Inflation, Indexation and Real Wage of Non-unionised Workers

In the aftermath of COVID-19 and war on Ukraine, most countries around the world are suffering from high inflation and unemployment. The rise in the price of consumables affect all, but workers with market-determined wages suffer more than those who benefit from institutional wage bargaining. Workers outside union coverage expect fall in both nominal and real wages in the long run. However, inflation raises real wage of non-union workers if high rental return improves nominal wage due to substitution. Partial wage indexation by union workers hurts non-union real wage, but sector-specific capital raises it.