Chapter 13: Conflict in wage and unemployment determination in the UK
13. Conﬂict in wage and unemployment determination in the UK Philip Arestis and Iris Biefang-Frisancho Mariscal1 I INTRODUCTION This chapter presents a theoretical model of wage and unemployment determination in which historical and ideological elements, as well as conventional economic factors, play a role. The model is based on the view that labour productivity is not given by the existing technology alone but also by various socioeconomic determinants and in particular the real wage rate (Bowles and Boyer, 1988). Furthermore, the model illustrates the battle over the distribution of income (Rowthorn, 1977, 1995). It also follows the tradition of Keynes, in that workers bring with them not only labour power but also their past history and norms of justice in the workplace, which are more important in determining their relative and average wage level than purely market forces of supply and demand (Keynes, 1936). Having established the theoretical model in section II, we then go on to estimate the model in section III, using quarterly data for the UK over the period from 1966 until 1994. Section IV concludes. II THE WAGE MODEL The model is summarized in Figure 13.1. Conﬂict arises over labour productivity and the real wage (block I). The only means workers have to enforce wage claims is the threat of a reduction in productivity or a complete withdrawal of labour. The only means employers have to discipline wage demands is the threat of dismissal, which is only eﬀective if workers suﬀer a...
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