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Copyright © Cambridge Political Economy Society

research-article

Pigou, Clark and modern economics: the quality of the workforce

D. R. Stabile*

*St Mary's College of Maryland

Abstract

Pigou and Clark investigated the relationships between wages and the quality of the workforce with their common but distinctive concept of social costs. Pigou found cases in labour markets where improvements in workforce quality had external benefits that increased GNP. Clark saw the social costs of labour as the overhead costs society had to be pay to keep its workforce intact, and using a dynamic institutional theory, argued that those costs should be placed directly on business in terms of a guaranteed living wage. It is argued that modern economics has neglected any connection between wages and social costs by treating them separately and propounding a trade-off between equity and efficiency. As a result, they analyse cost cutting programmes in terms of their impact on competitiveness, and neglect how they can result in an inferior workforce.

Manuscript received January 11, 1993; final version received March 14, 1994.


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