The key question of indexation of wages to prices

In the United States and the euro zone, prices follow unit labour costs. But since the late 1990s, wages have only been very imperfectly indexed to prices. So there was no longer a price-wage loop, and a price shock (due for example to rising commodity prices) no longer triggered high and lasting inflation. But if today wages were to be re-indexed to prices, we would find ourselves back in the situation of the 1970s and 1980s, with the risk of lasting inflationary trends. It is crucial to know today whether wages are still weakly indexed to prices or whether they have re-indexed to prices (whether they will become re-index ed to prices). In the first case, inflation will be much lower and less long-lasting than in the second case. Recent developments show that the under-indexation of wages to prices seems to persist, both in the United States and the euro zone, which is reassuring in terms of the risk of a sharp and lasting rise in inflation.