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Pay Policy, Accumulation and Productivity

Published online by Cambridge University Press:  01 January 2023

G.C. Harcourt
G.C. Harcourt*
Affiliation:
Jesus College, Cambridge and School of Economics, University of New South Wales
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Abstract

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The stock of capital goods will always be a mixture of new best-practice techniques and older vintages, associated with lower productivity and higher running costs yet still profitable to keep running if short-term variable costs are covered. A crucial determinant of the proportion of new to old machines in any industry’s stock of capital goods is therefore the level and rate of change of wages. The rate of accumulation not only has these supply-side effects; it is also obviously a major determinant of activity and employment. There is the possibility of a virtuous cumulative process. To achieve this, we need to make sure, that wages in all industries rise by amounts which are determined principally by the growth of overall productivity and the general price level.

Type
Research Article
Information
The Economic and Labour Relations Review , Volume 8 , Issue 1 , June 1997 , pp. 78 - 89
Copyright
Copyright © The Author(s) 1997

Footnotes

*

This article is a revised version of a chapter in Jonathan Michie and John Grieve Smith (eds), Employment and Economic Performance: Jobs, Inflation and Growth (Oxford University Press, 1997). I am most grateful to, but in no way implicate, Willy Brown, Andrew Glyn, John Grieve Smith, Bryan Hopkins, John King, Peter Kriesler, John Nevile, Brian Reddaway, Bob Rowthorn and John Wells for their comments on a draft of the chapter/article. I would also like to thank, with the same proviso, the participants in the Post Keynesian Economics Study Group (February 1996), in the conference of the volume in Robinson College (May 1996) and in the seminar series of the University of New South Wales (March 1997) for their comments. I also thank the editors of the book and Oxford University Press for allowing me to publish this revised version in ELRR.

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