Wage Push Inflation

AAA

DEFINITION of 'Wage Push Inflation'

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.

INVESTOPEDIA EXPLAINS '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. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  2. Core Inflation

    A measure of inflation that excludes certain items that face ...
  3. Headline Inflation

    The raw inflation figure as reported through the Consumer Price ...
  4. Inflation

    The rate at which the general level of prices for goods and services ...
  5. Deflation

    A general decline in prices, often caused by a reduction in the ...
  6. Deflationary Spiral

    A deflationary spiral is when a period of decreasing prices (deflation) ...
Related Articles
  1. Bonds & Fixed Income

    Coping With Inflation Risk

    Inflation is less dramatic than a crash, but it can be more devastating to your portfolio.
  2. Entrepreneurship

    Cost-Push Inflation Versus Demand-Pull Inflation

    Gain a deeper understanding of aggregate supply and demand, forces which raise the price of goods and services.
  3. Investing Basics

    Beta: Gauging Price Fluctuations

    Learn how to properly use this measure that can help you meet your criteria for risk.
  4. Economics

    What You Should Know About Inflation

    Find out how this figure relates to your investment portfolio.
  5. Options & Futures

    Introduction To Inflation-Protected Securities

    Inflation is an enemy to investors - except to those who invest in IPS, which guarantee a real rate of return with no credit risk.
  6. Bonds & Fixed Income

    6 Factors That Influence Exchange Rates

    Find out how a currency's relative value reflects a country's economic health and impacts your investment returns.
  7. Mutual Funds & ETFs

    GLD vs. IAU: Which Gold ETF is Better?

    Looking to play gold with ETFs? A look at SPDR Gold Trust Shares (GLD) versus iShs Gold Trust Trust Units (IAU).
  8. Economics

    What is the Income Effect?

    In economics, the income effect is the change in the consumption of goods caused by a change in income, whether income goes up or down.
  9. Economics

    What is Fiat Money?

    Fiat money is currency that a government has declared to be legal tender, but is not backed by a physical commodity.
  10. Economics

    What Do You Need To Know About Inflation?

    When it comes to inflation, there is no shortage of opinions: one side argues the Fed should raise rates, and the opposition says the Fed should stay put.

You May Also Like

Hot Definitions
  1. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  2. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
  3. Hurdle Rate

    The minimum rate of return on a project or investment required by a manager or investor. In order to compensate for risk, ...
  4. Market Value

    The price an asset would fetch in the marketplace. Market value is also commonly used to refer to the market capitalization ...
  5. Preference Shares

    Company stock with dividends that are paid to shareholders before common stock dividends are paid out. In the event of a ...
  6. Accrued Interest

    1. A term used to describe an accrual accounting method when interest that is either payable or receivable has been recognized, ...
Trading Center