Decisions by trade union not to demand wage increases, or to moderate their demands. Wage restraint is often urged on unions by governments trying to restrain inflation. From the point of view of workers as a whole, there is a sensible argument for wage restraint: if large demands are met, this is likely to lead to loss of jobs. If inflation continues, the authorities are likely to shift to restrictive monetary and fiscal policies, and even with given policies, higher money wages lead to higher prices, lower real balances and thus lower effective demand. From the point of view of particular unions, each representing only a small percentage of the labour force, wage restraint is not a sensible policy unless it is needed to retain their own members' jobs. If the employers can afford wage increases without job losses, the gains accrue to their own members, while most of the macroeconomic effects of higher wages fall elsewhere in the economy.

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