Page:The Economics of Unemployment.djvu/71

manufactured goods, on terms of high profits. Though more employment will give higher aggregate wages, wage-rates will not rise so fast as prices and profits. This wage-lag is generally admitted. It signifies for us the important fact that during rising prices and reviving trade the distribution of the product, i.e. of real incomes, is favourable to the employing and capitalist classes, unfavourable to labour. For though the wages and even the real income of the workers may be rising with the enlargement of the product, this enhanced working-class income represents a smaller proportion of the whole income. Now since saving, as we see, comes mainly from the accumulation of surplus income of the capitalist and employing classes, the under-saving which accompanied depression now gives place to what will once more become over-saving when the revival of trade has gone some distance. For as the process of revival with rising prices goes on, the amount of fresh credit needed to finance the expanding volume of business on a higher price level continually grows, and since the time-lag for wages still keeps trade highly profitable, the increased saving and the increasing production continues, making once more towards a rate of production visibly greater than is able to find a profitable market So a check upon the rise of prices takes place, the lag of wages has time to catch up, and employers are faced with high costs of production when prices are beginning to fall and markets are insecure. Under such circumstances finance begins to take alarm and credits are restricted, and so the downward path once more is taken.