ABSTRACT
In much of the discussion of wage equations, the role of the trade union in setting the nominal wage level in a highly unionised economy like the UK has generally either been disregarded or treated as a source of exogenous 'militancy'. The links between unionised and the competitive or 'residual' sector are two-fold: the real wage paid in the competitive sector shifts the supply curve of labour to the union intermediary in the unionised sector and employment in the unionised sector shifts the supply curve in the competitive sector. The authors look in detail at the UK's experience with incomes policy they found, in line with their theory, no evidence whatever of the virtuous effects alleged in some quarters. They conclude that industrial structure has no bearing on inflation, neither does the structure of the labour market. Inflation originates and is perpetuated elsewhere in the system; the labour market merely reflects as one element in the transmission process.
