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‘Wage-Price Spiral’ is just another bogus economic theory to keep the rich rich, and the poor poor

Here's what a Wage-Price Spiral actually is - and why it's essentially just the new 'Trickle Down Economics'.


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Over the last few weeks, you’ve probably noticed that the Tories and much of the mainstream media have been warning workers not to demand higher wages because it could supposedly ‘push prices up yet higher’ and cause a so-called “wage-price spiral”.

However, regular Evolve readers will be entirely unsurprised to hear that a ‘wage-price spiral’ is actually a totally discredited economic theory that has absolutely no grounding in our current reality whatsoever.

Basically, it’s just a bogus Capitalist argument to try and brainwash ordinary people against their own interests, so they don’t demand better wages, and so bosses can keep creaming off bigger and bigger proportions of the profits for themselves.

To put it simply, ‘wage-price spiral’ is basically just the new ‘trickle-down economics’ – and here’s why:

The theory of a wage-price spiral is thus:

1) Inflation happens, prices go up
2) Real wages drop
3) People demand higher wages
4) Businesses incur higher labour costs
5) Businesses put prices up to compensate

And repeat ad infinitum, apparently.

But what the theory completely ignores is:

a) Profits have never been higher – meaning many businesses have more than enough money to afford to pay workers higher wages

b) Under our current system of free-market Capitalism, competition between businesses should keep prices low anyway

In addition, if ordinary people don’t have any disposable income, they simply don’t spend – so non-essential businesses suffer. This means that when prices go up, the government needs to ensure that wages go up too so that the economy doesn’t take a nosedive and non-essential firms start going bust due to lack of business.

Yet, at the same time as non-essential businesses are suffering due to people having no money, private firms who provide essential services that we all have to spend money on simply to live – such as oil, gas, water, rail etc – are seeing record profits, and are paying out billions in dividends to their shareholders every year.

The answer is simple. We need to tax this type of monopolised profit far more, or just renationalise essential services and utilities so we can invest the profits back into higher wages and better conditions for workers.

But, as ever, bosses want to keep all the profits for themselves – and the billionaire-owned media’s rush to warn workers not to demand higher wages by warning them about a potential ‘wage-price spiral’ is quite blatantly just self-interested horse shit.

We’ve had almost half a century of bosses getting richer and richer at the expense of ordinary people – it’s time to organise and fight back again.

However, here’s economist Grace Blakeley to explain it better than us:

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