Martin L. Weitzman, professor of economics at the Massachusetts Institute of Technology, addresses the problem of wage rigidity in his new book, The Share Economy. In a brief article in the New York Times of May 26, 1985, Weitzman argues that wage rigidity is the central problem of all Western economies.

The old policies of spending ourselves into full employment are unsuccessful, and so is the monetarist solution which assumes that stability can be achieved through rigid control of the money supply. Weitzman believes that both approaches detour around the key malfunctioning market—the labour market—and that the major macroeconomic problem is the wage system. A fixed wage provides stable income for employees but loads unemployment on low seniority workers and inflation on everybody. The way to non-inflationary full employment, according to Weitzrnan, is extensive institutional change that "would provide strong incentives for employers to maintain high levels of output and keep prices low." If part of the labour costs were made dependent on the economic health of the company, there would be a much-needed flexibility for business as well as an incentive for both labour and management.

According to Weitzman, the Western economies could learn from the Japanese approach to wages and profit sharing. Their relatively flexible labour payment system helps their economy ride out the low part of the business cycle, while governments have more leeway for fighting inflation. The West ought to adopt "a social contract that promises workers full employment without inflation but asks, in return, that workers receive a significant fraction of their pay in the form of a profit-sharing bonus." Weitzman realizes that such changes will be difficult and may require incentives such as favourable tax treatment of the profit-sharing component of a worker's pay. It will require, he writes, "a broad political concensus that the social gains of permanent full employment without inflation are worth more than the narrow private losses that inevitably will accompany the transition. Yet, the benefits of inflation-free full employment are so enormous, the potential increase in national income is so great, that we cannot afford not to move in this direction."