Читать книгу Out of Work - Richard K Vedder - Страница 35

Just demonstrating that a statistical relationship exists between two or more variables does not, of course, prove causality. Going back to our simplest expression of the neoclassical/Austrian perspective in (1), it is at least theoretically possible that instead of rising adjusted real wages causing higher unemployment, higher unemployment causes higher adjusted real wages. Yet such a conclusion is implausible. One might dismiss that possibility on the basis of economic theory or logic. It makes sense that higher wages would price workers out of the market causing increased unemployment, but makes no sense that higher unemployment would cause wages to rise (if anything, higher unemployment might induce wage-cutting.)

However, critics of the model above would argue that only the proximate causes of unemployment are examined, not the underlying factors. For example, the unemployment-price change relationship observed in (4) and table 3.3 above ignores the causes of price changes. Similarly, the underlying causes of changes in the money-wage variable are not made explicit. These criticisms have some validity, and as the discussion unfolds in the next several chapters we will look at some of the deeper causes of changing prices and wages.

The most criticism, however, relates to productivity change. Keynesians would argue that productivity change is highly procyclical, responding to fluctuations in aggregate demand. For example, they might make the point that if aggregate demand declines, businesses face a decline in the demand for labor (the demand curve in figure 2.1 shifts downward and to the left). At least initially, businesses do not reduce staff proportionally with reduced production, leading to a decline in output per worker. If true, changes in the adjusted real wage are at least partly determined by Keynesian-style aggregate-demand shifts, making the statistical results cited above far less unambiguously supportive of Austrian or neoclassical perspectives on the determinants of unemployment.

It is true that there is a positive statistical association in the twentieth century between short-term fluctuations in economic activity and changes in the productivity of labor. Running a regression between the percent annual change in labor productivity and the percent growth in real GNP (the best measure of economic activity), we find that for the ninety-year period, about one-third of the annual variation in labor productivity growth is explainable by fluctuations in the level of economic activity.²¹ Moreover, the observed relationship is highly significant in a statistical sense. Over some subsets of the century, the proportion of productivity variation explained by changing real GNP is slightly higher, although never as much as half.

We could call productivity change induced by cyclical shifts in aggregate demand “Keynesian productivity change.” Yet a large majority (about two-thirds) of the observed variation in labor productivity is not of this nature. Thus, the claim that the productivity variable’s behavior is largely determined by shifts in aggregate demand seems questionable.

Moreover, in any given year, the growth in real GNP reflects not only cyclical forces (such as changing aggregate demand), but also the longterm growth in real output, influenced by such things as the formation of productive inputs, especially capital, and the resultant increase in the capital-labor ratio. This is the type of productivity advance talked about by Adam Smith in The Wealth of Nations, and can be termed “Smithian productivity change.”²² Moreover, even with respect to cyclical fluctuations, it may be true that spurts and lapses in technological progress and innovation may themselves cause business cycles and also explain variations in productivity growth over time: this was the argument of Joseph Schumpeter, and consequently, we might speak of “Schumpeterian productivity change.”²³ In short, the cyclical component of real-output change may be caused by multiple factors.

One final test of the role of productivity change was performed. Keynesians have often argued that shifts in human behavior regarding one of the key components of aggregate demand have been a decisive factor in explaining cyclical activity. For example, the Great Depression has been explained in large part by downward shifts in the investment and/or consumption components of aggregate demand.²⁴ Out of any given income in 1930, people spent less than what historical experience would have predicted, thus triggering a depression (helped by a “multiplier effect”). In the lingo of economists, “autonomous consumption fell.” Similar demand shifts have allegedly explained both the onset of the World War II boom (increase in autonomous government spending) and the lack of a depression at the end of the war (increased autonomous consumption and investment).²⁵

The relevant question here is, to what extent have shifts in one of the key components of aggregate demand impacted on labor productivity, the adjusted real wage, and thus unemployment? The proposition that fluctuations in labor productivity are partly induced by Keynesian-style shifts in one of the components of aggregate demand is subject to empirical analysis. We performed a two-stage regression procedure. First, we identified shifts in autonomous consumption or investment spending that potentially could cause a shift in aggregate demand. This involved, in the case of consumption, estimating a consumption function where consumption is related to disposable income.²⁶ Similar investment and government-spending functions were estimated. The discrepancy between actual spending (say, for consumption) and predicted spending is an indication of the extent that spending in a given year deviated from the normal long-run trend consistent with that income or output level. It provides a means of measuring changes in autonomous consumption (or other components of spending). Second, we related the year-to-year changes in autonomous spending to observed productivity change using a simple bivariate regression. In every case (consumption spending, gross private domestic investment spending, government purchases of goods and services, and net exports), we found no statistically significant relationship, even at the 10 percent level using a one-tailed test. Indeed, a majority of the results had a negative sign, not the relationship predicted by Keynesian analysis. On the basis of this, we believe that the proposition that shifts in components of total spending are an important determinant of productivity change is not defensible. At the same time, however, it is true, over all, that the business cycle is related to productivity changes to a moderate extent. Cycles in innovation and capital formation may impact simultaneously on productivity (Schumpeterian and Smithian changes) and output growth. This in no way detracts from the usefulness of the adjusted real wage model in analyzing the proximate determinants of unemployment variations.

There is very strong statistical evidence of a relationship between the adjusted real wage and unemployment. Higher adjusted real wages, other things equal, mean higher unemployment. The three factors determining the adjusted real wage—money-wage levels, price levels, and labor productivity—are of roughly equal importance in their unemployment impact. There is some evidence that unemployment reacts to changes in the adjusted real wage almost immediately, with the bulk of the impact felt within two years. At the same time, there is some lingering effect felt even after that lag. The productivity variable has a cyclical component to it, but the empirical evidence suggests that shifts in the aggregate demand for goods and services play no significant role in explaining this component of the adjusted real wage.

In brief, the neoclassical and Austrian view of the determinants of unemployment seems to have a great deal of validity. We now turn to a closer look at the changes in unemployment in American history, with this theory in mind, hoping to ascertain in greater detail the underlying factors that have generated both changes in the adjusted real wage and variations in unemployment.