Wage-Push Inflation Law and Legal Definition
Wage push inflation is an inflationary spiral caused by rapid increases in wages. It is an inflation caused by increased costs as a result of higher wages. In such situations the increasing wages are not offset by increasing productivity. Therefore the costs rise, which results in higher prices for goods produced. For example, suppose a state raises its minimum wage from $10 per hour to $20 per hour. For paying its workers an employer will have to increase the price of his/her products. This makes the goods and services more expensive. Soon $ 20 will not be sufficient to purchase necessary goods and services and the minimum wage needs to be raised again. Thus the cycle starts over, creating an inflation spiral.
