Please ensure Javascript is enabled for purposes of website accessibility Salary vs inflation: Can we keep up? - UK - BNY Mellon

High wage inflation reflects high price inflation and tight labour markets. Some increase in real wages – wages adjusted for inflation – is warranted in a number of countries, partly because the demand for workers is outstripping their supply, but also because real wages have risen slowly for a number of years. Real wages usually rise in line with productivity but, if they fall behind, as they have in many countries over the past decade, the share of the economy devoted to wages falls. That should probably correct itself over time – the shares of national income going to wages and profits tends to be stable over long periods of time. The tricky task for central banks will be to allow some increase in real wages, while simultaneously bringing inflation back to target.

Shamik Dhar, chief economist, BNY Mellon Investment Management

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1290700 Exp: 23 February 2024

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