Wage-price spiral

The wage-price spiral describes a dynamic where rising wages and salaries go hand in hand with rising prices. Wage negotiations usually aim at wage increases that offset at least inflation. If inflation is high, wage increases tend to be similarly high. Companies then include the higher wage costs in their prices. As a result, prices go up, which pushes up inflation further. Rising inflation, in turn, leads to higher wage demands. By contrast, there is also the term price-wage spiral.