Is the world economy entering a wage-price spiral?

THE RICH world is used to wages and prices growing slowly. In the decade after the global financial crisis, inflation rarely exceeded central banks’ targets, and wages seemed unable to grow much faster. The spending power of average hourly pay in Britain, Italy and Japan was about the same at the start of the pandemic as it had been in the mid-2000s. The fact that American wage growth averaged 2.9% from 2015 to 2019 while average inflation stayed below 2% seemed a rare triumph.

The recovery from the pandemic has brought about a startling change: prices and wages are both surging. American hourly pay rose by 4.6% in the year to September while consumer-price inflation of 5.4% is more than wiping out those gains. In Germany inflation has reached 4.1% and the main public-sector union is asking for a pay increase of 5%. Wages and prices have even picked up modestly in Japan.