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Real and Money Wage Rates

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  • John T. Dunlop

Abstract

In the General Theory, John Maynard Keynes held money and real wage rates move in opposite directions. In expansion, prices increase faster because of increasing costs and a rise in the proportion of product going to profits. Neoclassical economists held similarly. Money illusion of workers supported their common view. The author's 1938 article rather showed a procyclical pattern, significant to macroeconomic models of the economy. Contemporary literature with new elements of compensation and new measures of wages supports a slightly procyclical relationship. Increased output and employment in expansion do not require lower real wages.

Suggested Citation

  • John T. Dunlop, 1998. "Real and Money Wage Rates," Journal of Economic Perspectives, American Economic Association, vol. 12(2), pages 223-234, Spring.
    • Handle: RePEc:aea:jecper:v:12:y:1998:i:2:p:223-34
    Note: DOI: 10.1257/jep.12.2.223
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    File URL: http://www.aeaweb.org/articles.php?doi=10.1257/jep.12.2.223
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    References listed on IDEAS

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    Cited by:

    1. Stirati, Antonella, 2014. "Real wages in the business cycle: an unresolved conflict between theory and facts in mainstream macroeconomics," MPRA Paper 53743, University Library of Munich, Germany.
    2. Susanto Basu & Alan M. Taylor, 1999. "Business Cycles in International Historical Perspective," Journal of Economic Perspectives, American Economic Association, vol. 13(2), pages 45-68, Spring.
    3. Antonella Stirati, 2016. "Real wages in the business cycle and the theory of income distribution: an unresolved conflict between theory and facts in mainstream macroeconomics," Cambridge Journal of Economics, Cambridge Political Economy Society, vol. 40(2), pages 639-661.

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    More about this item

    JEL classification:

    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity

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