Real Wage Erosion from Unanticipated Profit-Push Inflation

An economy experiences a wave of industrial consolidation, leading to a significant decrease in market competition. Consequently, firms across major sectors increase their average profit markup over production costs. If workers' and firms' expectations about future price increases remain stable, what is the most likely immediate impact on the relationship between the inflation rate and the employment rate?

Impact of Deregulation on Inflation and Employment

Impact of Trade Policy on the Inflation-Employment Relationship

In an economy where inflation expectations are firmly anchored, a widespread increase in firms' market power that allows them to raise their profit margins will cause a movement up along the existing Phillips curve, leading to higher inflation at a lower level of unemployment.