Page:The Economics of Unemployment.djvu/94

contracts upon lower wage-rates to be extorted or cajolled from trade unions hampered by heavy unemployment benefits. In other words, this insistence of labour on retaining a larger share of the product would be itself one important factor in controlling fluctuations of prices and trade. Thus a good deal of the otherwise 'inevitable' would be avoided.

Labour's firm stand for a rising standard of civilised life and the insistent retention of any improvement in that life would modify considerably the magnitude of the fluctuations hitherto made possible by the 'elasticity' of wages.

The history of 'sliding-scales' in wage agreements testifies to the influence of elasticity of wages in aggravating fluctuations of trade by enabling employers to gamble upon future wage reductions.

This wholesome general reaction upon the volume and regularity of trade follows from the adoption of our general analysis of trade depression. The acceptance of real wage reductions in bad times as inevitable and desirable means acceptance of the prevailing conditions of the distribution of wealth as between capital and labour, which we regard as the root cause of fluctuations and depressions. The refusal of such wage reduction makes for a more equal distribution of wealth, a better balance of production and consumption, and a fuller and more regular use of all factors of production.

The first answer, then, to those who urge that a real wage reduction in bad times will, by lowering costs of production, bring some recovery of trade and an increased aggregate income to the workers,