A post Keynesian approach on the decrease in bargaining power of labour between 1970 and 2008: Financialisation-induced decline in capital accumulation- comparison of Germany and UK

As it has been pointed out within the Post-Keynesian Approach, financialisation process by lowering reinvestment and thus capital accumulation incentives (due to enabling "financial profits" possibilities without investment and cause of shareholder pressure) leads higher unemployment levels after 1970. And higher unemployment may raise the degree of worker substitution for firms as hiring with a lower wage is easier because of higher amount of job seekers and because of lower "productivity lost" by replacement due to shorter vacant days. In other words, if unemployment rate is low cause of high investment level, firms are not able to threat incumbent workers to substitute them with new workers as turnover costs are higher since lost in productivity matters due to longer vacant days cause of less amount of job seekers and due to hiring with a lower wage is difficult; incumbents can negotiate for higher wage increases. In addition, cause of distortions in unemployment benefits in the last decades, ability of workers to survive during unemployment period had been decreased, too. In short, financialisation leads less capital accumulation, less capital accumulation leads higher unemployment and higher unemployment leads higher degree of worker substitution which lessens bargaining power of the labour. I will first try to explain the finance-dominated capitalism which is characterised by "high profits, low investment' and then focus on the relationship between capital accumulation and unemployment. The argument will be tested via "Engle and Granger Two-Step Error Correction Model" through a comparison of Germany and UK within the period of between 1970-2008 in which deregulation has dominated. The reason behind this preference is that the United Kingdom is the prominent example of liberal Anglo-Saxon Model, whereas Germany is the leading figure of Social Market Model. Hence I think they will be best cases to test the argument. The model consists of bargaining power of labour which is my own calculation and capital accumulation rate which is the growth rate of net capital stock. I presume that I can capture over capital accumulation rate both the impact of financialisation on investment level and also the degree of changes in financialisation and investment level, simultaneously. Keywords: Bargaining power of labour, financialisation, unemployment, capital accumulation, degree of worker substitution, Germany, United Kingdom