The effects of inflation on the labor market Essay

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Objective: The effect of inflation on the job market
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
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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, fluctuations in the value of the US dollar, and other

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