Three stages must be completed for a fall in unemployment to bring back inflation

For a fall in unemployment to bring back (core) inflation, the following stages must be completed : The fall in unemployment must lead to faster growth in per capita wage s , so employees' bargaining power must be strong enough ; The faster growth in per capita wage s must not be offset by faster growth in per capita productivity (which could be the case if companies want to produce more and are faced with hiring difficulties caused by the fall in unemployment), and unit labour costs must therefore rise faster ; The rise in unit labour costs must lead to a rise in companies’ sales prices; companies mu st therefore have sufficient pricing power, and must not be prevented from increas ing their prices. When we look at the large OECD countries, we see that none of these countries has gone through the three stages that would lead to a rise in inflation.