Wage-Price Spiral Law and Legal Definition
Wage price spiral is a vicious circle process in which rising prices push wages higher and the rising wages in turn increase production costs that lead to further price increases. It is a wages chase prices and prices chase wages kind of situation. The different sides of the wage bargain try to keep up with inflation to protect real incomes. This can happen either due to high aggregate demand combined with near full employment or due to supply shocks, such as an oil price hike.