Footsie's misplaced wage worries
Article Abstract:
There is concern that a drop in unemployment in the United Kingdom could lead to wage rises that outstrip productivity, and this tends to depress stock prices. Real wages have not risen, and this may be partly because the supply of workers has increased, and people entered employment were not always previously classed as unemployed. Some employees may also work harder than necessary in exchange for job security, and this helps stabilize wages. Inflation may still result from higher prices rather than wages. The link between increased demand for labor and rises in real wages is not clear cut.
Publication Name: Investors Chronicle
Subject: Business
ISSN: 0261-3115
Year: 1997
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Waging a phoney war on inflation
Article Abstract:
The Bank of England is likely to call for higher interest rates as a response to UK wage inflation of 5.5% in the private sector and 5% in the economy as a whole. The data could exaggerate the problem since it is affected by bonuses at the end of 1996, so average earnings growth could fall. There is a debate as to when wage inflation will become a problem, but with unemployment falling rapidly, some analysts argue that further falls could be inflationary. Others argue that greater labor flexibility will allow unemployment to drop more without inflationary pressure.
Publication Name: Investors Chronicle
Subject: Business
ISSN: 0261-3115
Year: 1997
User Contributions:
Comment about this article or add new information about this topic:
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