WAGE POLICY AND INFLATION
| Published date | 01 June 1958 |
| Date | 01 June 1958 |
| Author | A.K. CAIRNCROSS |
| DOI | http://doi.org/10.1111/j.1467-9485.1958.tb00354.x |
SCOTTISH
JOURNAL
OF
POLITICAL
ECONOMY
JUNE
1958
WAGE
POLICY
AND INFLATION
THIS
issue of the
Scottish
Journal
of
Political Economy
is devoted to
a discussion
of
wages in conditions of full employment and in the
context of post-war Britain. Over the past five years, to go back
no
further, wage rates have risen at an annual rate that has varied be-
tween
4.6
per cent. and
8.2
per cent. while unemployment has at no
time been greater than
2
per cent. What view ought one to take of
these two phenomena and of the connection between them?
On
the one hand, one can argue that full employment is simply
shortage of labour seen from the other side, and that shortage custom-
arily gives rise to an increase in price,
so
that continuous full employ-
ment and continuously rising wages are natural concomitants. From
this it
is
a short step to attributing the upward drift of prices that goes
with this situation to full employment itself and to the conclusion
that some relaxation
of
pressure
on
the labour supply
is
indispensable
if
inflation
is
to be halted.
This line
of
argument, which is developed in Mr. Parkinson’s con-
tribution, draws special strength from the circumstance that in Britain
no less than
14
m. workers have been absorbed into employment since
1948
without any increase in the size of the population between the
ages
of
15
and
65,
the normal limits
of
working age. The pressure
on
labour supply has also found expression in an extension
of
over-
time
so
that, contrary
to
popular belief, hours actually worked,
throughout the post-war years, have been longer than they were before
the war.
It
is consistent with this line of thought that stress should be laid
on
demand factors in the inflationary process, since the shortage of
labour has itself
to
be accounted for and clearly postulates a high
level
of
demand. The implication is, indeed, that a compression
of
demand, whether by fiscal
or
monetary techniques, will operate to
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