It describes a scenario where higher wages boost aggregate demand, which in turn immediately forces firms to cut wages to maintain competitiveness.

Rising wages increase production costs, prompting firms to raise prices, which then leads workers to demand even higher wages in a continuing cycle.

A wage-price spiral occurs when increased government spending drives up both wages and prices simultaneously, independent of labor market conditions.

The phenomenon where rising wages lead to cost reductions that eventually bring down prices is known as a wage-price spiral.