Monetary Stabilisation as Distributional Conflict: A Kaleckian Model of Wage Shares, Employment and Interest-Rate Policy

Can monetary policy stabilise distributive conflict without undoing the demand effects of redistribution? This article develops a compact Kaleckian model in which functional income distribution affects aggregate demand, labour-market tightness feeds back onto the wage share, and the nominal policy interest rate responds with inertia to distributional pressure and unemployment. The analysis distinguishes the structural demand regime from the demand outcome observed after monetary-policy feedback. In a structurally wage-led economy, a sufficiently strong monetary response to wage and cost pressure can overturn the expansionary demand effect of a higher wage share. The same policy mechanism also contributes to local dynamic stability by weakening the cumulative interaction between demand, employment and wage claims. In a profit-led economy, the distribution-sensitive component of monetary policy reinforces the contractionary structural channel, while employment-sensitive easing can offset part of that pressure. The model therefore shows that monetary stabilisation is not distributionally neutral: the way a central bank responds to conflict inflation can alter employment adjustment and the realised macroeconomic consequences of redistribution.