Are wage demands always driving inflation? Three measures to prevent this

public service strikes

Will wage increases keep driving prices up and will we never get rid of inflation?

(Photo: IMAGO/Eibner)

Berlin It’s a warning sign. The Verdi union negotiated a wage increase of 11.5 percent for Deutsche Post employees on average. At the same time, inflation in Germany remains high. The wage increase at the post office, albeit spread over two years, should not be the last of this magnitude. Will wages keep driving prices up?

That’s what British economist Charles Goodhart fears. “The new normal for inflation will be three and a half to four percent,” said the former central banker in an interview with the Handelsblatt with a view to demographic change. When the baby boomers retire, the labor shortage will increase. They can push through higher wages. Companies compensate for this with higher prices.

But that doesn’t necessarily have to be the case. Not every salary increase results in higher consumer prices. Social partners, politicians and society would have to implement three measures so that Germans can earn more money without conjuring up an era of inflation.

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