When inflation accelerates, so does the pace at which labor costs increase. The converse, however, is not true; that is, rising labor costs do not lead to inflation. Wage-push theories of inflation ignore the crucial role of money: without excessive money growth, high wages cannot translate into a sustained, general rise in output prices.
Suggested citation: “Wage Trends,” Federal Reserve Bank of Cleveland, Economic Trends, no. 96-08, pp. 08, 08.01.1996.