Inflation caused by skyrocketing wages.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.
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.
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