What are greedflation and wageflation?
Just when you thought you'd wrapped your head around inflation, two more terms enter the economic lexicon


A free daily digest of the biggest news stories of the day - and the best features from our website
Thank you for signing up to TheWeek. You will receive a verification email shortly.
There was a problem. Please refresh the page and try again.
We've heard a lot about inflation in recent years, but we might not be as familiar with two terms that describe phenomena that could be partly driving it: greedflation and wageflation.
"When inflation took off in 2021 in the U.S., so did corporate profits," said The Wall Street Journal. This raised some eyebrows. But just as profit margins are beginning to narrow, "wages are now growing faster than prices," which is "just as problematic for getting inflation down."
What are greedflation and wageflation?
Greedflation is "inflation driven by corporations flexing their power to jack up prices more than cost," the Journal explained. In other words, when the "circumstances of 2021 and 2022 made for a seller's paradise," corporations cashed in. "Pretax margins shot from 15.6% in the fourth quarter of 2019 to 17.9% in the second quarter of 2021," based on the Commerce Department's measure of total value added by corporate businesses.
Subscribe to The Week
Escape your echo chamber. Get the facts behind the news, plus analysis from multiple perspectives.

Sign up for The Week's Free Newsletters
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
From our morning news briefing to a weekly Good News Newsletter, get the best of The Week delivered directly to your inbox.
Wageflation, on the other hand, occurs when wages grow at a faster rate than prices. It's "a precipitous, unexpected and immediate rise in wages based on unique market forces," wherein "employers pay more for the same job and the same level of productivity," Forbes said. While wageflation might be less enraging for the average American, given that it's a win for workers, it's still "a key driver" of the inflation situation we're in right now, per CNBC.
When you apply via our links we may earn an affiliate commission.
How are they relevant to the economy right now?
Greedflation is "on its way out," the Journal said. "Pretax margins, which widened sharply in 2021 and 2022, were roughly back to prepandemic levels in the first quarter of 2023." This is further evidenced by the fact that "margins in six of the S&P 500's 11 sectors were lower in the second quarter than four years earlier," the Journal added.
The trend of wageflation, however, seems to be stubborn. "In the first quarter of 2023, wages and salaries rose to 49.3% of corporate value added, higher than in 2019," the Journal said. Additionally, "labor costs per unit of sales rose 6% in the year through the first quarter, ahead of prices, which were up 5.3% in the same period."
However, the precipitous rise in wages may be leveling off. "Layoffs have skyrocketed nearly fivefold in 2023 across some industries," CNBC said. "The only way to correct for overpaying on base salary is reductions in force … And part of that reduction is layoffs," Lori Wisper, managing director at Willis Towers Watson, told CNBC.
Where does all this leave the economy? We're at a crossroads, said the Journal. "Either profit margins will have to narrow further, which businesses will resist; high inflation will have to continue, which the Federal Reserve is fighting; or productivity will have to boom, of which there is no sign yet. If none of those things happen, then wageflation, like greedflation, will have to go away."
What does this mean for your wallet?
If you're a worker who has benefited from wageflation, you're likely "seeing rising purchasing power," Axios said. However, there's a question of "whether the labor market will be strong enough to keep real wage gains coming as inflation continues to diminish."
As far as how supply and demand constraints are affecting the prices of goods and services, it varies by industry. Supply "seems to be improving, at least for goods," according to the Journal. "Global shipments of automotive semiconductor chips and U.S. auto production in the past few months are finally above prepandemic levels," which has led to rising automotive inventories and incentives.
But at the same time, "demand for services is holding up better," as the "services supply is still constrained," the Journal added. "One reason air travel is so expensive is that airline capacity this year is about 14% below prepandemic trend levels."
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She has previously served as the managing editor for investing and savings content at LendingTree, an editor at SmartAsset and a staff writer for The Week.
Continue reading for free
We hope you're enjoying The Week's refreshingly open-minded journalism.
Subscribed to The Week? Register your account with the same email as your subscription.
Sign up to our 10 Things You Need to Know Today newsletter
A free daily digest of the biggest news stories of the day - and the best features from our website
Becca Stanek has worked as an editor and writer in the personal finance space since 2017. She previously served as the managing editor for investing and savings content at LendingTree and an editor at SmartAsset. Prior to that, she was a staff writer at The Week. She's freelanced for publications including SoFi, Forbes, LendingTree, Finance of America Mortgage, and Policygenius while she earns her MFA in creative writing from Queens University in Charlotte. She currently lives in Valatie, New York.
-
The week’s best photojournalism
In Pictures A steaming volcano, a giant crater and more
By Anahi Valenzuela Published
-
Texas and Yelp are suing each other over crisis pregnancy centers
Talking Point A battle over free speech and abortion rights heads to court
By Joel Mathis Published
-
Dianne Feinstein, history-making Democratic US senator, dies at 90
The Explainer Her colleagues celebrate her legacy as a trailblazer who cleared the path for other women to follow
By Theara Coleman Published
-
How could a government shutdown affect you financially?
The Explainer The status of various food, housing, and loan programs may become uncertain if the government shuts down
By Becca Stanek Published
-
How to catch up on retirement savings
feature It's not too late!
By Becca Stanek Published
-
How to ask for a pay rise to combat inflation
feature Wage growth has overtaken inflation so the chances of getting more money may soon start to recede
By Marc Shoffman Last updated
-
5 tips when retiring amid market volatility
feature In a turbulent market, diversification becomes especially important
By Becca Stanek Published
-
How upgrading your credit card could unlock new perks
feature If you've had the same credit card for a long time, it might be time for a change
By Becca Stanek Published
-
5 psychological tricks companies use to make you spend more
feature Are you getting a good deal, or are you being manipulated by sneaky sales tactics?
By Becca Stanek Published
-
Buying a new car: Why are prices so high?
feature How can you purchase a new car without pressing your budget to the limit?
By Becca Stanek Published
-
The money saver's guide to tipping
feature How to show your appreciation without completely emptying your wallet
By Becca Stanek Published