4  BIS central bankers’ speeches  distribution of returns from the sale of the product does, with workers getting more and shareholders less. Similarly, if employees become more productive and get higher pay as a result, inflation should be stable. In such a case, the higher pay is matched by higher output.
However, inflation pressures occur when remuneration goes up and firms just pass the higher costs on to consumers. With the relative lack of competition in our product markets, that’s typically what happens. The end result is a sustained rise in inflation, which in turn keeps nominal interest rates high and undermines competitiveness.