I saw my friends astonished by a report indicating that UK unemployment rate is at 6 % and it should have been zero(or so they assumed). I am thus tempted to write about the relationship between inflation and unemployment and explain why no country in this world can achieve low unemployment and at the same time have low inflation. The logic behind this economic reality is simple:You see when more and more jobs are created in a country, those workers ability to agitate for higher and higher pay increases. A case in point is our country is teachers and Labour Union where we have continued to witness rising demands for more and more increment in salaries. When this reality sinks in, the only rational thing for any producer(who is an economic agent) to do will be to pass this increase in labor costs to the retailer who finally pass it to you as the consumer in form of higher prices. The end result is that i son of Muranga, the land of 10 billionaires and 1 million zeronnaires, will be forced to carry a basket of notes to buy njugu karanga:-P A keen analysis on what has transpired here points to the preference of low unemployment to a low inflation.It is the trade off, talk of eating your cake, would you expect to have it till? In practice, monetary economists tend to favor price stability (low inflation) while Keynesian economists favor job creation. By the way, did the opposition leader of Mozambique actually diss our jakom? I hope he didnt because that would break my heart. Wacha nimalize hii uji ya Omogusii
Posted on: Thu, 16 Oct 2014 08:57:38 +0000
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