127 Int'l Lab. Rev. 1 (1988)
Would Revenue-Sharing Pay Cure Unemployment

handle is hein.journals/intlr127 and id is 15 raw text is: International Labour Review, Vol. 127, 1988, No. 1

Would revenue-sharing pay cure
W hen an idea suddenly takes hold of the popular imagination, it is well to
examine its roots and ponder its probable effects. Recently, profit-
sharing or revenue-sharing - giving workers part of their earnings in the
form of a share in profits - has been widely advocated by economists,
politicians, journalists and others, not on social or equity grounds but as a
means of guaranteeing full employment and price stability. The economist
who has pressed this claim most forcefully, M. L. Weitzman, has been hailed
as a prophet, and his book on the subject has been described as the most
important contribution to economics since Keynes's General theory. In it he
affirmed that revenue-sharing would vaccinate capitalism against stagfla-
tion.I With fixed wages, he argued, fluctuations in aggregate demand have
been translated into changes in the level of employment, and have thus led to
high unemployment in times of recession, whereas, if earnings were tied to
profit levels, exogenous shocks would produce fluctuations in wages and
prices, but not in employment.
If this thesis were true, it would have enormous practical implications.
Many influential people have accepted it, and in several countries legislation
and tax incentives have been introduced to encourage a shift from fixed wage
to revenue-sharing pay systems - a shift that is already under way in such
countries as France, the United Kingdom, the United States and even in
Sweden. It is against that background that the present article sets out to
consider briefly the theoretical links between profit-sharing and unemploy-
ment, identifying the assumptions and implications of what is becoming part
of the supply-side approach to economic policy, and to examine the
relevance and conclusions of available empirical research.
The macro-economic claims
The belief that profit-sharing might have beneficial effects on employ-
ment at the macro-economic level is far from new, and was formally
* International Labour Office.

Copyright (P International Labour Organisation 1988

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