IN AN EARLIER ISSUE OF Brookings Papers on Economic Activity, George Perry argued that the Phillips curve, measured in the conventional way, had shifted to the right in recent years, and estimated that a 4 percent overall unemployment rate would produce about 1 /2 percentage points more inflation per year than was the case in the mid-1950s. Perry’s conclusion was based on a wage equation that used, instead of the overall unemployment rate, two other measures of labor market conditions: (1) a weighted unemployment rate, in which the unemployment rate for each age-sex group is weighted by the relative hours of work and wage levels of that group; and (2) an unemployment dispersion index, which measures the variance of unemployment rates among different age-sex groups.
