Wages-fund doctrine simplified:
1. Wages increase when the wages-fund increases.
2. The wages-fund increases when profits increase.
3. Profits increase when wages are kept low.
Thus the way to increase wages is to lower them.Wages-fund doctrine updated:
1. Full employment requires economic growth.
2. Sustained economic growth requires low inflation.
3. Controlling inflation requires limiting wage demands.
4. Limiting wage demands requires a non-accelerating inflation rate of unemployment (NAIRU).
Thus the way to achieve full employment is to circumvent it.
1 comment:
If a retailer lives on 5% profit and raises prices 5% which in turn loses 5% of sales then the retailer ends up back in pretty much the same place -- because the retailer is working from profit on gross income (100%).
If a labor union forces the retailer to raise prices 5% which in turn loses 5% of sales then the labor union is way ahead -- because labor (in this example) represents only 10% of retailer costs. Total sales drop 5% but labor's price is up 50%.
OTH, if the retailer can squeeze (unorganized) labor back to 5% of costs while maintaining the same price level then the retailer will double his (formerly 5%) profit.
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