W.H. Philips and the Philips Curve

A.W.H. Phillips was an economist whose reputation was based largely on a single paper on the right topic published at the right time. In the late 1950-s, the connection between inflation and unemployment ranked as a major unsolved problem of macroeconomic theory. The curves that Phillips drew in his famous article in "Economica" suggested a simple, stable relationship between inflation and unemployment.

The central proposition of the Phillips curve theory is: other things remaining constant, the higher the unemployment rate, the lower is the inflation rate.

Phillips's original idea was that the unemployment rate indicates the state of demand pressure in the economy. When unemployment is low, real GNP is above capacity, bottlenecks arise, and inflation accelerates. When unemployment is high, real GNP is below capacity, and inflation diminishes.

In the early 1960s, the Phillips curve became a central element of macroeconomics.

B. Translate into English.

Безработица – это одна из серьезных проблем, с которыми сталкивается любое общество. Как и любое явление, она не может быть оценена однозначно. С одной стороны, она дает людям время и возможность найти подходящую работу. С другой стороны, состояние безработных приводит людей к поиску незаконных заработков. Последствия безработицы весьма внушительны. Во-первых, это отсутствие заработка. Во-вторых, это потеря приобретенных профессиональных знаний и человеческого достоинства. Очевидно, что человек, разочаровавшийся найти высокооплачиваемую работу, соглашается на сомнительные предложения. Кроме того, безработица толкает людей к совершению преступлений. Если безработица длительная, она вызывает серьезные социальные и психологические проблемы не только для безработного, но и для его семьи.

LISTENING

Kate Barker is the Chief Economic Adviser of the Confederation of British Industry, and a member of the panel of economic advisers to the British Treasury. You will hear her talking about the things that will need to change if labour markets become increasingly flexible.

Ex. 1. Listen to Part One of the interview and answer the questions.

1. A 'flexible labour market' is one in which:

1. workers are able to do a variety of jobs.

2. it is easy for companies to hire non-permanent staff.

3. workers arc free to choose the hours they work.

2. What is the advantage of a flexible labour market for employers?

3. What does 'the more flexible labour market is considered to have encouraged inward investment' mean?

4. Kate Barker says that three things will have to be rethought or reconsidered if the British labour force is going to remain more flexible.

Complete the gaps:

In particular, the structure of (1)…………………………needs to be revisited, if you have people moving between employments and unemployment much more quickly. The structure of (2)……………………………needs to be revisited, if you have people no longer working for a long time for the same employer, and finally in Britain we tend to have a very high level of owner-occupation – more people (3)………………………….and they borrow a great deal of money in order to pay for that. It would be much more logical to have a big (4)………………………., if you want to have a very flexible labour market.

Ex. 2. Listen to Part Two of the interview. According to what Kate Barker says, which is the correct answer in each case?

1. In a flexible labour market, such as that in the USA,

1. unemployment falls in a downturn or recession.

2. unemployment rises in a downturn or recession.

2. In a flexible labour market

1. unemployment rises during an economic upturn.

2. temporary employment rises during an economic upturn.

3. permanent employment rises during an economic upturn.

3. In a flexible labour market, there are

1. badly-paid workers who have frequent periods of unemployment.

2. well-paid workers who have frequent periods of unemployment.

3. 10% of earners who have frequent periods of unemployment.

4. Wages are falling

1. because of the deregulation of the labour market.

2. because there is now a kind of 'underclass' of workers.

3. because of competition from Asian countries.

Ex. 3. Listen to Part Three of the interview and answer these questions.

1. What are the two measures that Kate Barker suggests governments should take to help the long-term unemployed?

2. What, according to Kate Barker, is a common attitude among employers towards long-term unemployed people?

SPEAKING

A.

Read the dialogue in pairs and do the following exercises.

1 –	I hear that Sam lost his job. Did you hear that, too?
2 –	I did hear something about his job being abolished.
1 –	What a terrible thing to happen now, just when he and Helen are expecting their first baby!
2 –	It is a shame, I’ll admit, but I told Sam months ago to get out of that place where he works and get another job. I had a feeling that the company wasn’t very stable financially.
1 –	You mean it’s not a strong company? I’d always thought it was one of the strongest around.
2 –	If you’ve been reading the news in the financial section, you could see that the company was headed^1 for trouble. I wouldn’t be surprised to see it go bankrupt before the end of the year.
1 –	It sure is too bad. Is there anything we can do for Sam?
2 –	I’m going to call him this afternoon. I heard yesterday that there’s going to be an opening^2 in the section where I work. He can get his application in^3 today.
1 –	I’ll check things out^4 with my boss, too. There may be something open in one of the departments over in Fairmont.

Notes:

1. to head – to move or go in a certain direction;

2. opening – place or position that is vacant;

3. to get in – to submit;

4. to check out – to prove true.

Ex. 1. Conversation in context

1. What is Sam’s relationship to the speakers?

2. Where does the discussion take place?

3. Is Sam present?

4. Can the speakers help Sam?

Ex. 2. Personal application

1. Did you ever lose your job? If so, describe how it felt.

2. What are the most financially stable companies in your country?

3. Do you get along well with your boss?

4. Are there any openings where you work?

1. Would your friends help you find a job?

B.

Speak on:

• the basic cause of the business cycle;

• the phases of the business cycle;

• business cycle theories;

• the definition of unemployment, its types

• the reasons for unemployment;

• the impact of technology changes on unemployment;

• the geographic distribution of jobs;

• costs of unemployment;

• positive sides of frictional and structural unemployment;

• the goal of full employment;

• the Philips Curve.