Distributing Disadvantage in the New Industrial State: A Study of the Phillips Relation for the Mature Corporation

Abstract

This essay proceeds along two fronts. It begins by establishing a "Phillips-like" trade-off which is institutionally rather than market-determined. The contract curve for general equilibrium analysis in the labor market presents a situation uncannily like the Phillips curve. Then a number of developments in those institutions due to rapid technological advance are discussed, and a case is postulated in which the institutions no longer serve their limiting function upon each other. The phenomenon of wage-leadership is examined to show how results in this sector might be generalized to the economy as a whole. The second front involves the problem of governmental response to institutional change. The history of trade unions through law and national policy demonstrates that the government has frequently lagged behind this institutional development, with detrimental results for society. The notion is advanced that intervention into the private economy should not be treated as a problem of ideology, but of theory. In this sense, there are patterns of intervention which are more compatible with different types of institutional development. The mis-matching of types leads to instability or even conflict. Specifically, a high rate of wage-inflation emerging from one sector of the economy is a sign that trade unions and employers do not perform the way they used to, and national policy must be adapted to suit these ends.

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