There are two types of inflation. The first is cost-push inflation. This occurs when production costs increase leading companies to increase prices. This is the primary type of inflation that we've been experiencing since the end of Covid.
The second is demand-pull inflation which occurs when consumer demand exceeds available supply. When you raise salaries on a broad scale in order to try and catch up with cost-push inflation it will often lead to demand-pull inflation because more people have more money to spend.
But raising salaries will always outpace demand-pull inflation. When salaries fail to keep up with inflation it is almost always cost-push inflation that is causing the problem.
No comments:
Post a Comment