NAIRU and the Reserve Army of Labour

[alanjjohnstone]

I was originally going to blog this article to connect it with the Marxist concept of the Reserve Army of Labour

https://www.theguardian.com/commentisfree/2019/jul/26/having-a-constant-pool-of-unemployed-workers-is-deliberate-policy

which links to a Reserve Bank of Australia website article

https://www.rba.gov.au/publications/bulletin/2017/jun/2.html

But to be truthful, the website explanation became a blur to me and I couldn’t  nail it down to key statements.

I’d really appreciate someone summarizing and giving me something to blog with

[Dave B]

Well there is a long section on it in capital.

 

So it is included in Marxist theory.

 

There are some really interesting succinct quotes somewhere on it from FED reserve bank chairmen and there ilk.

stating that it is done as a deliberate and necessary policy etc etc eg unemployment driving down cost of wages etc

 

 

https://www.marxists.org/archive/marx/works/1867-c1/ch25.htm#S3

[ALB]

Quite part from the difficulty of calculating this so-called “non-accelerating inflation rate of unemployment”  it is based on the false assumption that it is wage increases that cause inflation (as a rise in the general price level) whereas we know that the main reason for a rise in the general price level is governments’ currency/monetary policy.

At present the aim of government policy is to maintain a rate of inflation of around 2 percent. This is compatible with various different rates of unemployment. If applied strictly enough, it could be maintained even if unemployment rose above the NAIRU, or “natural” rate of unemployment as some economists have chosen to call it.  From a Marxist point of view, it is capitalism’s nature to require a pool of unemployed as a “reserve army of labour” to be mobilised in times of boom, but there is no particular rate of this.

What the endorsement of this theory as a policy aim does show, however, is the hypocrisy of governments in imposing draconian conditions for the granting of as little unemployment pay as possible on the grounds that everybody could get a job if they wanted, whereas they know perfectly well that everybody can’t and that its their declared policy aim that they shouldn’t.

[ALB]

Just realised that when I wrote that the rate of inflation could be maintained “even if unemployment rose above the NAIRU” I meant to write “even if it falls below the NAIRU”, i.e even if unemployment fell. Actually, it could still be maintained if it rose above it as well, as the basic point I was trying to make was that the there was no necessary link between the rate of inflation and the rate of unemployment.

[Author]

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