Incomes Policy: Some Further Results on the Determination of the Rate of Change of Money Wages

In an earlier paper, Lipsey and Parkini [3] reported that the rate of change of money wages in the United Kingdom is closely related inversely to the level of unemployment in times when income restraint policies are not being operated, and that it is approximately constant and independent of the level of unemployment when these policies are being operated.2 If the Lipsey-Parkin analysis is correct, there is a crucial level of unemployment below which restraint policies will, on the average, be successful and above which such policies will, on the average, fail. That crucial level of unemployment was calculated to be 1-8 per cent. There is, of course, a considerable range of error on this point estimate. The equations on the basis of which this conclusion was reached are:3