Of the factors I have mentioned, the second factor -- upward pressure on wages being weak -- and the third factor -- an improvement in labor productivity constraining inflation -- can be  6  understood collectively through the concept of the real wage gap. 1 The real wage gap is defined as the deviation of real wages from labor productivity.
Put differently, a positive real wage gap implies that the rate of change in real wages exceeds that in labor productivity. In such cases, firms must raise their sales prices in order to make up for the labor cost increases, which leads to inflation.