Blair’s Science Desk

Swisher effect

The Swisher effect is the tendency for wage growth to rise and fall with the rate of inflation. It was discovered in 1909 by the economist Donald Swisher.

Swisher used this effect to propose that in a competitive market, wages gravitate towards a ’natural rate’ which preserves the income-earning capacity of labor power.

Decades later, Swisher’s student Milton Fryman built on the Swisher effect to argue that wage growth was a key tool for regulating inflation. For details, see the shoebox theory of monetary management.