Incomes Policy and Equity

Abstract

In both United States and United Kingdom there recently has been a revival of interest in incomes policy, or guideposts. This time reason is not to control inflation while maintaining full employment, but to control inflation and increase employment since present inflation coincides with what are considered to be high unemployment levels. If guideposts are used during a period of rapidly increasing employment, a problem may arise that previous attempts at incomes policy could ignore in short run, although it would have arisen if these attempts had been continued for very long. The problem this article is concerned with is that of relationship between profits and wages embodied in guideposts compared with view of that relationship embodied in discussions of fairness. 1 The former is in terms of income shares, latter in terms of wage rates versus profits. It usually is assumed that norm to be used in wages policy is obvious; a recent article stated the problem of setting an average norm is not one of major problems of an incomes policy.2 The standard wages policy, that average percentage increase in wages rates be equal to growth in productivity,3 sometimes has been formulated on a macro level. That is, all wages should change at same rate as average productivity for economy, as was case with U.S. guideposts or early British policy. At other times it has been formulated on a micro level; that is,