Inflation Hurts US Workers; Europeans Keep Pace

But higher Europe wages drive up prices
By Clay Dillow,  Newser Staff
Posted Aug 22, 2008 10:20 AM CDT
Workers in the U.S. have seen wages rise only 3.3% against an inflation rate of 4.1%.   (AP Photo)
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(Newser) – Workers in the US are falling behind inflation while their counterparts in the 15-nation Eurozone are keeping pace, in part because of more powerful unions, the Wall Street Journal reports. But rising wages may damage the European economies, as they deter companies from hiring and in turn boost inflation. When wages are indexed to prices, an inflationary spiral is particularly hard to break,  the paper observes.

Eurozone wages were 3.4% higher in the first quarter than a year ago, mirroring inflation, while in the US, wages increased 3.3% against a 4.1% rise in inflation. But while the European Central Bank must keep interest rates high—currently 4.25%, the highest in nearly 7 years—to deter a wage-price inflationary spiral, the US Fed can keep interest rates at a low 2% to rekindle economic growth.