wage indexation

Wage indexation is a system where wages are automatically adjusted based on changes in a specific economic indicator, usually inflation or the cost of living. Its purpose is to ensure employees' purchasing power remains stable over time, preventing wages from losing value due to rising prices. For example, if inflation increases by 3%, wages might be increased by the same percentage to maintain workers’ real income. This process helps workers keep up with increased living costs, promoting income stability and economic fairness.