5 
Based on the assumption that unemployment and reduced growth 
of demand must dampen the progress of productivity, we can 
now analyse the course of wages and wage cost. 
First, the data Table I.A, I.B and II.A show the course of 
productivity growth. The reduction in the growth rates is 
largest in Japan and England, in the case of output per man 
also in Italy and Austria. These are the countries where the 
jobs were most protected (redundancy was greatest). 
Now what are the net effects of the unemployment ? There are 
two counteracting factors, the reduction in real wage target 
(the realised target!) and the reduction in productivity 
growth. Which way the balance of the two turns depends on 
circumstances, it is different in different countries. 
As mentioned before there is a transmission mechanism by 
which wages are transformed into prices. This is complicated 
in so far as imports, materials and taxes come into it, since 
they may not rise in the same proportion. We shall, however, 
consider specially the effect of productivity. 
It is generally taken for granted that a real wage increase 
which corresponds to the growth of productivity will be non 
inflationary. But what happens if the growth rate of productivity 
declines (turns out afterwards to be lower?). The real wage