What is the relationship between wages and inflation?

A wage increase is a good thing, and everybody wants it. However, If the inflation rate increases faster than the wage rate, it a different story. In macroeconomics, there is a theory called Wage-Price Spiral. The theory suggests that, initially, rising wages increase disposable income while consumer goods prices are not changing. Because people have more money to spend, the demand for goods increases. While it is impossible to have a simultaneous rise in supply in the short run, the increase in demand will lead to a price increase for goods, resulting in inflation. The rising prices then put pressure on wages and push wages to increase again. So, in the end, a Wage-Price spiral is formed. It is hard to say whether the wage increase is the cause or an effect of inflation. For example, in the 1970s, people suffered from the Wage-Price spiral caused by the increase in oil prices, which led to inflation. In order to curb this inflation, the Federal Reserve responded by raising interest rates, attempting to stop the spiral. However, this dropped inflation to such a degree that it caused the Double Dip Recession in the 1980s. In the visualization, we can see the wages and inflation increasing in the late 1970s, until slightly before the recession in the 1980s. A similar trend can be observed slighty before the Great Recession Since 2020 Q1, the average wages have increased. However, the inflation rate is snowballing rapidly. We are currently in a Wage-Price Spiral. The Federal Reserve has recently used monetary policies such as raising rates to encourage people to save more when they have disposable income.
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