Wage-price spirals are far scarier in theory than in practice

Rising salaries are a poor predictor of future inflation. Wage-price spirals are far less common than believed and can be driven by the same force: excessive spending in the economy compounded by shortages of both products and the workers to produce them. Overheated economies are worth worrying abou

June 24, 2023 . 2:34 PM

1 min read

Wage-price spirals are viewed as inflationary nightmares, but they are far less common than believed.
In the 1970s, the inflation stems more from successive oil-price shocks rather than from prior wage gains.
Short-term spirals were not followed by a sustained acceleration in wages and prices.
Wages shot up simply because demand for workers outstripped supply.
Overheated economies are worth worrying about regardless of whether prices and wages are feeding on each other.