The general concensus seems to be that cost-push inflation will never become a threat. However, when any topic starts to enter the mainstream, as in the example of the cartoon, then things have a funny way of coming out of the woodwork.

NAIRU or, non-accelerating rate of inflation is the theoretical economic construct governing or relating to cost-push inflation. The basic premise is that an increase in demand can be translated into higher employment only up to the NAIRU limit. At that point, higher demand drives higher prices. This is an adjunct to Capacity Utilization, which relates to manufacturing capacity.

Thus it is easy to understand therefore that the establishment, economists, are in essence discounting any chance of a cost-push inflation as employment is currently falling. Would this therefore negate my advocacy, of the possibility of a cost-push inflation?

Let’s examine the historical data: First, the employment data;

This demonstrates the periods of high unemployment. Periods where according to the “Phillips Curve” wages should remain constant, or even fall, due to the NAIRU theory.

Here then is the wages data;

Clearly we can see that the decade of the 1970’s was marked by higher wages, with lower employment. Any guesses as to inflation at these times? Of course, the highest inflation in modern times within the US

Year……………Inflation Rate
1970……………… 5.92
1971……………… 4.30
1972……………… 3.31
1973……………… 6.21
1974……………. 10.98
1975…………….. 9.14
1976……………. 5.76
1977……………. 6.45
1978……………. 7.61
1979………….. 11.27
1980………….. 13.52

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