Theory of Wages and Employment

Theory of Wages and Employment

Theory of Wages and Employment

Theory of Wages and Employment

Excerpt

In the preface to his Theory of Wages, written in 1931, J. R. Hicks noted that:

. . . periodical reconsiderations of each of the main departments of economic theory are an important part of the duty of economists. . . . Such a reconsideration of wage theory seems long overdue . . . for the most recent comprehensive statements of a positive theory of wages in English--of anything more than an elementary character--are now thirty or forty years old.

Today, almost three decades later, the cycle has run full course, and it seems appropriate again to reassess the theory of wages and employment. In the intervening years the development of the theory of pricing under imperfect competition and of aggregate income and employment determination have altered the face of economic theory and analysis, and the growth of trade unionism has markedly changed the structure of the market. It is a tribute to the earlier work of Hicks in England, and of Paul Douglas in this country, that despite these developments they have remained over the years the two most widely used sources for students seeking a general view of the fundamentals of wage determination. Many major contributions have occurred in this field in recent years, but they have mainly appeared in the periodical literature or in specialized studies on some aspect of the market for labor. Thus it is hoped that a fresh look at this general area of economic theory needs little apology.

In the following chapters attention is concentrated on the wage decision at the level of the firm, and on the relationship between the resulting level of wages in the economy as a whole and other factors which influence the level of employment. Certain subjects which are of natural concern to the student of the labor market--such as internal wage structures, geographical wage differentials, the choice between income and leisure, and the practical aspects of industrial relations--have been deliberately omitted, and the reader may turn to other sources to add flesh to the skeletal framework presented here. Part I, dealing largely with the development of neoclassical wage theory, is intended primarily for the student who is fairly well acquainted with general economic theory, but . . .

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