The Phillips’ Cline

tween the level of unemployment and the rate of wage increase. We know that Keyncs was of the opinion that trade unions would tend to raise wages more rapidly
when unemployment rates were higher  Phillips studied the relationship between unemployment and the rate of changes in money wages in the U.K. over the period 1862-1957. As a result of this study he seems to have discovered a stable relationship over the whole period between the rate of wage increase  and the percentage of unemployment. Phillips Curve shows this relationship. It may also be considered a relationship between inflation and unemployment, because when there is inflation money wages invariably go up under trade union pressure. In thc figure, rate of unemployment is shown along the .r-axis and the rate or wage increase along
the v-axis, both in percentages.  From this figure. which represents a hypothetical economy, we find that when wages rise by 2% per annum, unemployment goes up
by 4%. TIllis we may say that  as wages rise unemployment rises more than proportionately. But the curve also shows that when unemployment has reached a
very high level, say 5%, wages do not rise at all, which means that, in the case of wide-spread unemployment, the workers are more keen to get employment than to
fight for higher wages, The concept of Phillips Curve has bccn widely accepted as a useful concept. though there iU’C economists who question its realism. i.e.. they Jo nut regard it as representing a realistic situation. There is no doubt that. as wc have said above, in thc case on widespread unemployment, thcrc is a keen competition
fur securing jobs and consequently pressure for securing higher wages is correspondingly reduced. However, Phillips’ Curve may be u-cd for establishing
actual relationship between unemploy

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