Keynes, Uncertainty and the Global Economy

Keynes, Uncertainty and the Global Economy

Beyond Keynes, Volume Two

Edited by Shelia C. Dow

The revival of interest in Keynesian economics since the late 1980s reinstates the importance of Keynes’s contribution to economic theory and policy. This is the second of two volumes in which authoritative contributions are presented by an outstanding group of international experts to celebrate Keynesian economics, and to review and further the developments of post Keynesian economics of recent years.

Chapter 13: Conflict in wage and unemployment determination in the UK

Philip Arestis and Iris Biefang-Frisancho Mariscal

Subjects: economics and finance, post-keynesian economics


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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