Phillips curve

Graph showing the relationship between percentage changes in wages and unemployment, and indicating that wages rise faster during periods of low unemployment as employers compete for labour. The implication is that there is a stable trade-off between inflation and unemployment, and that the dual objectives of low unemployment and low inflation are inconsistent. The concept has been widely questioned since the early 1960s because of the apparent instability of the relationship between wages and unemployment, and since then the Phillips curve has been widely regarded as misleading in its explanation of inflation. The curve was developed by the New Zealand-born British economist Alban William Phillips, who graphically plotted wage and unemployment changes between 1861 and 1957.