Unemployment, Labor Relations, and Unit Labor Costs

Abstract

In his seminal 1943 paper on the political business cycle, Michal Kalecki (1971) argued that industrial leaders feared full employment because the economic insecurity created by unemployment was necessary to keep wages low and maintain work intensity and discipline on the shop floor. On the basis of this reasoning, Kalecki concluded that governments would not use demand management policies to achieve permanent "full employment." In terms of current macroeconomic debates, Kalecki had sketched the outlines of a theory of the "neutral" or "natural" rate of unemployment based on the importance of disciplinary unemployment as a regulator of unit labor costs.