ABSTRACT

By trade union action or by legislation a minimum real wage might be set for all work done. The outstanding disadvantage of this form of action is that it would reduce the volume of employment that it was profitable to provide with a given amount of real capital equipment. It is possible, but not certain, that automation involves not only (i) a rise in output per man and (ii) a reduction in the relative importance of men to machines but also (iii) a reduction in the elasticity of substitution between men and machines. If this is so, the direct damage done by the pushing up of the wage rate in any one automated industry would be limited; if a fixed number of men is required to look after each automated machine, a rise in the real wage will cause a fall in profits without much affect on employment per machine.