Wage Push Inflation

What is 'Wage Push Inflation'

Wage push inflation is a general increase in the cost of goods that is preceded by and results from an increase in wages. In order to maintain corporate profits after an increase in wages, employers must increase the prices they charge for the goods and services they provide. The overall increased cost of goods and services has a negative effect on the wage increase, and eventually, higher wages will be again needed to compensate for the increased prices for consumer goods.

BREAKING DOWN 'Wage Push Inflation'

Wage push inflation is an inflationary spiral that occurs when wages are increased and business must, in order to pay the higher wages, charge more for their products and/or services. The wage increase, then, is not as helpful to employees since the cost of goods has also risen. If prices remain increased, workers will eventually require another wage increase to compensate for the cost of living increase.

RELATED TERMS
  1. Justified Wage

    A wage level for a job that is set by market dynamics and justified ...
  2. Living Wage

    A theoretical wage level that allows the earner to afford adequate ...
  3. Cash Wages

    Cash wages include any kind of compensation that comes in the ...
  4. Minimum Wage

    The minimum amount of compensation an employee must receive for ...
  5. Taxable Wage Base

    Also known as the Social Security Wage Base, this base is the ...
  6. Wage Expense

    In financial accounting, wage expense represents payments made ...
Related Articles
  1. Personal Finance

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
  2. Options & Futures

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  3. Investing

    Why $15 Minimum Wage Might Not Be Good News for Anyone (MCD, DPZ)

    Discover why the minimum wage isn't the panacea it is made out to be, and how artificial wage increases strain businesses and consumers.
  4. Personal Finance

    How Minimum Wage Impacts Unemployment

    We explain how the minimum wage affects unemployment, public assistance, and the economy overall.
  5. Economics

    Minimum Wages Can Raise Unemployment

    Learn why many economists feel that minimum wages, while intended to benefit low-wage workers, actually hurt them by increasing unemployment.
  6. Personal Finance

    Why Minimum Wage Is a Kingmaking Issue in Elections

    Minimum wage is an essential issue for presidential candidates in the lead-up to the 2016 election. We look at the reasons why.
  7. Stock Analysis

    What the Recent Minimum Wage Debate Means for McDonald’s Stock Price (MCD)

    Find out what effect a minimum wage increase will have on McDonald's stock price. Examine the results of the increase in McDonald's minimum wage.
  8. Personal Finance

    Can A Family Survive On The U.S. Minimum Wage? (WMT, COST)

    As the political debate roars on, the numbers are clear: Even two full-timers at U.S. minimum wage can't keep a family of four above the poverty line.
  9. Economics

    Does Raising The Minimum Wage Increase Inflation?

    Raising the minimum wage might spur more spending and stimulate the economy.
  10. Economics

    5 Developed Countries without Minimum Wages

    Find out about five developed nations that have no federally regulated minimum wage and how these countries use unions to ensure workers are paid their due.
RELATED FAQS
  1. Does raising the minimum wage increase inflation?

    Explore whether raising the minimum wage increases inflation. This is a polarizing topic that is inherently linked to unemployment. Read Answer >>
  2. Which states have the lowest minimum wage?

    Learn which two states share the lowest state minimum wage and are also the only two that sit below the required federal ... Read Answer >>
  3. How can minimum wages contribute to a market failure?

    See why minimum wage laws create a market failure among low-productivity workers by making it illegal for companies to hire ... Read Answer >>
  4. What are the advantages and disadvantages of a wage price spiral?

    Read about the so-called wage-price spiral, a Keynesian explanation for rising prices that exist concurrently with rising ... Read Answer >>
  5. How much of my income goes to Social Security taxes?

    Discover how much of your income goes to social security tax: what the rate is, what the limits are and what types of income ... Read Answer >>
  6. Will a hike in the minimum wage result in deadweight loss to businesses and labor?

    Learn the effects of a minimum wage hike on businesses and the market. Learn how deadweight loss is created by such hikes ... Read Answer >>
Hot Definitions
  1. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  2. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  3. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  4. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  5. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
  6. MACD Technical Indicator

    Moving Average Convergence Divergence (or MACD) is a trend-following momentum indicator that shows the relationship between ...
Trading Center