Wage Inflation
Rapid increase in wage levels.
Formula
Real Wage Change = Nominal Wage Change − Inflation Rate
Real World
Amazon warehouse workers in the UK secured pay rises above inflation in 2023, but those increases fed directly into Amazon's labour cost base, illustrating how tight labour markets create a cost-push spiral.
Exam Focus
When evaluating wage inflation, consider both the short-run cost pressure on businesses and the long-run competitiveness impact on export-dependent firms.
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