CHAPTER 6 - The Regulation of Wages and Salaries

Abstract

This chapter discusses the regulation of wages and salaries. It is usually argued that the inclusion of all or at least most forms of income in the policy is necessary in order to make it politically acceptable to wage and salary earners. This is certainly true that comprehensive agreement should be reached among the social partners not only about personal incomes but about the allocation of the entire national income. There have been attempts to allow pay rises equal in money terms to all or most employees and attempts to use a formula made up of an absolute plus a percentage term, with the purpose of achieving a general and uniform compression of relative earnings at the same time as control over the national average rate of increase. In the process of pay-cost inflation, especially if its rate has passed a certain level, the dissatisfaction of employees is enhanced by the following phenomenon. Each annual or other periodic wage or salary agreement catches up with the rise in prices that has occurred since the last one and most often more than catches up with it. But as pay rises come in discrete doses separated in time, whereas consumer prices are creeping upwards continuously, the subjective experience of employees is a gradual fall in their real earnings over most of the time, punctuated by rare redressments.