An analytical model of a plastically deforming solid is assumed to be a material where the second spatial gradients of strain are included in the constitutive equations. These constitutive equations are combined, in a one dimensional shearing problem, with the second law of thermodynamics and condition of thermodynamic stability. The results are that a phase change occurs when the von Mises yield condition is reached because the material is also thermodynamically unstable. The second law of thermo-dynamics forces the deformations that occur to be nonhomogeneous on a small scale. Therefore the model is in agreement with experimental data. This type model therefore can be used to unify the continuum theories of plasticity with those with a more “physical” basis because deformations occur at two different scales.