A Keynesian View of The Redistribution of Work

Abstract

The task of reconciling full employment with relatively low inflation was achieved in most industrial countries with reasonable success during the immediate post-war decades. However, the emergence of ’ stagflation’ - simultaneous increases in unemployment and inflation - in the 1970s under the impact of oil price shocks ushered in ‘monetarist’ policies, which assigned inflation-reduction a higher priority than full employment. The ensuing monetary shocks resulted in unprecedented mass unemployment throughout the world. Whilst the United States has created near full employment conditions, in the EU, unemployment, albeit cyclical, has persisted at high levels and co-exists with often excessively long hours worked by those in employment. Solutions to European unemployment divide between a neo-liberal orthodoxy which advocates the introduction of more ‘flexible’ labour markets in an attempt to ape what is thought to explain the US success and a heterodoxy which advocates demand reflation as well as a redistribution of working time, involving hours-reduction and work-sharing. This paper analyses the causes of unemployment and its solutions, including a redistribution of work, from a Keynesian perspective.