Page:The Economics of Unemployment.djvu/88

for the home market, e.g. the building trades. Lower wages will mean cheaper houses. Cheaper houses will mean a demand for more and larger houses, thus furnishing more employment to capital and labour in the building trades. The acceptance of lower wages will not mean a reduction of money income, or of aggregate demand for commodities, on the part of the whole body of workers in the building trades. For the larger number employed and the fuller employment at the lower wage-rates, will leave this class of workers with as large or even a larger aggregate of purchasing power than they would have had by refusing to take lower rates. Indeed, it is argued, if other workers besides those in the building trades are also accepting lower wages, costs and prices will fall in these other trades, so that workers in the building trades will be able to spend their reduced money incomes more advantageously. In other words, it is suggested that by a general reduction of wages the workers will be at least as well, or better off, than before. They will buy more of one another's products at lower prices. More workers in each trade will be employed and earning incomes, so that the total purchasing and consuming power will be greater than would be the case if 20 per cent. of them remained unemployed and the other 80 per cent. did short time at high wage-rates.

In other words, wage reduction will mean that capital and labour, which otherwise stand idle because what they could produce could not get sold on terms which would give even a minimum profit to the employer, can now be employed and the product