Different Matters by Damien Grant cover image

Different Matters with Michael Reddell

Different Matters by Damien Grant

NOTE

The historical correlation between wages, unemployment, and inflation

Historically, there has been a correlation between low unemployment and high wage inflation, and a belief that this relationship could be exploited. In the 1960s, policymakers and economists thought that by pushing monetary or fiscal policies, they could reduce unemployment while tolerating slightly higher inflation. However, it was later found that while these relationships hold in the short run, in the medium term, people adjust their behavior and inflation expectations, leading to a situation where there's no longer a trade-off between unemployment and inflation.

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