy varied widely in pre-war years while the general level of wages remained fairly stable; since 1944, however, wage differentials generally narrowed while the general level of wages was constantly rising. The latter period is also characterized by the appearance of a wage slide, that is, of a considerable divergence between the behaviour of negotiated wage rates and of effective earnings.
G. Rottier

Chapter 16. Structural Inflation And The Economic Function Of Wages: The French Example

The share of wages in the French national income is approximately constant and very considerable. Moreover, the structure of wages is highly rigid. We propose to analyse the causes of this rigidity and to show how it contributes to making the economy inherently inflationary. Finally, we shall inquire whether the rigidity of wages does not denote a fundamental misconception of the economic function of wages under any economic system, and we shall suggest a reconsideration of distribution theory.
François Perroux

Chapter 17. The Effects of Inflation on the Wage Structure of France

The post-war period is characterized in France by important changes in the distribution of aggregate wages. The generalized use of the social wage is a manifestation of this upheaval, remuneration being henceforth dependent not only on output or working time but on family circumstances. The necessity of meeting essential requirements in periods of manifest penury leads to equalizing legislation. During that same period the scarcity of manpower, particularly of skilled labour, arising from reconversion and the development of the occupied countries, has led to the practice among employers of raising the wages of skilled workers by means of special output bonuses. An economy of rationing, on the one hand, and the scarcity of skilled labour on the other, makes the formulation of a priori ideas on the evolution of the wage structure during inflation a hazardous undertaking. It is therefore fitting to refer to facts and consider how they may be interpreted.
François Sellier

The Nature of Bargaining


Chapter 18. Approaches to the Theory Of Bargaining

For a longtime wage bargaining, like unemployment, was relegated to a modest back seat in the main body of academic economic doctrine. While all great realistic writers from Adam Smith onwards did realize their importance and paid attention to them in special chapters and in appendices, it was mainly ‘outsiders’ like Marx, Hobson, the Webbs, and a few business cycle and duopoly specialists, who found room in the centre of their theories for a realization that unemployment may be more than merely a consequence of adjustment difficulties or outside interference, and that bargaining can play a major rôle in wage determination. The main stream of economic theory remained comparatively untouched by these important economic phenomena. While unemployed families were suffering severe hardships and trade unionists were risking their lives to secure collective bargaining rights, unemployment was regarded by many writers as practically non-existent and bargaining itself as an empty illusion.
K. W. Rothschild

Chapter 19. The Nature of the Bargaining Process

The observer of a bargaining process sees two parties who in turn suggests the details of a plan of action in which each is to have a part. The central type of such plans is the exchange of goods or services for money. The process ends when a plan is found to which each party will commit itself on condition that the other is also committed. To such an observer the following questions would inevitably arise:
Why does each party repeatedly reject the plans suggested by the other?
On what principles does each party decide what kind and size of differences to make between one member and the next of its own series of plans?
What governs the length of time which elapses between a bid by one party and the next bid by the other?
Does each party determine the whole series of its own suggestions in advance or does it decide each step in the light of both parties’ previous steps?
On what grounds does each party decide what kind of plan shall begin and what kind shall end its own series?
Why is the bargaining process sometimes abandoned without agreement?
Why does not each party reveal to the other the whole series of its plans from the start?
G. L. S. Shackle

Labour Market and Labour Supply


Chapter 20. Labour Market Theory and Empirical Research

Economic theory provides a model of the operation of the labour market which helps to explain wage differentials and the allocation of labour between employers, occupations, industries, and regions as the market tends to move toward equilibrium. Marshall, for example, pointed to the ‘tendency’ of competition to result in ‘equality of efficiency-earnings in the same district’, and he added: 1
This tendency will be the stronger, the greater is the mobility of labour, the less strictly specialized it is, the more keenly parents are on the look-out for the most advantageous occupations for their children, the more rapidly they are able to adapt themselves to changes in economic conditions, and lastly the slower and the less violent these changes are.
Charles A. Myers

Chapter 21. Aggregate and Particular Labour Supply Curves

The supply of disposable labour depends upon ten general variables:
Natural population movements;
Distribution of the working population by working age;
Internal and international migration;
Productivity of the working population;
Distribution of the population by skills, industries, and labour markets;
Mobility of labour;
Labour policies pursued by the workers or imposed by the government;
Duration and intensity of work; (9 Disutility of work; (10 Remuneration for work.
Giovanni Demaria

Report on the Proceedings


Report on the Proceedings

Professor Dunlop, opening the discussion on Mr. Johnson’s paper, suggested that the latter should begin by answering a question put by Professor Reynolds : What are the main determinants of the level of money wages?
John T. Dunlop


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