What we know about the wage inflationary channel by Elena Bobeica, Matteo Ciccarelli, Isabel Vansteenkiste published by VOXEU (4/2022).
The recent inflation increase across advanced economies has rekindled a debate about the risk of wage–price spirals. This column looks at pass-through from labour cost to price inflation for the US and euro area countries, and finds that the risk is state dependent. Wage–price spirals are less likely with low inflation and anchored expectations. The pass-through is also shock-dependent, being larger with demand shocks. Finally, the degree of pass-through is linked to secular trends mostly outside the control of central banks.
