Incomes Policy: The “TIP” of the Iceberg

  • Samuel Rosenberg


In 1944 John Maynard Keynes, while editor of the Economic Journal, wrote the following to an economist who had submitted an overformalistic analysis of the problem of inflation:

I do not doubt that a serious problem will arise as to how wages are to be restrained when we have a combination of collective bargaining and full employment. But I am not sure how much light kind of analytical method you apply can throw on this essentially political problem.1


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  1. 1.
    Richard Kahn, “Some Aspects of the Development of Keynes’s Thought,” Journal of Economic Literature 16 (June 1978): 557.Google Scholar
  2. 2.
    For a more extensive discussion of the worker-capitalist relation in the process of production, see Richard Edwards, Contested Terrain: The Transformation of the Workplace in the Twentieth Century ( New York: Basic Books, 1979 ).Google Scholar
  3. 3.
    For an example of the rhetoric of scarcity, see President Carter’s statement accompanying his proposed budget for the current fiscal year. He said: “In formulating this budget I have been made acutely aware once more of overwhelming demands upon the budget and of the finite nature of our resources.” New York Times, January 24, 1978, p. 24.Google Scholar
  4. 4.
    Inflation may increase uncertainty, making long-range planning more difficult. It may increase speculation, a generally unproductive activity with potentially destabilizing effects. Social conflict may worsen, for virtually everyone, feeling cheated by inflation, will strive to make up their losses by increasing their demands.Google Scholar
  5. 5.
    Michael J. Crozier, Samuel P. Huntington, and Joji Watanuki, The Crisis of Democracy: Report on the Governability of Democracy to the Trilateral Commission ( New York: New York University Press, 1975 ), p. 113.Google Scholar
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    Craufurd D. Goodwin, ed., Exhortation and Controls: The Search for a Wage-Price Policy, 1945–71 (Washington, D.C.: Brookings, 1975), pp. 385, 387.Google Scholar
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    Economic Report of the President (Washington, D.C.: U.S. Gov’t. Printing Office, 1979 ), p. 128.Google Scholar
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    Edward F. Denison, “The Puzzling Drop in Productivity,” Brookings Bulletin (Fall 1978 ): 12.Google Scholar
  9. 9.
    Some suggestive evidence concerns the coverage given by recent journalistic accounts of labor-management relations to the demands of management for “givebacks” from labor in the work process designed to improve productivity.Google Scholar
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    In a maximizing framework, increases in monopoly power or changes in the strategies of those who have this power are needed for monopoly power to cause inflation. However, the extent and location of concentrated economic power influences the degree to which inflationary impulses are transmitted throughout the society.Google Scholar
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    There are many different explanations in the literature for the development of internal labor markets. They range from those emphasizing job-specific training to those emphasizing the use by employers of internal labor markets to stifle the development of class consciousness among their workers. For an example of the explanation based on training, see Peter B. Doeringer and Michael J. Piore, Internal Labor Markets and Manpower Analysis (Lexington, Mass.: D.C. Heath, 1971), chapter 2. For an explanation based on class-consciousness considerations, see Katherine Stone: D.C. Heath, 1971), chapter 2. For an explanation based on class-consciousness considerations, see Katherine Stone, “The Origins of Job Structures in the Steel Industry, ” Review of Radical Political Economics 6 (Summer 1974 ): 61–97.Google Scholar
  12. 12.
    C.R. Livernash, “The Internal Wage Structure,” in New Concepts in Wage Determination, edited by G.W. Taylor and F.C. Pierson ( New York: McGraw-Hill, 1957 ), p. 140.Google Scholar
  13. 13.
    Public sector workers are being ignored in this paper, for recent wage settlements in the public sector have been relatively low and the “urban fiscal crisis” and “taxpayer revolt” have created an extremely unfavorable bargaining atmosphere for these workers.Google Scholar
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    Economists disagree on the empirical importance of wage interdependence and historical wage relationships. Eatwell, Llewellyn, and Tarling, in a study of twenty industries in fifteen countries, including the United States, from 1958 to 1967, find that the average interindustry dispersion of labor productivity increases was quite large. Also wage increases in each country were highly correlated with those that occurred in the three industries in which labor productivity was rising the fastest. John Eatwell, John Llewellyn and Roger Tarling, “Money Wage Inflation in Industrial Countries,” Review of Economic Studies 41 (October 1974):515–23. On the other hand, Flanagan, in a study of American wage setting from 1959 to 1975, argues against the importance of wage interdependence. Robert J. Flanagan, “Wage Interdependence in Unionized Labor Markets,” Brookings Papers on Economic Activity, 1976: 3, pp. 635–73.Google Scholar
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    In many instances, lower-level production employees are laid off on the basis of seniority with some rights of recall based on accumulated seniority. Thus, they maintain a stable relationship of sorts with the firm.Google Scholar
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    For a more extensive discussion of this point, see Edwards, Contested Terrain, pp. 157–59.Google Scholar
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    Julius S. Brown, “How Many Workers Enjoy Discretion on the Job?” Industrial Relations 14 (May 1975): 196–202.Google Scholar
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    For an elaboration on changing attitudes toward work, see Richard Sennett, “The Bosses’ New Clothes,” New York Review of Books, February 22, 1979, pp. 42–6. At the same time as I was writing this section, the Wall Street Journal had a series of articles dealing with the issues of worker absenteeism and productivity growth in which similar points were made concerning negative attitudes toward work. Wall Street Journal, March 13, 1979, pp. 1, 16; March 14, 1979, pp. 1, 33. For an article skeptical of these sorts of journalistic accounts, see Robert J. Flanagan, George Strauss, and Lloyd Ulman, “Worker Discontent and Workplace Behavior,” Industrial Relations 13 (May 1974): 101–23. Their conclusion concerning the ability of conventional economic variables, such as unemployment and the demographic composition of the work force, to explain productivity change is contradicted by studies, such as Denison’s, of more recent productivity trends.Google Scholar
  19. 19.
    The theory of the second best, the basis for this assertion, is presented in R. G. Lipsey and K. Lancaster, “The General Theory of Second Best,” Review of Economic Studies 24: 11–32.Google Scholar
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    Charles L. Schultze, The Public Use of Private Interest ( Washington, D.C.: Brookings, 1977 ), p. 75.Google Scholar
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    A very interesting discussion of the development of the broad coalition of business groups can be found in Thomas Ferguson and Joel Rogers, “Labor Law Reform and Its Enemies,” Nation, January 6–13, pp. 1, 17–20.Google Scholar
  22. 22.
    Arnold R. Weber and Daniel J.B. Mitchell, The Pay Board’s Progress: Wage Controls in Phase II ( Washington, D.C.: Brookings, 1978 ), p. 139.Google Scholar
  23. 23.
    Ibid., p. 263.Google Scholar
  24. 24.
    Laurence Seidman, “Tax-Based Incomes Policies,” Brookings Papers on Economic Activity, 1978: 2, p. 336.Google Scholar
  25. 25.
    For an interesting discussion of these two issues, see the paper by Thomas Mayer in this volume.Google Scholar
  26. 26.
    There are certain circumstances in which this weapon of business can lose most of its effectiveness. For a discussion of these conditions, unlikely to occur in the American political economy in the relatively near future, see Fred Block, “Cooperation and Conflict in the Capitalist World Economy,” Marxist Perspectives 2 (Spring 1979 ): 88.Google Scholar
  27. 27.
    Lawrence Klein and Vijaya Duggal make such a proposal. Seidman discusses it in Seidman, “Tax-Based Incomes Policies,” p. 340.Google Scholar
  28. 28.
    Arnold R. Weber and Daniel J.B. Mitchell, “Further Reflections on Wage Controls: Comment,” Industrial and Labor Relations Review 31 (January 1978): 153.CrossRefGoogle Scholar
  29. 29.
    John Maynard Keynes, “National Self-Sufficiency,” Yale Review 22 (Summer 1933 ): 760.Google Scholar

Copyright information

© Springer Science+Business Media Dordrecht 1981

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  • Samuel Rosenberg

There are no affiliations available

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