Shocks and Structural Breaks: Labor Market Reforms in the United Kingdom
IMF Working Papers, November 1, 1994
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- Shocks and Structural Breaks: Labor Market Reforms in the United Kingdom
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Bibliographic details
- Authors: Eswar S Prasad, Ramana Ramaswamy
- Published: November 1, 1994
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451922653.001
Summary and central argument
- Paper analyzes the effects of the labor market reforms launched in the early 1980s by the Conservative government led by Mrs. Thatcher.
- Main argument: the increase in the growth of labor productivity in manufacturing after 1980 and the improvement in the responsiveness of employment to variations in output can be largely attributed to the success of the reforms in reducing industrial disputes and removing structural impediments in the labor market.
- Counterpoint: the reforms did not succeed in moderating real wage growth or improving the tradeoff between wage inflation and unemployment.
- Attribution for failure on wages: certain aspects of the wage bargaining system and the influence of relative wage norms in the process of wage determination.
Findings on productivity and employment responsiveness
- Increase in the growth of labor productivity in manufacturing after 1980 linked to:
- Reduction in industrial disputes.
- Removal of a number of structural impediments in the labor market.
- Improvement in the responsiveness of employment to variations in output associated with the reforms.
Findings on wages and wage–unemployment tradeoff
- Reforms did not moderate real wage growth.
- Reforms did not improve the tradeoff between wage inflation and unemployment.
- These outcomes are attributed to:
- Certain aspects of the wage bargaining system.
- Influence of relative wage norms in wage determination.
Subject areas and keywords
- Subject: Employment, Labor, Labor market reforms, Production, Productivity, Wages
- Keywords: Employment, Europe, inflation, inflation-unemployment tradeoff, Labor market reforms, product wage, Productivity, real wage, wage, wage inflation, wage relativity, wage-bargaining system, wage-unemployment tradeoff, Wages, WP