Real and Money Wage Rates
- (pp. 223-234)
AbstractIn 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.
Citation1998. "Real and Money Wage Rates." Journal of Economic Perspectives, 12(2): 223-234. DOI: 10.1257/jep.12.2.223
- E24 Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital