Income distribution, macroeconomic analysis and barriers to full employment

This paper seeks to reassert the significance of income distribution for macroeconomic analysis. It argues that the non accelerating inflation rate of unemployment, which has been central to mainstream macroeconomic analysis, should be viewed as a distributional constraint on the achievement of full employment with the implication that mechanisms to resolve distributional conflict without resort to the weapon of unemployment are required if full employment is to be secured. The significance of income distribution for aggregate demand is then been examined, and it is argued that higher profit shares in the past 15 years have harmed the prospects for high levels of economic activity and employment, and that rising profitability does not appear to have stimulated investment. It is then finally argued that monetary policy should not be seen as a technical matter but rather as a policy with significant distributional impacts.