Calculating Wage Demands with Past Inflation
A worker is preparing for annual wage negotiations. In the previous year, they received a 3% nominal wage increase, but the actual inflation rate for that year was 5%. For the upcoming year, the worker wants to recover the purchasing power they lost and also achieve a 2% real wage increase. Assuming the worker expects the inflation rate for the upcoming year to be the same as it was in the previous year, what is the total nominal wage increase they must demand? Explain your reasoning.
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A union is negotiating a new three-year contract for its members. The union's goal is to secure a 3% increase in real wages for the upcoming year. Based on economic forecasts, both the union and the employer agree that the inflation rate over the next year is likely to be 4%. To achieve their real wage goal, what is the minimum nominal wage increase the union must demand?
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Calculating Wage Demands with Past Inflation
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