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The Impact Of Salary Increase On Inflation In Nigeria
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1.2 STATEMENT OF THE PROBLEM.
The problems that occur when salaries
are increased are raising labour costs which in turn lead to cost push
inflation. As workers demand wage increases, companies usually choose to
pass on those costs to their customers through price increases, thus
causing inflation that is where prices are forced upwards because when
people have much money with them. It increases aggregate demand.
Also
wages increase leads to retrenchment of workers thus causing inflation
has tremendous impact on the output and employment decision by firms
because inflation distorts the price mechanism by making it difficult to
distinguish changes in the general prices level, it creates uncertainty
making the investors less willing to take risks and invest especially
in long term project, inflation push up real interest rates as lender
demand a bigger risk premium on their money.
This work therefore aims
at investigating the impact of salary increase on inflation in the
Nigeria economy. For the purpose of this study the salary increase as
represented with federal government recurrent expenditure excluding
social service, economic service, transfers. If government wants to
solve the problems of inflation it will end up creating unemployment .As
a result of this, various economics theorists have theorized about the
relationship between salary increase and inflation thus giving rise to
the theories, causes and effects of inflation.
1.3 OBJECTIVES OF THE STUDY.
This
research is solely aimed at finding out the impact of salary increases
on inflation in Nigeria. The specific objectives of the study are as
follows;
1. To investigate the impact of salary increase on inflation in Nigeria.
2. To examine the trend of inflation in Nigeria over the years.
1.4 STATEMENT OF HYPOTHESIS.
Based
on our study of the impact of salary increase on inflation in Nigeria,
the research question has been used to formulate the following
hypothesis;
Ho: Salary increase does not lead to inflation in Nigerian.
Hi: Salary increase has caused inflation in Nigeria.
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ABSRACT - [ Total Page(s): 1 ]No economy can escape the evils done is by inflation and unemployment because when measures to control one are being employed the other is being upset. However, we are dealing with inflation alone. In fact, this study investigates the impact of salary increase on inflation in Nigeria. In a bid to achieve the objective of the study, ordinary least square regression method was adopted using secondary data from 1984 to 2009 the results indicate that there is a negative relationship between the depe ... Continue reading---
