Wage Push Inflation


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.

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.

  1. Inflation

    The rate at which the general level of prices for goods and services ...
  2. Consumer Price Index - CPI

    A measure that examines the weighted average of prices of a basket ...
  3. Headline Inflation

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

    A measure of inflation that excludes certain items that face ...
  5. Deflation

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

    The state in which market supply and demand balance each other ...
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