Wage-push inflation

(redirected from Wage Push Inflation)

Wage-push inflation

Inflation caused by skyrocketing wages.

Wage-Push Inflation

Inflation caused by increased costs as a result of higher wages. To give an extreme example, suppose a state raises its minimum wage from $5 per hour to $30 per hour. In order to be able to pay workers, an employer is forced to significantly increase the prices on his/her products. This in turn makes goods and services more expensive, and the $30 per hour suddenly lacks the purchasing power it had when the minimum wage was $5 per hour. Soon, it is no longer sufficient to purchase necessary goods and services and the minimum wage must be raised again. The cycle starts over, creating an inflation spiral.
References in periodicals archive ?
The Fed Funds rate should be at least 200 basis points above inflation when the US economy is at full employment, wage push inflation is accelerating and crude oil prices have doubled from their lows.
This would lead to a wage push inflation in addition to the inflation caused by increase in rental increases.
Whether it ever can occur is difficult to say (economists cannot agree on the definition of full employment, for one thing), but in our current time of rising interest rates, it is more likely unemployment will increase, so wage push inflation fears may be banished from the scene for a long time to come.