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The alleged trade-off between price stability and the rate of unemployment has been at the center of interest in economics for the past decade. Early work on this question by Phillips (1958) and Lipsey (1960) suggested an inverse relationship between wage changes and the level of unemployment for Great Britain over the period 1861-1957. Both writers argued that their results could be rationalized in terms of a Hicksian-type market" adjustment function."'However, it has proved difficult to identify a stable relationship between wage changes and unemployment for the United States, and this has led some economists to reinterpret the Phillips relationship. 2

Adding a profit rate variable to the wage change-unemployment equation leads to a bargaining interpretation of the macroeconomic data. The wage determination process in the manufacturing sector, in which 70 per cent of the labor force is organized, has been …