Assessing the Political Aspects of Full Employment: Evidence from Strikes and Lockouts

By Luke Petach

PKES Working Paper 2407

May 2024

Using monthly state-level data on work stoppages from the Bureau of Labor Statistics (BLS) and state-level labor market data from the Current Population Survey (CPS) this paper estimates the effect of state-level labor market conditions on strike activity from 1993 to 2023. Panel fixed-effects estimates suggest a one percentage-point increase in the unemployment rate reduces the number of work stoppages involving 1,000 or more workers (per million) by approximately 14%. The fixed-effects estimates are supported by a propensity-score based specification that exploits the differential timing of national recessions across US States. Entering a recession is negatively related to state-level strike activity as measured by both work stoppages and the share of employed workers reporting an absence from work due to a labor dispute. The results in this paper provide empirical support for Kalecki (1943)’s argument regarding the “political aspects of full employment”: weak labor markets reduce direct action by labor, thereby providing a rationalization for capitalist opposition to full employment policy.

Keywords: Michal Kalecki, Strikes, Work Stoppages, Labor Relations, Business Cycles

JEL classification: D33 E11 J52