Monday, July 8, 2013

Thatcher, Cameron and Real Wages

Real wages are pro-cyclical, a well established regularity that led Keynes to accept (after evidence presented by Tarshis and Dunlop) that his marginal decreasing productivity demand for labor might be wrong, and that Kalecki seemed to be right (see his article here; subscription required).

The graph below (source here) shows how much real wages have fallen in this and previous recessions in Britain.
Note that in the following one, real wages fell less (so far) than during Thatcher, but the decline has been way longer than with the Iron Lady.

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