Abstract
This chapter presents evidence on the relationship between real wages and employment in Europe, with special emphasis on France. It also presents a simple model of classical unemployment and shows that such a model seems seriously inconsistent with the evidence. A modified model is developed in which it is assumed that firms cannot immediately reduce their labor forces when real wages rise. The unemployment rate may be measured by the vertical distance between the labor force path and the employment path; it rises steadily during the initial adjustment period, and indeed continues to rise, although more slowly, even after employment growth resumes. A personal guess is that the productivity slowdown and the red wage surge were both symptoms of an underlying sea change in attitudes: a politicization of economic relations.
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