Wage Growth When Inflation Is High

Jordà, Òscar; Liu, Celeste; Nechio, Fernanda; Rivera-Reyes, Fabián

Journal Article

Wage Growth When Inflation Is High

Abstract: In a tight labor market, workers are able to respond to price increases by bargaining for higher wages. Analyzing conditions since the pandemic shows that, in the recent environment of elevated inflation and low unemployment, wages have become much more sensitive to expected price inflation than in the past. The impact of inflation expectations on wages also appears to have become longer lasting.

Keywords: wage growth; price inflation; inflation expectations; unemployment; covid19;