Abstract
* author wishes to thank R. F. Adams, A. E. Fechter, and G. R. Green for the many helpful comments they have provided. research for this paper was supported by funds provided by an Area Redevelopment Administration Technical Assistance Grant. 1 A. W. Phillips, The Relation Between and the Rate of Change of Money Wage Rates in the United Kingdom, 1861-1957, Economica, November 1958, pp. 283-99. For a recent application of the Phillips analysis, as well as reference to most of the previous studies, see William G. Bowen and R. Albert Berry, Unemployment Conditions and Movements of the Money Wage Level, Review of Economics and Statistics, May 1963, pp. 163-72. 2 Philip Ross, Labor Market Behavior and the Relationship Between and Wages, Industrial Relations Research Association, Proceedings, 1961, pp. 275-97. In addition to the explanations given by the discussants for the negative results obtained by Ross, his results can also be explained simply on the basis of an inadequate measurement of unemployment. Ross uses the letter (BES) classification for his measure of the unemployment rate. numerical rate is taken to be the mid-point of the range covered by each letter grade. range of actual unemployment rates covered by each letter grade is quite wide, and it is surprising when Ross remarks, A surprising number of markets had no change in unemployment from one year to the next (p. 285). Recently a study of local labor markets in Canada has been published by S. F. Kaliski, The Relation Between and the Rate of Change of Money Wages in Canada, International Economic Review, January 1964. levels and changes in the unemployment ate.3 process which is being described is essen ially one of price adjustment to existing and expected conditions of market excess supply or demand. price in the labor market is the wage rate, and expected excess demand or supply is measured by the unemployment rate and changes in this rate. use of present and/or past rates of unemployment, along with changes in these rates, must be considered as a proxy for expected future conditions in the labor market. In
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