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Why is it that when there is low inflation workers will accept a low wage increase?
From the worker's perspective, raises are judged good or bad in reference to inflation. Its really a question of buying power more than the actual amount of money. Think of this example... If inflation is running 2% per year and you get a 2% raise, you break even. Your salary buys the same stuff at the start the year and the end of the year. If inflation is 2% and you got a 4% raise, you're now making more money than before. You have more buying power relative to the economy as a whole. So as a worker, your goal is to be able to buy more each time you get a raise. So if inflation is low, you can accept a lower raise and still increase buying power as long as the raise is higher than inflation. So when infaltion is low, a low raise (that's still bigger than the rate of inflation) just as effective as a large raise when inflation is high.
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What is the relevance of the Phillips curve to modern economies?
The Phillips curve plots inflation against unemployment and was first published in 1958. It was used in policy making to reduce unemployment by accepting a higher level of inflation. However, as inflation increases workers begin to factor the increase into their wage demands, e.g. if the workers know that inflation is running at 5% and want a 'real' wage increase of 5% they'll ask for 5%+5%=10% wage increase (if they only receive an increase of 5% the real value of their wages will stay the same and if they have no increase the real value will fall by 5%). Because all workers factor in inflation into their wage demands unemplyment returns to its original level while inflation remains high. This realisation was made after the economic woes of the 1970s and 80s where there was significant inflation and unemplyment in many countries - something that had been unpredicted. The relevance of the Phillips curve today serves as a warning that governments cannot trade unemployment for inflation. This is why Central Banks only target inflation and not unemloyment in their monetary policy decisions.
What are two variants of cost-push inflation?
1. Wage Price Spiralis when workers receive a significant wage increase, which is passed to consumers through higher prices, which decreases SAS. if wages continue to increase, then the Reserve Bank should increase the supply of money to restore full employment equilibrium......
What are the different kinds of inflation?
On the basis of rate of Inflation, there are different types of Inflation. They are:Creeping Inflation.Walking or Trotting Inflation.Running inflation.Hyper or Galloping Inflation.Open Inflation.Suppressed Inflation.On the basis of rate of Inflation, there are different types of Inflation. They are:Creeping Inflation.Walking or Trotting Inflation.Running inflation.Hyper or Galloping Inflation.Open Inflation.Suppressed Inflation.
Should minimum wage be tied to inflation?
Yes, tying minimum wage to inflation can help ensure that workers maintain their purchasing power over time. As the cost of living rises, linking minimum wage to inflation would provide a more stable economic foundation for low-income earners, reducing poverty and inequality. This approach can also help stimulate the economy by increasing consumer spending, as workers have more disposable income. However, it may require careful implementation to balance the interests of businesses and workers effectively.
Can a persons money wage decrease at the same time their real wage increases?
Yes, a person's money wage can decrease while their real wage increases if the rate of inflation decreases faster than the reduction in their nominal wage. For example, if a worker's nominal wage drops by 2% but the inflation rate falls by 5%, the purchasing power of their earnings—real wage—can increase despite the nominal wage decrease. This situation highlights the distinction between nominal and real wages, where real wages reflect the buying power of income adjusted for inflation.
What is the relevance of the Phillips curve to modern economies?
The Phillips curve plots inflation against unemployment and was first published in 1958. It was used in policy making to reduce unemployment by accepting a higher level of inflation. However, as inflation increases workers begin to factor the increase into their wage demands, e.g. if the workers know that inflation is running at 5% and want a 'real' wage increase of 5% they'll ask for 5%+5%=10% wage increase (if they only receive an increase of 5% the real value of their wages will stay the same and if they have no increase the real value will fall by 5%). Because all workers factor in inflation into their wage demands unemplyment returns to its original level while inflation remains high. This realisation was made after the economic woes of the 1970s and 80s where there was significant inflation and unemplyment in many countries - something that had been unpredicted. The relevance of the Phillips curve today serves as a warning that governments cannot trade unemployment for inflation. This is why Central Banks only target inflation and not unemloyment in their monetary policy decisions.
What are two variants of cost-push inflation?
1. Wage Price Spiralis when workers receive a significant wage increase, which is passed to consumers through higher prices, which decreases SAS. if wages continue to increase, then the Reserve Bank should increase the supply of money to restore full employment equilibrium......
Which type of regulation increases costs for consumers but helps US businesses?
Laws that increase the minimum wage for workers
What are the different kinds of inflation?
On the basis of rate of Inflation, there are different types of Inflation. They are:Creeping Inflation.Walking or Trotting Inflation.Running inflation.Hyper or Galloping Inflation.Open Inflation.Suppressed Inflation.On the basis of rate of Inflation, there are different types of Inflation. They are:Creeping Inflation.Walking or Trotting Inflation.Running inflation.Hyper or Galloping Inflation.Open Inflation.Suppressed Inflation.
Should minimum wage be tied to inflation?
Yes, tying minimum wage to inflation can help ensure that workers maintain their purchasing power over time. As the cost of living rises, linking minimum wage to inflation would provide a more stable economic foundation for low-income earners, reducing poverty and inequality. This approach can also help stimulate the economy by increasing consumer spending, as workers have more disposable income. However, it may require careful implementation to balance the interests of businesses and workers effectively.
What minimum has increased over time?
The minimum wage in many countries has increased over time due to inflation and efforts to improve workers' standard of living. This increase is often driven by government legislation and social movements advocating for fair compensation for labor.
Most countries around the world have some sort of minimum wage law Explain why the minimum wage may hurt workers as much as help them?
Minimum wage may hurt a worker if the rate of inflation is higher than the minimum wage.
What is sliding wage scale?
It increases the wages as the prices increase. This is so the worker is paid equally to the rise in inflation.
What was the Ohio minimum wage in 2006?
In 2006, the minimum wage in Ohio was $6.50 per hour. This rate was established following a ballot initiative in 2006 that aimed to gradually increase the minimum wage in the state. The wage was set to increase annually based on inflation, reflecting the cost of living adjustments.
Can a persons money wage decrease at the same time their real wage increases?
Yes, a person's money wage can decrease while their real wage increases if the rate of inflation decreases faster than the reduction in their nominal wage. For example, if a worker's nominal wage drops by 2% but the inflation rate falls by 5%, the purchasing power of their earnings—real wage—can increase despite the nominal wage decrease. This situation highlights the distinction between nominal and real wages, where real wages reflect the buying power of income adjusted for inflation.
What was the average wage in 1945?
In 1945, the average wage for American workers varied by industry and occupation, but it was approximately $2,000 to $2,500 per year. This amount reflected the economic conditions following World War II, including labor shortages and inflation. Adjusted for inflation, this wage would be significantly lower than today's average incomes.
Which type of regulation costs for consumers but helps U.S. Businesses?
Laws that increase the minimum wage for workers
