Deconstructing the Phillips Curve for pre-1914 Britain

A.W.Phillips estimated his famous relationship between unemployment and wage inflation entirely from pre-1913 British data about which he said little. His wage series was in fact partly interpolated and the remainder were ‘Standard Rates’, set unilaterally by trade unions: members offered work at sub-‘Standard’ wages could claim unemployment benefit. Phillips’ unemployment data came from the same unions, and the statistical relationship is unsurprising. The paper analyses the wage-setting process within the Amalgamated Engineers, the largest national union pre-1914. The largest single determinant of wage reductions was local unemployment, but increases were determined more by the union’s finances and its success in recruitment. [This draft written in 1999.]