Wednesday, June 24, 2015

The Wages-Fund Doctrine for Dummies

 Wages-fund doctrine simplified:
1. Wages increase when the wages-fund increases. 
2. The wages-fund increases when profits increase. 
3. Profits increase when wages are kept low.
Thus the way to increase wages is to lower them.
Wages-fund doctrine updated:
1. Full employment requires economic growth. 
2. Sustained economic growth requires low inflation. 
3. Controlling inflation requires limiting wage demands. 
4. Limiting wage demands requires a non-accelerating inflation rate of unemployment (NAIRU).
Thus the way to achieve full employment is to circumvent it.