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Employment, Wages, and Unionism in a Model of the Aggregate Labor Market in Britain

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  • John H. Pencavel

Abstract

Two propositions figure prominently in explanations for Britain's comparatively low growth in employment: first, the wage-setting mechanism is insufficiently responsive to the growth of unemployment and, second, there exists a well-defined negative causal relationship from wages to employment with the features of a conventional labor demand function. Using aggregate annual observations from 1953 to 1979, find the evidence for a conventional labor demand curve to be fragile and find little support for the notion that trade union objectives are unaffected by unemployment as some versions of the "insider-outsider" hypothesis would maintain. In general, the empirical results in this paper emphasize that confident inferences about Britain's employment record cannot be drawn from aggregate data.

Suggested Citation

  • John H. Pencavel, 1989. "Employment, Wages, and Unionism in a Model of the Aggregate Labor Market in Britain," NBER Working Papers 3030, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:3030
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    References listed on IDEAS

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    1. Jackman, Richard, 1985. " Counterinflationary Policy in a Unionised Economy with Nonsynchronised Wage Setting," Scandinavian Journal of Economics, Wiley Blackwell, vol. 87(2), pages 357-378.
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    3. Carruth, Alan A & Oswald, Andrew J, 1987. "On Union Preferences and Labour Market Models: Insiders and Outsi ders," Economic Journal, Royal Economic Society, vol. 97(386), pages 431-445, June.
    4. Andrews, Martyn J, 1987. "The Aggregate Labour Market: An Empirical Investigation into Market-Clearing for the UK," Economic Journal, Royal Economic Society, vol. 97(385), pages 157-176, March.
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    6. Layard, Richard & Nickell, Stephen, 1986. "Unemployment in Britain," Economica, London School of Economics and Political Science, vol. 53(210(S)), pages 121-169, Supplemen.
    7. Grubb, David B. & Jackman, Richard & Layard, Richard, 1983. "Wage rigidity and unemployment in OECD countries," European Economic Review, Elsevier, vol. 21(1-2), pages 11-39.
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