Profits and the Rate of Change in Money Earnings in the United States, 1935-1959

In a recent study an attempt was made to explain the rate of change in money earnings in the United States by the level and rate of change of unemployment.) This showed that although there appears to have been some relationship between the level of unemployment and the rate of change in earnings in the United States since 1900, the strength of this relationship has varied from one period to another. In the period after the Second World War, especially, there were only weak signs that the rate of change in earnings was responsive to the degree of unemployment. Mr. Kaldor has suggested that the rise in money wages depends on the increase in profits of the previous year.3 According to him there is a complicated interaction, in a growing economy, between the rise in profits and the rise in wages A rise in profits leads to a rise in wages whlich, by increasing demand further, causes a faster rate of increase in profits . Mr. Kaldor is not explicit as to the role of the level, as distinct from the rate of increase, of profits. A priori, one might expect that employers would be more willing to grant, and labour more eager to extract, higher wages when profits are unusually high than when they are unusually low, and vice versa, irrespective of whether profits are rising or not. Further, Mr. Kaldor appears to favour a time lag of one year in the adjustment of wages to profits. But there is no a priori reason to think that this is appropriate. The lag may be longer or shorter than one year, and not necessarily a multiple of a year.5 This article, therefore, tests various hypotheses that the rate of change in money earnings may be influenced, after a

Earnings · Economics · Labour economics · Macroeconomics · Monetary economics · Unemployment · Unemployment rate · Economic Theory and Policy

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