The effects of inflation on the labor market Essay

This essay has a total of 834 words and 4 pages.

The effects of inflation on the labor market

Name: Stephen Adeleye
Course: Economics 201
Objective: The effect of inflation on the job market
Date: 05 - 05 - 2003
The Effects of inflation on the Job Market
In the major industrial countries, low unemployment usually creates inflationary
pressures. But during the recent economic expansion in the United States, prices have held
steady despite low unemployment. Inflation is generally defined as an upward directional
increase in the average of prices. Most people tend to be concerned about it because it
reduces the purchasing power of the income earned by households. Though a few exceptions
most commodities accentuate to this general assumption, all other things being equal. On
the contrary the job market is a database of positions available for either a specific
profession or the pool of potential applicants nation wide. With the use of visual aid and
extensive explanations I will relate the connection between inflation and the Job market
in America.

Inflation is caused by increasing the quantity of money used in purchasing a fixed amount
of goods. This could also happen by reducing the number of goods available for a fixed
"nominal" amount of money. On both sides money is subjected to it's intrinsic relevance.
Meaning peoples expectation of return varies when tendering a barter object.

In mutualism, the job market consists of all available positions available to all
individuals sixteen years and above who are willing and able to work. In a deeper context
the basic component of the job market is the minimum wage. The minimum wage is the lowest
hourly salary that an employer is allowed to pay an employee for services rendered. The
Federal Labor board sets the minimum hourly labor rates. The lowest hourly rates are
decided by a collective bargaining, an arbitration and a board action legislation. Minimum
wage laws were passed to ensure that employees are reasonably compensated. However
exceptions to this include volunteer services, family businesses and of recent C.E.O.'s
like Steve Jobbs who earns an annual salary of only 99 cents but receives millions in
other gratuities

The Philips Curve
THE PHILLIPS curve is the negative empirical relationship between inflation and the
unemployment rate--has long been a mainstay of market and policy analysis of inflation in
the United States. Macroeconomic forecasters and policymakers alike have relied on the
Phillips curve to provide a reading of the likely path for inflation in the period ahead.
In the past few years, however, the Phillips curve seems to have become less reliable. The
unemployment rate has fallen in the 1990s, but the expected subsequent increase in
inflation has not occurred. Some have attempted to explain this in terms of developments
in the labor market--specifically, increased fears of job loss. However, measures of job
insecurity do not help to explain why the Phillips curve has been less reliable than in
the past. Other factors, such as the behavior of labor costs other than wages,
Continues for 2 more pages >>