[발췌 10장: W. R. Garside's] British Unemployment 1919-1939

출처: W. R. Garside, British Unemployment 1919-1939: A Study in Public Policy (Cambridge University Press, 2002)

자료: 구글도서

※ 발췌(excerpts)

Chapter 10. Pricing Jobs: the real wage debate and interwar unemployment

During the 1920s few observers inside or outside of government could resist the temptation to blame industrial stagnation, rising unemployment and falling overseas trade upon the failure of money wages to respond freely or adequately to market signals. Accepted economic doctrine taught that the demand for and supply of labour would be rendered equal by the operation of free market forces. The persistence of unemployment convinced contemporaries, therefore, that particular institutional and attitudinal forces were creating market imperfections to the detriment of Britain's economic revival.

  This preoccupation with apparent labour market failure proved to be an important element in the evolution of the radical plea for a more interventionist and managed economy in Britain. Mass unemployment convinced Keynes in particular that whatever pure theory might proclaim, once money wages and prices could not and so obviously did not clear markets, for whatever reason, then some alternative strategy had to be adopted. If aggregate demand fell but money wages did not, he was to contend, the labour market would not clear. Even if money wages did fall, there was no guarantee that planned output would settle at a full employment level. This contention raised the intriguing question of whether the unemployment associated with a level of interwar real wages above market clearing levels could have been reduced earlier and more substantially by a mildly inflationary policy of fiscal expansion. The substance of that debate is taken up in subsequent chapters. First we must examine why the 'problem of wages' figured so prominently in the diagnosis of interwar unemployment.

The Neo-Classical Theory of Wages and Employment [1]

Many government officials, industrialists and economists between the wars saw a distinct connection between the crisis of unemployment and the prevailing level of money wages and prices. There were differing interpretations, however, as to the precise nature of this alleged association and of its consequences for public policy. Nevertheless, the contrast between employment conditions and the behaviour of real wages in the pre-war and post-war periods, and more particularly the co-existence in Britain in the early 1920s of increased labour costs and falling international competitiveness, convinced many contemporary observers the real wages, already 'too high', were a fundamental cause of the prevailing economic malaise.

  It was generally conceded that before 1914 British nominal wages possessed a sufficiently high degree of flexibility to prevent excessive unemployment. Although there is evidence of standard wage rates being maintained while prices fell during the 1880s and early 1890s, in contrast to the experience of the previous thirty years, labour unions during the Edwardian period proved generally unable to prevent wage reductions in times of rising unemployment. Collective bargaining procedures and statutory unemployment insurance had yet to be fully developed; thus the temptation to accept wage reductions rather than endure extreme poverty was strong. At that time, Clay noted:

It was impossible to maintain wage rates generally at a level that restricted employment throughout industry; somewhere, usually at many points, wages (in relation to efficiency) could be reduced to the level at which expansion could take place.[2]

  According to the classical equilibrium theory of the labour market, both the demand for and supply of labour were functions of the real wage. The demand price of labour was equal to its marginal product, that is, the extra unit of labour. The supply price of labour was that at which the marginal product of labour equalled the value which the marginal unit of labour assigned to the leisure forgone by working (the marginal disutility of labour). Aggregate labour demand  was a negative function and labour supply a positive function of the real wage. It was the real wage, therefore, which served to equate the supply of and demand for labour. Providing that real wages were flexible, market forces would ensure that all those willing to work at a given real wage would in fact be employed; prices would adjust through market competition to reduce any temporary unemployment, leaving those not willing to work at the prevailing level of real wages voluntarily unemployed. As Pigou put it:

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p. 284

( ... ... ) recorded unemployment levels in excess at times of 16% of insured workers. By 1929 money wages were only 1.2% below their 1925 level. The fall in British unit wage costs during the same four-year period, moreover, was only one-half of that achieved in the United States and only one-quarter of that in Sweden. [7] Even the tightly skewed industrial and regional distribution of unemployment did not produce any significant widening of wage differentials between depressed and growing regions or between expanding and contracting industries. The general impression for most of the years after 1923, in other words, was of rather stable nominal money wages in the face of falling prices.

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Unemployment and Wages in the 1920s (p. 289)

Keynsian Theory, Unemployment and Wages in the 1930s (p. 293)

It was in these circumstances that Keynes, already convinced of the folly of deflation as a cure for depression and deeply suspicious of the free market system as a guarantor of full employment equilibrium, vigorously attacked any notion of reformulating economic policy along strictly classical lines. ( ... pp. 294-297 unavailable ... )