Wage Theory, New Deal Labor Policy, and the Great Depression: Were Government and Unions to Blame?

  title={Wage Theory, New Deal Labor Policy, and the Great Depression: Were Government and Unions to Blame?},
  author={Bruce E. Kaufman},
  journal={Industrial \& Labor Relations Review},
  pages={501 - 532}
  • Bruce E. Kaufman
  • Published 1 July 2012
  • Economics
  • Industrial & Labor Relations Review
A growing number of economists blame the length and severity of the Great Depression on factors that rigidified wage rates, raised production costs, and interfered with the market allocation of labor. The target of their critique is President Franklin Roosevelt's New Deal labor program, which they portray as creating a series of large negative supply shocks through encouragement of unions, minimum wages, unemployment insurance, and other anticompetitive industrial relations practices. The… 

Sidney and Beatrice Webb's Institutional Theory of Labor Markets and Wage Determination

Sydney and Beatrice Webb were among the most influential institutional labor economists of the pre-World War II period yet this portion of their work has fallen out of sight for more than a

Richard Lester's Institutional‐Industrial Relations Model of Labor Markets and the Near‐Zero Minimum Wage Employment Effect: The Model Card and Krueger Ignored but Shouldn't Have

Abstract: David Card and Alan Krueger dedicate their minimum wage book Myth and Measurement (1995) to Richard Lester, an institutional‐industrial relations labor economist and key figure in the

Background of the Employment Act I: A Living Wage

The first three decades of the twentieth century saw the USA transformed into a mature economy. Manufacturing became the dominant industry of the nation and a large number of low-skilled workers were

Adam Smith’s Economics and the Modern Minimum Wage Debate:The Large Distance Separating Kirkcaldy from Chicago

In the post-World War II period the spearhead of opposition to minimum wage (MW) legislation has been economists associated with the Chicago School, such as Friedman, Stigler, and Becker. They have

How Capitalism Endogenously Creates Rising Income Inequality and Economic Crisis: The Macro Political Economy Model of Early Industrial Relations

A major economic issue today is the causes and consequences of wage stagnation and rising income inequality. This paper uncovers, describes, and formalizes the macro political economy model developed

The Changing Contours of Long-Term Unemployment: The Need for a More Radical Policy

Since the financial meltdown of 2007, unemployment has consistently been above 6.0 percent. On one level, long-term unemployment can be accounted for by structural changes. But, on another level, the

The Hybrid System of Redistributive Economics

This chapter provides an overview of the book’s general theme that the period following World War II was not an Age of Keynes in macroeconomic policy and that the Employment Act of 1946 was more

An Institutional Economic Analysis of Labor Unions

This paper uses institutional economic theory in the line of Commons and Coase to examine the purposes, economic effects, and social welfare consequences of labor unions. Cross‐discipline and

The Political Economy of a Living Wage

In this book, I will tell the story behind Franklin D. Roosevelt’s interest in a living wage. This chapter first examines the issues a living wage raise for interpretations of the economic policies

The Optimal Level of Market Competition: Neoclassical and New Institutional Conclusions Critiqued and Reformulated

This paper examines a fundamental issue in the theory of economic organization: the optimal level of market competition. Answers in neoclassical and new institutional economics are identified and



The Minimum Wage as Industrial Policy: A Forgotten Role

In the welter of arguments being debated in connection with amending minimum wage legislation, the protagonists have lost sight of the original intent of such state intervention. That purpose was to

Accounting for the Great Depression

Economists have offered many theories for the U.S. Great Depression, but no consensus has formed on the main forces behind it. Here we describe and demonstrate a simple methodology for determining

Why Wages Don't Fall during a Recession

A deep question in economics is why wages and salaries don't fall during recessions. this is not true of other prices, which adjust relatively quickly to reflect changes in demand and supply.

On Equilibrium in Labor Markets

  • A. Rees
  • Economics
    Journal of Political Economy
  • 1970
In a recent issue of this Journal Lucas and Rapping (1969b) present some original and interesting views on the nature of equilibrium in labor markets. Unfortunately, in the process they seriously

Did American Welfare Capitalists Breach Their Implicit Contracts during the Great Depression? Preliminary Findings from Company-Level Data

It has been claimed that American employers' experiments in private welfare capitalism collapsed during the Great Depression, giving place to the welfare state and industrial unionism. Recent

The Fallacy of Wage Cuts and Keynes's Involuntary Unemployment

  • John Levendis
  • Economics
    Journal of the History of Economic Thought
  • 2007
The lingering economic problem for economists in the 1920s and 1930s was unemployment. What caused it? More importantly, what could cure it? John Maynard Keynes's work offered new insights regarding

Wages and Keynes: Lessons from the Past

Keynes' ideas on wage setting and unemployment had a profound effect on American economic thought.1 Discussion of these ideas can be divided into two categories: historical and analytical. Under


American institutionalist writers were much involved in the pre-Keynesian discussion over the problems of business cycles, unemployment, and appropriate government policy towards the problems of

Industrial Employment and the Policies of Herbert C. Hoover

Most historians claim that Herbert Hoover adhered to a policy of laissez faire after the stock market crash of 1929. This laissez faire policy is allegedly responsible for the severity and

Institutional Economics and the Minimum Wage: Broadening the Theoretical and Policy Debate

Debate among labor economists on the pros and cons of a minimum wage law has come to focus on whether labor markets are competitive or monopsonistic. Using principles and concepts of institutional