Wage Push Inflation
- This is an inflation which occurs when trade unions are strong enough to cause an increase in the wages. Especially where there is excess demand for labour due to the competitive nature of the market. The workers may also demand for wage increase due to increased cost of living in the economy.
- High wages would mean higher costs of production and if the increase in wage rate exceeds their increases in productivity, the aggregate supply schedule shifts to the left leading to commodity shortage that will force prices ¬upwards. Besides, the producers will increase the, prices of products in order to cope up with the increased cost of production.