Jim Devine wrote:
> Rather, as part of the price-wage spiral that characterizes inflationary
> persistence in the face of low demand, I'd say that it's the _lack of_
> price competition (i.e., price-setting power) that represents capital's
> contribution to the dynamic.
. . .
> Industry-level Phillips curves are flatter (showing less inflationary
> response to changes in unemployment) as industries are more monopolized
> and unionized.
Was this a typo? It seems to say the opposite of what you are otherwise
saying.
> It's true that profligate management (hiring nephews
> and buying too many corporate jets) do contribute to inflation (by lowering
> labor productivity growth) but I don't see how this is the whole story.
I meant profligate in their industrial relations and workforce
management -- as in negotiating exhorbitant wage increases because they
can be passed on to customers and hoarding labour as a way of responding
to changes in demand. The joker in this deck is the often overlooked
(according to Pfeffer) distinction between hourly labour rates and labour
costs per unit of output. Pfeffer says managers typically behave as if
rates were a proxy for costs because changes in rates are tractable and
changes in costs aren't. (BTW, from what I've seen the economics
literature -- namely on labour as a quasi-fixed cost -- typically does the
same).
If employers are in a position to pass on labour "costs" to the consumer,
there may well be an incentive to inflate those costs and pocket the
differential between the putative increased costs and the actual increased
rates. On the other hand, if competition prevents employers from passing
their costs to consumers this doesn't mean they automatically become
provident managers. Instead of exercising monopoly power in the market for
their products, they may simply shift to exercising monopsony power in the
labour market and shift the overhead costs of their labour to society.
The labour *process* and the labour market are two very distinct entities
that, of course, have profound effects on one another. But one cannot
extrapolate changes in the labour process from changes in the labour
market. Furthermore, because of interaction between process and market,
one can only "predict" one kind of change in the market (wage
inflation) from another (unemployment) by holding process constant.
Tom Walker
