Wage-Price Spiral
The wage-price spiral is an economic concept where rising wages lead to increased prices, and vice versa. When workers demand higher pay, businesses often raise prices to cover these costs, resulting in inflation. As prices go up, workers may seek even higher wages to maintain their purchasing power, creating a cycle. This can lead to persistent inflation as each increase in wages spurs further price hikes. Essentially, it’s a feedback loop where wages and prices continuously drive each other up, complicating efforts to control inflation in the economy.
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The wage-price spiral is an economic concept where rising wages lead to increased prices for goods and services, which then prompts workers to demand even higher wages to keep up with the cost of living. For example, if employees receive a pay raise, businesses may raise their prices to cover the higher labor costs. This cycle continues, as higher prices lead to further wage demands, creating a loop of inflation. Essentially, it reflects how wages and prices can influence each other, potentially leading to sustained inflation if not managed properly.