The theory and practice of voluntary incomes policies with particular reference to the British Labour government's social contract, 1974-79
This thesis explores the necessary conditions for voluntary wage restraint in advanced industrialized democracies. In particular, it addresses the question of how governments can get union movements to trade their labour market power for non-wage objectives, and how union peak organizations can secure near universal compliance with a voluntary wages policy, notwithstanding the pressures upon individual unions to free ride. Rational choice theory furnishes the initial analytical framework. Within these terms it will be argued that the problem of securing voluntary restraint has the strategic structure of a prisoner's dilemma. In other words, the situation entails an inherent conflict between individual and collective interests. Moreover, this conflict is not merely between the short-term interests of individual unions and those of the whole labour movement, but also between labour (wages) and capital (profit). Given this situation, the thesis will investigate the conditions under which rational, self-interested unions, seeking to maximize some combination of real wage, relative wage and employment objectives, and operating in the context of uncertainty, decentralized bargaining and a significant degree of monopoly power in the labour market, will voluntarily be prepared to restrain their wage demands. Following this exploration, the behavioural assumptions of rational choice theory will be modified to allow for the fact that economic agents are also motivated by various normative commitments, and that these can be sufficient in certain circumstances to overcome the free-rider problem. This new theoretical approach will then be employed in a detailed examination of the Social Contract between the British Labour Government (1974-79) and the Trades Union Congress. It will be concluded that certain moral, political and ideological commitments played a crucial role in the negotiation, implementation and eventual collapse of the Social Contract. It should be noted that this inquiry is based upon published sources and interview data.