Moneyzine
Contents
/Careers Guides/Wage Deflation

Wage Deflation

Moneyzine Editor
Author: 
Moneyzine Editor
1 mins
September 26th, 2023
Advertiser Disclosure

Definition

The term wage deflation refers to employee compensation that does not keep pace with inflation or decreases over time. Wage deflation can occur during economic recessions; it may also be caused by technological advances that lower the value of labor.

Explanation

When an economy's growth slows down, the number of unemployed individuals typically increases. As the ranks of the unemployed rise, there is a simultaneous increase in the competition for open jobs. This over-supply of labor will oftentimes result in the lowering of wages, as out-of-work individuals desperately seek employment. As one of the impacts of inflation, if the growth in wages does not keep pace with the rising prices, then wage deflation is said to occur.

In addition to poor economic conditions, wage deflation can also occur when jobs are displaced by technological advances that automate what were traditionally manually-performed tasks. Once again, this competition with automation results in workers willing to accept lower wages to retain their jobs. Employees may also find themselves in competition with domestic or overseas outsourcing solutions that may be cost-advantaged through economies of scale or lower regional wages.

Related Terms

Related Content

  • Is It Worth Pursuing a Master's Degree?
    In an era where education is synonymous with opportunity, many consider pursuing a Master's degree a surefire way to advance their careers. However, is it really the golden ticket to success we've been led to believe?
    March 21st, 2024
  • The gender pay gap, the persistent disparity in average earnings between men and women throughout their careers, serves as a critical measure of wage inequality. This gap underscores the ongoing issue of income disparity, despite the ideal of equal pay for equal work.
    March 14th, 2024
  • 7 Essential Financial Moves After Losing Your Job
    Navigating the stormy seas of job loss? You're not alone.
    February 23rd, 2024
  • The Most In-Demand Skills to Get Hired in 2024
    Every job requires a combination of vital skills, but what skillset is valued most in 2024? As the job market evolves, staying ahead means it’s key to understand and acquire the skills that employers value most.
    April 12th, 2024
  • Key Productivity in the Workplace Statistics for 2024
    In 2023, global employee engagement saw a slight uptick, with 23% of employees engaged, up by two percentage points. However, a sizable 59% are categorized as disengaged, while actively disengaged employees, known as "loud quitting," declined to 18%. These figures highlight the persistent challenge for organizations to cultivate happiness and productivity in the workplace.
    January 31st, 2024

Contributors

Moneyzine 2024. All Rights Reserved.