The Political Economy of Wages and Unemployment
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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.
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Chapter 5: How Bargaining May Build a Ceiling Instead of a Floor

William Oliver Coleman


Chapters 3 and 4 were concerned with how the wage rate might be shaped by a majoritarian political process, in which the median voter is a wage earner. The two chapters concluded that the wage rate formed by such a process would exhibit both the rigidity and the volatility characteristic of labour markets. A defect in the assumption of a majoritarian process deciding the wage is that it amounts to supposing that the wage rate is subject to a ‘dictatorship of the median worker’, in which the labour force’s most preferred wage rate is unilaterally imposed on employers. Not only does such a ‘dictatorship of the median worker’ grossly exaggerate the present strength of the labour interest, but it also misses democracy’s requirement for a degree of consensus amongst its composing and rival constituencies: neither the spirit nor the practise of democracy coincides with ‘50 per cent plus one taking all’. If we think in terms of two constituent political interests – ‘capital’ and ‘labour’ – this appetite of democracy for consensus suggests that both interests must participate in the shaping of the wage rate. This chapter therefore moves to analyse the situation where neither rival interest can simply impose its most preferred restriction on market forces by the sole virtue of being a majority. Instead any such restriction of the labour markets must be agreed upon by both interests. So in terms of historical narrative of labour conditions we move away from ‘victories’, ‘milestones’ and ‘landmark judgements’ and towards ‘compromises’ and...

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