Is A Wage Price Spiral Inevitable?

Society appears to be stuck in a never-ending cycle, where inflation continues to rise and wages can’t keep up. However, some analysts are predicting that a wage price spiral could be on the horizon. 

A wage price spiral refers to rising inflation leading to growing wages so professionals can keep up with the increased cost of living. 

However, this means employers are left with the additional challenge of mitigating their expenses, while paying employees a fair wage. So how can the best of both worlds be achieved? 

For starters, perspective is important when knowing how to approach inflation. Some argue that a wage price spiral isn’t guaranteed and that wage hikes have not played a measurable role in inflation growth.

It’s nearly impossible to predict how long inflation will persist, but it is showing signs of easing. However, because of the slight wage increase, businesses could artificially inflate their prices to achieve a better profit margin.   

Another reason that a wage price spiral may not occur is the expectation of an economic slowdown in the near future. As a result, the tight labor market may loosen up as demand for workers decreases. 

Many regions have also inched closer to reaching pre-pandemic employment levels, with both Asia and the U.S. expected to rebound by the end of the year.    

While there has been a clear power dynamic shift from employers to employees, further supporting the likelihood of wage increases, research indicates that it isn’t just money workers want — they want their company to invest into important social causes, offer flexibility and focus on nurturing a healthy company culture.