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Wage-price spiral

wayj-PRYS SPY-rul /ˌweɪdʒ praɪs ˈspaɪrəl/

noun phraseC1GRE

formalbusinesseconomics

A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation.

In a wage-price spiral, rising wages increase business costs, leading to higher prices. These higher prices then prompt workers to demand even higher wages to maintain their purchasing power, perpetuating a cycle of inflation.

The story behind the word. This phrase vividly describes a cyclical economic phenomenon. 'Wage' comes from Old North French 'wagier,' meaning 'to pledge.' 'Price' comes from Latin 'pretium,' meaning 'value.' 'Spiral' comes from Latin 'spira,' meaning 'a coil' or 'twist.' Together, they paint a picture of wages and prices chasing each other upwards in a 'coiling' or 'twisting' motion, each pushing the other higher in a continuous, self-reinforcing loop.

Collocations

trigger a wage-price spiral
risk of a wage-price spiral
avoid a wage-price spiral

Example sentences

"Economists fear that current labor shortages could trigger a wage-price spiral, making inflation even harder to control." Economic commentary.
"The 1970s saw concerns about a wage-price spiral contributing to persistent inflation." Historical analysis.
"The central bank aims to prevent a wage-price spiral by anchoring inflation expectations." Central bank policy.

Memory hook

WAGES go up, then PRICES go up, then WAGES go up again, like a never-ending SPIRAL. Wages chase prices

When not to use

Do not use 'wage-price spiral' for a single instance of wages or prices rising. It describes a continuous, self-reinforcing cycle.

Fun facts

The concept of the wage-price spiral is a key component of 'cost-push inflation' theory.

Related words

Inflation, Purchasing power

Explore more words

Expansion, Fiscal Policy, closed-loop, Bubble, Monetary Policy, escalate