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The government's wage strategy, 1979-1983

Gennard, John (1983) The government's wage strategy, 1979-1983. Quarterly Economic Commentary, 8 (4). pp. 38-41. ISSN 0306-7866

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    The present government's economic strategy is designed to reduce the rate of inflation by controlling the rate of increase in the money supply and, amongst other things, by attempting to make labour and product markets more competitive. This objective has been reflected in the government's attitude towards pay settlements. On this front the strategy has been to convince workers that there is a demand curve for their services and that this curve is not price inelastic. Hence the constant reference by government ministers to workers pricing themselves out of jobs and more recently, to the need for them to price themselves back into work. The general theme has been to stress that pay changes should be related to productivity improvements and the ability of enterprises to pay and to reduce the emphasis both on comparability, whether expressed in terms of equity, social justice, or the 'going-rate', and on the level of inflation as the basis of wage improvements. This "economic perspective" examines the merits of the government's strategy and proposes alternatives.