Employment, Wages, and Unionism in a Model of the Aggregate Labor Market in Britain
John H. Pencavel
Two propositions figure prornir.ently in explanatons 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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