Introduction: Exploring the Political Economy of Wages

Abstract

The spectacular increase of wealth and income inequality across the globe in the last forty years has given new vigour to the debate over the determinants of the rewards of work. The expansion of the role of a dynastic, patrimonial rentier class taking advantage over those who rely on only work for their income has fuelled criticism of the relationship between capital and labour, and of the value of different forms of work. This intellectual conjuncture has led to a lively global debate and demands for urgent solutions. In labour economics, it has led to a different and more complex understanding of the functioning of the labour market, and a more pluralistic approach has prevailed, even if the ontological conceptions within mainstream economics may appear substantially unchanged. Interpretations of the change in wage levels have moved from demand-based explanations between sectors and within groups to approaches that take into account the role of politics, and ideology, including the demise of the social democratic tripartite arrangement, the neoliberal turn in economic policy, and the role of sharp declines in union membership. The idea that employers have a determinant market power and act as a monopsonist in setting wages of their employees, even if only on account of market frictions that make it costly for workers to change jobs, has triggered a flourishing research area. This view has been confirmed by recent studies of labour relations, which note common patterns across countries resulting ‘first and foremost as an increase in employer discretion everywhere’. In short, the political dimensions of work have become an important explanatory factor for wage levels, alongside the role of globalisation and technological change. Unexpectedly, a similar debate on the meaning and the value of work and its remuneration has been raised by the COVID 19 pandemic, in particular concerning the role of key workers.