Wage Spirals Flashcards
What is a Wage Price Spiral?
In Macroeconomies, a theory describing wage increases causing price increases which in turn cause wage increases.
Why don’t wage price spirals really occur?
Because “corporate” profits have become so high that they can tank a wage increase
Why has wage price spiral been debunked?
The IMF performed a study on this concept and realized it had little evidence in history
What other reason explains the lack of wage price spiral? Or at least the unimportance of it if minimum wage is tied to inflation?
The core of this is that if minimum wages, or at least minimum wage, is tied to inflation then wages will constantly grow if prices do rise with wages, making it pointless to increase prices since people then gain higher wages to pay for that price inflation
Why will inflation never be tied to wages?
Because then people would never be poor, meaning they won’t be willing to be stuck in cheap work or abusive industries, and shatter a lot of profit margins for employers.
