An economic theory that describes the relationship between the rate of inflation and unemployment. It says that there was a consistent, inverse relationship between wage inflation and unem-
ployment in the United Kingdom from 1861 to 1957. When unemployment was high, wages were slow to increase. The opposite happened when unemployment was low. The only exception was the period between the two world wars when inflation was extremely high. The theory is named after A.W.H. Phillips (1914–1975) who published a study in 1958 that was viewed as a milestone macroeconomic theory. However, recent economic performance has questioned this theory, as low inflation in the U.S. has coincided with low unemployment.