Employment, Wages, and Unionism in a Model of the Aggregate Labor Market in Britain
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NBER Working Paper No. 3030
Issued in July 1989
NBER Program(s): LS
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.
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