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The WageIncome Ratio in France, 19491973

The WageIncome Ratio in France, 19491973 A recent analysis of wages has shown that within the productive structure of the French economy a twofold process of factor substitution is under way, namely the substition of capital for labour and of nonmanual for manual workers. By the logic of neoclassical distribution theory, the relative price of manual labour should be increasing as its marginal productivity rises. But computations which we have carried out for the French economy between 1949 and 1973 yield the opposite result the relative price of labour has fallen steadily over the period. The aim of this article is to attempt to explain how much of this decreasing trend is attributable to changes in the structure of the active population and how much is due to changes in the structure of the prices of labour. For this purpose, and following the work of Phelps Brown and Sheila Hopkins, we have calculated an index reflecting the relationship between the index of manual workers' wage rates and the index of national income per head of the occupied population. This relationship represents what is usually referred to as the wageincome ratio. WIR, with the difference that, in this case, it is limited to wage rates in the private sector. Changes in the index of the WIR can be regarded as reflecting changes in the relative index of a unit of labour if it is accepted that the index of income per head of the occupied population itself can be interpreted as an index of the price of productive factors. This hypothesis is accepted by Phelps Brown and S. Hopkins the wageincome ratio gives us the rate of exchange of a unit of wageearners' work, not against quantities of produce but against quantities of other factors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Social Economics Emerald Publishing

The WageIncome Ratio in France, 19491973

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References (4)

Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
0306-8293
DOI
10.1108/eb013781
Publisher site
See Article on Publisher Site

Abstract

A recent analysis of wages has shown that within the productive structure of the French economy a twofold process of factor substitution is under way, namely the substition of capital for labour and of nonmanual for manual workers. By the logic of neoclassical distribution theory, the relative price of manual labour should be increasing as its marginal productivity rises. But computations which we have carried out for the French economy between 1949 and 1973 yield the opposite result the relative price of labour has fallen steadily over the period. The aim of this article is to attempt to explain how much of this decreasing trend is attributable to changes in the structure of the active population and how much is due to changes in the structure of the prices of labour. For this purpose, and following the work of Phelps Brown and Sheila Hopkins, we have calculated an index reflecting the relationship between the index of manual workers' wage rates and the index of national income per head of the occupied population. This relationship represents what is usually referred to as the wageincome ratio. WIR, with the difference that, in this case, it is limited to wage rates in the private sector. Changes in the index of the WIR can be regarded as reflecting changes in the relative index of a unit of labour if it is accepted that the index of income per head of the occupied population itself can be interpreted as an index of the price of productive factors. This hypothesis is accepted by Phelps Brown and S. Hopkins the wageincome ratio gives us the rate of exchange of a unit of wageearners' work, not against quantities of produce but against quantities of other factors.

Journal

International Journal of Social EconomicsEmerald Publishing

Published: Feb 1, 1975

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