[37] The Netherlands had a wage explosion in the early 1950s after a period of wage restraints, but this still allowed a quick return afterwards to the favourable lower left region.
[38] Data The Netherlands Central Planning Bureau. ‘Not working’ involves the Dutch programs ZW+AAW+WAO+IOAW+IOAZ+WW+Vorstverlet+ABW (sick leave, disability from birth or later, workers and independents, welfare relief and unemployment). Welfare relief was intended to be temporary but can be permanent, for example for the 55+ workers who do not have to apply for jobs any more.
[39] On p358 they discuss the Lucas supply function y =
(p - p*) for GNP y and inflation p, and remark that this is also Lucas’s explanation of the Phillipscurve. In chapter 10 they discuss some ‘useful models’, of which in p542-555 the Phillipscurve, starting out with Tobin’s 1972 discussion of price and wage dynamics.
[40] The ‘insider-outsider theory’ (Lindbeck & Snower (1988)) has the similar effect that the decisive group shifts the burden. But there the emphasis is on union membership.
[41] Borjas also states: “(…) the demand for unskilled workers declined perhaps because of technological change which favors skilled workers or because of the internationalization of the U.S. economy.” (p467)
[42] Of course, not all unemployment is caused by the minimum wage. The 25% in the graph is a result of simplifying assumptions. But it is an acceptable presentation, since Dutch official statistics grossly underestimate unemployment (and reduce the labour force).
[43] Money is denoted as MX. Perhaps unfortunate, but it keeps our formulas readable.
[44] B for Dutch “Bestaansminimum” (subsistence). English Basic Net Income or Benefit.