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The moral reflections of the medieval Scholastics on trade and loans are discussed in this chapter. Institutional change in thirteenth- and fourteenth-century Europe facilitated specialization, the widening of markets, and the spread of monetary exchange. Thomas Aquinas and others respond to these developments with instruction on the Christian duties of merchants, borrowers, and lenders. Drawing on Aristotle, Roman law, and the Scriptures, they identify the criteria for justice in a particular product exchange by focusing on its purpose and identifying practices of fraud and economic compulsion. Scholastic opposition to usury is grounded in the phenomenon of economic duress, though several extrinsic titles to interest are eventually extended. By the sixteenth century, Scholastics are laying greater stress on the impersonal dimensions of exchange and the manner in which competition fosters commutative justice in product and labor markets. The vignette “Medieval Scholastics and Moral Values for the Subprime Mortgage Crisis” is included.

The conclusions summarize the main results. In particular, neither the Marx' reserve army mechanism nor mass unemployment as a disciplining device, as in Kalecki's work, are necessary for the functioning of a capitalistic system. The introduction of minimum and maximum real wages can attenuate the negative consequences of booms and recessions provided that markets, including the labor market, are sufficiently flexible implying that employers must not be constrained in their hiring and firing decisions. Further, lower and upper bounds for real wages can be seen as one ingredient of a flexicurity economy that intends to overcome the conflict between capital and labor. Thus, flexicurity capitalism can be considered as a Western type of competitive socialism, as envisaged by Schumpeter, that does not only successfully solve the coordination problem but also the incentive problem in the principal-agent scenario.

Coal mining offered the opportunity to earn money quickly during booms, but it was a dirty, dangerous job often located in isolated little towns. To protect themselves against exploitation by employers, coal miners exercised both voice and exit. The voice came in the form of collective action either through the formation of labor unions or labor strikes. The United Mine Workers of America (UMWA) enhanced the welfare of their members in several ways. Within the coal industry, miners obtained higher wages by joining the union and striking. The union did not necessarily lead to a better situation in all phases of the job, however. Accident rates were no lower in union than in non-union mines, nor was the quality of sanitation better, holding other factors constant. Blacks were welcomed into the union in the mining areas where they had long been located, but a number of union locals in the North treated blacks as pariahs. The UMWA was crushed along with the coal operators by the deterioration of the industry in the late 1920s and early 1930s.

This chapter begins the historical analysis of welfare state development by tracing the origins of American segmentalism, a pattern of labor market control marked by decentralized industrial relations, relatively high and downwardly rigid wages paid by many large employers (efficiency wages), and extensive use of company benefits (welfare capitalism). Leading employers in America embarked on their segmentalist strategy early in the 20^th century by breaking with existing and emerging centralized regulation of labor markets (multiemployer collective bargaining), desiring in part to assert absolute management rights against the militant claims of labor unions. For reasons analyzed in Ch. 2, success of the employers gave rise to heightened interests in regulatory social reform in response to the deflationary macroeconomic shock of the Great Depression.

The macroscopic changes to post‐industrial employment that were examined in the previous chapter are unlikely to affect all nations similarly. Job loss through de‐industrialization, e.g., will be more massive where existing industries are uncompetitive (as in Britain or Spain) and less devastating elsewhere—perhaps because firms are more adaptable (as in much of Danish, Italian, or German industry), but possibly also because wage costs decline (as in the US). De‐industrialization may or may not cause heavy unemployment, depending on skill and production structure, and also on how labour markets are managed; most of Europe has,e.g., transformed mass lay‐offs into early retirement. Similar root causes of post‐industrial employment will, therefore, have radically divergent outcomes—there is no such thing as one post‐industrial model because the institutional make‐up of nations differs, and so also does their choice of how to manage change. The different sections of this chapter are: Industrial Relations; Labour Market Regulation; The Dilemmas of Flexibilization; The Welfare State and the Reservation Wage; Wage Regulation; Employment Protection; The Regulatory Infrastructure and the Management of Industrial Decline; Managing the Equality—Jobs Trade‐Off; The Hump‐Shaped Curve—a quadratic measure of labour market rigidities; and National Idiosyncrasies and Welfare Regimes.

Italy's economic and employment problems were to a large extent home made, whereas external economic and political pressures did facilitate internal revitalization. While export‐oriented industries in northern Italy had maintained international competitiveness, overall employment rates were very low, and inflation was very high until the early 1990s. Since the clientelistic Italian state was not able to put the brakes on the spiral of wage and price increases that were automatically linked to all sorts of public and welfare‐state expenditures, public‐sector deficits were rising inexorably. After the collapse of the old party system, however, the unions were able and willing to enter into a series of accords with successive reform governments that not only facilitated price stability through wage restraint but that also legitimated significant welfare cutbacks that contributed to budget consolidation. The impetus for reform was a serious political commitment to meet the stringent Maastricht criteria in order to ensure Italy's membership in the European Monetary Union.

This chapter examines the impact of labour market regulation in Europe. It shows that regulation slows down flows out of unemployment, and contributes to the unemployment problem among young and low-skilled workers. Other than these, there is no consistent nor convincing evidence on the relationship between employment protection and unemployment in quantitative literature.

The UK developed an innovative agenda of new social risk policies through the 1980s and 1990s. The Conservative government up to 1997 essentially pursued liberal market reforms with minimal provision for vulnerable minorities. After 1997, new labour developed a programme of work‐life balance and New Deal labour market reforms that represented a change of direction in the UK context. These policies relied heavily on market provision and on market incentives, with a state safety net for those on low incomes, but were more generous than the previous provision and were carefully and consciously structured to enhance work incentives for women with domestic responsibilities and others. They were influential in welfare state debate across Europe and at EU level. Reliance on a private sector, which government cannot directly control, created problems, most notably in childcare, elder care, and pensions. The UK is able to change policy rapidly due to its highly centralised ‘Westminster’ governmental system. Its reform experience has important lessons for other European countries.

This essay explores the issue of globalization, focusing on damage caused to jobs, wages, and incomes of poor people by the dislocations and competition of international trade and foreign investment, and the weakening of the ability of the state to compensate for this damage and alleviate poverty. It discusses the poor as self-employed workers, as wage workers, and as users of public services and common property resources. It argues that in the medium-to-long run, globalization need not make the poor much worse off if appropriate domestic policies and institutions are in place and appropriate coordination among the involved parties can be organized. If the institutional prerequisites can be managed, globalization opens the door for some new opportunities even for the poor.

This essay attempts to show that seemingly reasonable policy interventions can easily backfire in the area of child labor. Thus, policy interventions cannot be left at the level of broad-brush statements but need to be crafted carefully. The general possibility of pathological reactions to policy interventions will be discussed, and one particular pathology will be spelled out in some detail because this is a problem that seems not to have been discussed in the literature, and also because it provides a generic illustration of the hazard of using standard instruments for curbing child labor.

This chapter assesses the impact of capital formation and economic development under Japanese rule on income distribution, consumption (standard of living), and savings in Korea, focusing those of Koreans and Japanese in Korea. This allows the evaluation of the ultimate beneficiaries of economic growth and transformation in the country relative to various economic sectors (e.g., industry and agriculture), income groups (e.g., landlords, farmers, businesses, and wage earners), and different nationalities (i.e., Koreans and Japanese). Similar analyses have been performed relative to personal consumption and savings, as well as business savings based on economic/income sectors/groups and nationality.

The chapter discusses three periods of policy change in the field of social protection for unemployed people. It explains basic parameters of unemployment protection systems, contrasting contemporary systems with those which existed in the late 1970s. Making use of several indicators, it assess the scale and profile of change in each country. The different reform profiles are identified and their genesis discussed in the context of major legislative changes. It argues that the specific links between unemployment protection systems and respective national political economy structures have impacted strongly on the emerging reform profiles. Dynamic power relations within and across government parties, as well as contextual changes impeded or facilitated policies, thus explaining cross-national variations in the pace and profile of reform.

This chapter examines New Labour’s efforts to rhetorically construct the political centre based on its policies on devolution, minimum wage, trade union recognition, and tax increase in the 2002 budget. It is argued that policies are not left-wing because policies are not ‘really’ anything. New Labour used definitions, comparisons, ridicule, authority, and arguments about cause and effect, contradiction, and sacrifice to persuade voters that its policies were at the political centre.

This chapter tracks changes in wages and wage inequality in Britain since the 1970s, focusing on the principal differences in wage levels between individuals and on what explains the rise in wage inequality. Section 4.2 begins with a discussion of the principal data sources used to track the evolution of wages over time. Section 4.3 gives some facts and figures on the extent of wage inequality across groups and over time, while Section 4.4 outlines and evaluates the main hypotheses put forward to explain rising wage inequality. Section 4.5 offers some concluding observations.

This chapter discusses advances in formal economic theory by examining how different positions among economists arise from their different assumptions and models. The discussion focuses on ways in which real world economies differ from the ‘competitive equilibrium’ model that has become the benchmark model. The current benchmark competitive equilibrium framework includes new classical, representative agent, and real business cycle models which assume that all markets (including the labor market) have clear, perfect information, complete markets (including perfect capital and insurance markets), perfect wage and price flexibility, perfect competition, perfect rationality, and no externalities. If these models accurately portrayed reality, the economy would be efficient and there would be no need for government intervention. The assumptions of these models, however, are unrealistic and it is difficult to reconcile the required macro-formulations with what is known about microeconomic behavior (without resorting to ad hoc assumptions about the nature of the stochastic shocks to preferences and technology). The inadequacies of these models are even greater for developing countries where information imperfections are more pervasive and more markets are missing or incomplete (e.g., insurance markets). Accordingly, economic research since the 1990s has focused on identifying the most important limitations of the standard competitive model, particularly those limitations that help to explain the nature of economic volatility.