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Guest Lecture: Professor James K GalbraithInequality, unemployment and the fallacy of labour market reform

Page updated 20 Sep 2007

Slides, abstract and paper from Professor James K Galbraith's Guest Lecture presented at the Treasury on 29 September 2005.

Professor James K Galbraith

University of Texas at Austin

James K. Galbraith holds the Lloyd M. Bentsen, jr. Chair of Government/Business Relations at the Lyndon B. Johnson School of Public Affairs, the University of Texas at Austin. He is a Senior Scholar with the Levy Economics Institute, and Chair of the Board of Economists for Peace and Security, an International Association of Professional Economists.

Galbraith is the author of several hundred scholarly and policy articles. His recent research on economic inequality has been published in many professional journals in the United States, Europe, Russia, India and elsewhere. He offers a regular column in Mother Jones, irregular commentary on Public Radio International’s Marketplace and occasional columns in the Texas Observer, as well as reviews and comment in many other publications. Galbraith holds degrees from Harvard and Yale (Ph.D. in Economics, 1981). He studied economics as a Marshall Scholar at King's College, Cambridge in 1974-5, and then served on the staff of the U.S. Congress, including as an economist for the House Banking Committee and later as Executive Director of the Joint Economic Committee in 1981-82. Among other work at that time, he was an architect of the modern procedures of congressional monetary policy oversight. He was a guest scholar at the Brookings Institution in 1985. He served as a Chief Technical Adviser to the State Planning Commission of China on a United Nations Development Program project on macroeconomic reform in 1993-1997. He held a Fulbright Distinguished Visiting Lectureship in China in the summer of 2001, and was named a Carnegie Scholar in 2003.

Visit the web-site of the University of Texas Inequality Project at utip.gov.utexas.edu  for current research and an archive of published writings. Papers on macroeconomic topics can be found on the Levy web-site at www.levy.org. The work of EPS is at www.epsusa.org.

Abstract

The doctrine that labour market reform can cure unemployment implies that increasing inequality in the structure of pay should lead to more demand for less-skilled labor and reduced unemployment. Detailed comparative analysis of the behavior of inequality and unemployment, using new data sets, strongly rejects this view. Within Europe, we find the unemployment is systematically lower in more egalitarian countries and especially in those small countries (such as Ireland and Austria) with the most inflexible labor markets. Further, we challenge the view that Europe as a whole is more egalitarian in its pay structures than the United States; this view rests on country-by-country comparisons that ignore the component of inequality between the countries of the European Union. Finally, we can show measures of inequality that could be used to extend this analysis to many other countries, many of which adopted the neoliberal programme with disappointing results.

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