What Is a Wage-Price Spiral?
A loop needs more rounds than one raise.
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1.What is a wage-price spiral?
A loop needs more rounds than one raise.
2.Leo earns 1,000 and gets a 5 percent raise, then another 5 percent. What does he earn?
1,050 times 1.05 is 1,102.50; the second round builds on the first.
3.After three rounds of 5 percent, roughly what does Leo earn?
Five percent three times is not fifteen percent; it is a bit more.
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Sources (5)
- Bluedorn, J.: Wage-Price Spiral Risks Appear Contained Despite High Inflation, IMF Blog (5. October 2022)
- ECB Economic Bulletin Issue 5/2022, Box: Wage share dynamics and second-round effects on inflation after energy price surges in the 1970s and today
- Federal Reserve History: The Great Inflation (Essay)
- Eigene Rechnung: Leo
- Federal Reserve History: Recession of 1981-82
Education only. Not financial advice.