Misery index
Topic: Inflation and Index Numbers: CPI, WPI, IIP and the Deflator · NCERT: Beyond NCERT
Meaning
The misery index is a rough measure of how hard economic life is for ordinary people. It adds two problems that people feel directly: rising prices and a lack of jobs.
Misery index = inflation rate + unemployment rate
A higher number means greater hardship. It is only a rough guide, because it gives equal weight to both problems and ignores other things such as growth or inequality.
Example
During the 1970s oil shocks, many economies faced high inflation and high unemployment at the same time. Both parts of the index rose together, so the misery index went up sharply.
Don't confuse with
- Stagflation: this is a situation of high inflation, high unemployment and stagnant growth all at once. The misery index is a number that measures how bad such a situation is.