Most studies that examine macroeconomic policy making in Britain agree that the militant wage behavior of unions and pervasive labor unrest was an important cause contributing to Britain's persistent economic problems in the postwar period and to the relative economic decline of the British economy (Hall 1986; Scharpf 1991). As these studies argue, in Britain income policies were repeatedly attempted but never succeeded. In a recent paper Rhodes summarizes this view, arguing that the political exchange premised on wage moderation in exchange for social policy expansion “was neither developed, nor institutionalized in Britain. One of the peculiarities (at least in the European context) of the British system was the divorce between the labor movement and the social insurance system. … Combined with ‘voluntarism’ and organizational fragmentation in industrial relations, this helped prevent the development of the notion of the ‘social wage’ in Britain” (Rhodes 2000: 22).

This characterization of policy making in Britain conflates two factors that might account for the lack of success of policies linking wage moderation to social policy expansion. The first of these concerns the preferences of the labor movement, while the second concerns the structure of the wage bargaining system. Did British trade unions deliberately reject the notion of a “social wage”? Did they show no concern for the expansion of social policy benefits, focusing only on the need to increase the real wages of their members? Did the British labor movement systematically rebuff ideas establishing an equivalence between wages and social policies?