The Political Economy of Wages and Unemployment

The Political Economy of Wages and Unemployment

A Neoclassical Exploration

William Oliver Coleman

In this tightly argued work William Coleman explores the macroeconomic implications of politically based restraints on competition in labour markets.

Chapter 9: Why the Majority May Choose the Wage of the Minority

William Oliver Coleman

Subjects: economics and finance, labour economics


It might be questioned whether the analyses of the previous chapters have much relevance to the contemporary world. For the previous chapters deal with restrictions on competition that intend to embrace the whole workforce. But in the present-day world restrictions on competition infrequently have such a universal aspiration. Much more commonly, such restrictions are imposed only on small and marginal sections of the labour force, with the wage rates of the great bulk of the labour force left to competitive forces. It seems that for only a minority of the poorly paid is regulation of the labour market a palpable reality. This chapter confronts the challenge that the relative marginality of labour market regulation poses to the standpoint of this book, and investigates whether it is possible for the moral of the preceding chapters to apply even in the situation where only a minority face wage regulation. To undertake this investigation the modelling of labour’s contribution to production needs to be developed. Up till now the labour force has been assumed to be homogeneous, and so there could be only one wage rate; there could be no ‘minimum wage’ distinct from the wage rate paid to all. This chapter therefore shifts away from the assumption of homogeneous labour to embrace the heterogeneity of labour, and is thereby able to answer various questions regarding the ‘electorally optimal’ wage regulation in the context of many different types of labour. Might it ever be to the advantage of a majority of purely self-interested...

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