Productivity Improvements and Markup Normalization Can Support Further Wage Gains without Inflationary Pressures

Vaishali Garga, Giovanni Olivei and J. Christina Wang

No 2024-5, Current Policy Perspectives from Federal Reserve Bank of Boston

Abstract: Wage inflation remains higher than it was before the onset of the COVID-19 pandemic, raising concerns that it could hinder progress toward a return of price inflation to the Federal Reserve’s 2 percent target. The impact of wage inflation on price inflation, however, cannot be considered independently of the behavior of productivity and firms’ markups. In that context, there are scenarios in which wage inflation could stay above trend for a few more quarters without contributing to higher price inflation.

Keywords: wage inflation; productivity (search for similar items in EconPapers)
JEL-codes: E24 E31 E39 (search for similar items in EconPapers)
Pages: 10
Date: 2024-06-27
New Economics Papers: this item is included in nep-eff, nep-mac and nep-mon
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