The Review of Economics and Statistics Vol. 31 No. 2 1949
The Optimum Wage Rate
Abstract
single industries or firms operating under pure competition in all relevant markets. In this simplified case, it seems clear enough that an increase in wage rates will tend to reduce employment and a reduction in wage rates to increase it. Even in the realm of microeconomics, however, inconclusiveness appears as soon as the assumption of pure competition is dropped. If oligopoly exists in the commodity market, the demand curve may be kinked, with the result that the marginal revenue curve is perpendicular over a considerable range, output may be the same for a wide variety of cost conditions, and a change in wage rates might leave employment unchanged; if monopsony or bilateral monopoly exists in the labor market, a strengthening of the bargaining power of trade unions and a consequent increase in wage rates may leave employment unchanged.' In the field of macroeconomics, the literature on wages and employment is still less conclusive. Since wages are at once income and cost, any change in the general wage level will have both favorable and unfavorable effects on the
- DOI
- 10.2307/1927863
- Volume
- 31
- Issue
- 2
- Pages
- 130
- Sources
- openalex crossref