| Sumario: | The shape of the demand curve for labor as a whole is not a truly fundamental postulate, subject directly to statistical investigation, since in both Keynesian and classical systems it is derived from the presumed shape of production functions. The logic of the Keynesian system provides that wage rates "largely govern" marginal prime costs and that with a given degree of monopoly, prices are determined by their marginal prime costs. Moreover, money wage rates are an increasing function of output. An expansion in output in the system hence raises money wage rates, but prices must increase even further with movement along a given production function. The real rate of return to labor must fall. This result is thus derived from a submodel for the short period which presumes a fixed degree of competition, marginal prime costs are labor costs, the money wage is an increasing function of output, and technology is fixed with production functions of customary shape. The view that output and employment do expand in the short run, in the total system, only with a decline in the real (product) wage rate, which is at once classical and Keynesian, will be confronted with three sets of empirical data: profit margins, labor's share in income, and break-even studies.
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