[2] Wages are an important element in firms’ cost structure. In the services industry, for example, wages account for around 40% of firms’ total cost of production. [3] Thus, changes in wage dynamics are typically significant enough to affect firms’ future pricing decisions. An example of this cost-push view of inflation is the increase in the minimum wage in Germany, which takes effect tomorrow.
And corporate borrowing rates have also come down. The 10-year bond yields paid by investment-grade nonfinancial companies have decreased from roughly 6 percent prior to the recession to below 5 percent currently, again a historic low. Riskier firms have also found the climate for borrowing to be hospitable.