The Phillips Curve revisited: implications of an urban legend for economics teaching in South Africa

Abstract

In his article, The Relation between Unemployment and the Rate of Change of Money Wage Rates in the United Kingdom, 1861–1957, Phillips demonstrates a clear trade-off relationship between the rate of change in nominal wages and the rate of change in unemployment for the period under study. Post-publication, Phillips’ article became popular and is widely discussed in first-year economics textbooks. This article analyses the educational implications of the Phillips curve in textbooks prescribed by South African universities. It has been found that in a number of these publications, the Phillips curve is incorrectly illustrated as a trade-off between the level of inflation and the level of unemployment, which is not what the author concluded. A change in the way the Phillips curve is taught at tertiary institutions is therefore required to ensure that students are properly informed about aspects impacting employment. The findings of Phillips in their original format, rather than as misrepresented in some South African textbooks, should be taught to South African students. The research also shows that educators should consult original sources, rather than relying on the interpretation of others, when teaching technical aspects of an academic discipline.

Keywords: economic growth; economics; employment; inflation; Phillips curve; unemployment