Ecorlomics and Industrial Relations

Abstract

The problem of accommodating 'pure' economic considerations based on an 'ideal' economic system to industrial relations pressures of the real world is a persistent feature of any system of wage fixation. Economic policy framed without sufficient regard to these pressures in the labour market can have perverse economic effects through prolonged unemployment and/or industrial unrest. The industrial structure of the labour market and the norms applied in wage determination provide the basis for conflict centred on the distribution of income between wages and profits and between the wages of one group of workers and others, resulting in cost inflation and/or unemployment. Current proposals for the resolution of this conflict are based on two opposite courses: decentralisation and centralisation of wage deter mination. The difficulties attendant on each course are discussed in the light of experience with wage indexation and the development of more decentralised wage fixing since the abandonment of indexation. It is suggested that there is no perfect solution to what is in substance an institutionalised conflict about the distribution of income. A compromise approach is called for in which economic and industrial relations requirements must find mutual accommodation.