Question

A major development since Marx’s time is the rise of powerful trade unions in most capitalist societies. As organizations committed to collective action and bargaining to improve workers’ positions in conflicts with their capitalist employers, trade unions have attracted Marxists’ theoretical and analytical interests. Is this not structural change? How does this differ from Keynesian ideology? Explain

Answer 1

1.Structural change model focuses on the mechanism by which underdeveloped economies transform their domestic economic structures from a heavy emphasis on traditional subsistence agriculture to a more modern, more urbanized and more industrially diverse manufacturing and service economy. The rise of powerful trade unions in most capitalist societies committed to collective action and bargaining to improve workers’ positions in conflicts with their capitalist employers, trade unions is a part of the structural change.

As per the Keynesians, macroeconomic significance of trades union bargaining power relates to the non-wage terms and conditions of employment so that a reduction in bargaining power will be associated with an increase in total income and profits (and therefore a fall in the wage share) without a fall in aggregate real wages, ceteris paribus. The real wage and the wage share are residuals. The trades union movement as a whole can influence only the level of money wages and the non-wage terms and conditions of employment, but not the real wage of workers as a whole.