The combination of an efficiency wage approach with the explicit consideration of pricinq and product market conditions leads to the existence of a unique NAIRU. The value of the NAIRU can be influenced by a variety of supply side policies but aqqreqate demand policies may also play a role. The effort function will be related to workers' waqe aspirations and if waqe aspirations depend on past outcomes of the distributional struqqle then an important element of hysteresis is introduced into the system. Expansionary demand policies which increase employment will be asaociated with unanticipated inflation. Real waqes will fall below the neqotiated level and this may cause a qradual shift in waqe aspirations and in the effort function.