Definition
Wage Control refers to governmental measures put in place to regulate the rate and extent to which wages can increase. These controls are typically expressed in percentage terms and aim to manage economic conditions, especially during periods of wage and price restraints. Such measures are often implemented to address national priorities, primarily to restrain inflation. Wage controls can include guidelines, freezes, or increment caps on wages.
Examples
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1970s U.S. Wage and Price Controls: In the early 1970s, the United States implemented wage and price controls under President Richard Nixon’s administration to combat inflation. These controls included a freeze on wages and prices for 90 days and subsequent measures ensuring controlled increases.
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UK Incomes Policy: The United Kingdom’s incomes policies in the 1960s and 70s also saw the government taking active measures to control wage increases, aligning with broader economic objectives to control inflation.
Frequently Asked Questions (FAQ)
Q: Why are wage controls implemented? A: Wage controls are primarily implemented to control inflation, ensure economic stability, and achieve other national economic priorities.
Q: How do wage controls affect the economy? A: Wage controls can help reduce inflation but may also suppress wage growth, potentially leading to reduced consumer spending and dissatisfaction among workers.
Q: Are wage controls still used today? A: While less common, wage controls can still be utilized in specific contexts, especially in times of extreme economic instability or hyperinflation.
Q: What are the legal implications of imposing wage controls? A: Legally, countries need to balance wage controls with labor rights and contractual obligations. Implementing wage controls often involves legislative action and can face resistance from labor unions and employers.
Related Terms
Inflation: The rate at which the general level of prices for goods and services rises, eroding purchasing power.
Price Controls: Government mandates that establish allowable prices for goods and services to manage economic stability.
Income Policy: Strategies employed by governments to control wages and income to curb inflation and ensure economic stability.
Cost of Living Adjustment (COLA): Automatic adjustments of nominal income levels to maintain purchasing power after inflation.
Online Resources
Suggested Books for Further Studies
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“Economics” by Paul Samuelson and William Nordhaus
- An essential read that covers various economic policies including wage and price controls.
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“The Age of Inflation” by Jens O. Parsons
- A deep dive into inflationary periods and the measures taken to control them.
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“The Economics of Money, Banking and Financial Markets” by Frederic S. Mishkin
- Provides a comprehensive look at financial markets, including government interventions like wage controls.
Fundamentals of Wage Control: Economics Basics Quiz
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