The prices and incomes accord : employment and unemployment / F. H. Gruen.

Abstract

1. This paper looks at incomes policies overseas to see how successful they have been and the conditions which seem to make it more likely that incomes policies are successful. 2. Short-run incomes policies do not seem to have achieved much change in the rate of growth of money wages in Britain, USA and Canada. Longer term policies have been successful in a number of countries including the Netherlands, Sweden, Norway and Austria - but in three of these four countries such success has crumbled after some years. 3. Successful incomes policies are assisted by a common view of the country's economic situation - a process helped by frequent exchanges of views on economic trends among economic technicians, business, labour and government. 4. The size and organisation of pressure gropups is also inportant. Where pressure groups are highly centralised, have power to commit their constituent organisations (as in Austria and Scandinavia) feasible incomes policy bargains are far more likely to be achieved. 5. The second section of the paper, entitled "The uphill task of reducing unemployment", dissects employment changes in various ways. It is pointed out that, even though the Labor Party's promise of creating half a million jobs in three years would exceed the greatest number of jobs ever generated in any three year period (at least since figures were kept in this form from 1967 on), only some 15% of these jobs would have been available to reduce either open or disguised unemployment - if this job target had applied to the last three years (the remainder being required to employ the growing population). 6. A dissection of changes in unemployment is used to show how the stop-go growth of the last decade has led to the ratcheting up of Australian unemployment levels. 7. There is, in fact, considerable danger of the labour market becoming more segmented with the unemployed being very much at the end of the queue - behind most new entrants to the labour force, behind the hidden unemployed and behind immigrants attracted to the country during brief periods of high economic activity. 8. A prices and incomes accord is likely to face significant short run, hopefully teething, problems. But even if it does become possible to isolate the current excessive wage settlements in certain key areas, fundamental longer term problems remain. 9. If wage pressures resume as soon as the growth rate of employment begins to exceed the population rate - as they did in 1979/81 - we are confronted with a very depressing scenario which would condemn us to low long term economic growth and high unemployment levels for the foreseeable future. 10. Some observers despair of a centralised wage setting system achieving the requisite degree of wage restraint and advocate a more decentralised "market determined" system. Reasons are given why a decentralised system of collective bargaining may not, in fact, achieve any greater degree of wage restraint. Show more