If wages were increased to match inflation, “then we risk a wage-price spiral such as this country experienced in the 1970s,” Johnson said in a speech framed as a pivot for the beleaguered leader after surviving a no-confidence vote earlier this week.

Johnson is not the only British policymaker this year to link pay rises with inflation. In February, Bank of England Governor Andrew Bailey said that there needed to be “restraint in pay bargaining,” due to the inflationary potential for pay increases. He later said in May that higher-income workers should “think and reflect” before asking for more money.

These policymakers argue that the idea of a “wage-price spiral” is pointed to as a reason to get inflation under control quickly—otherwise, the theory goes, workers demanding wage increases to preserve their income in real terms will increase costs for companies, which in turn increase prices to compensate, continuing the “wage-price spiral.”

If high inflation persists, price increases become routine and inflationary expectations set in. Central bankers, in order to fight prolonged inflation, may need to hike interest rates—and risk sending the economy into recession.

“We cannot fix the increase in the cost of living just by increasing wages to match the surge in prices,” Johnson said on Thursday. “When a country faces an inflationary problem, you can’t just pay more or spend more.”

1970s stagflation

The U.K. and the U.S. last saw large increases in both consumer prices and nominal wages in the 1970s. The oil crisis of 1973 caused global energy prices to surge, yet inflation in the two countries stayed stubbornly high even after the crisis passed.

Between 1973 and 1982, U.S. inflation barely fell below 5.0%, and at times reached double digits. Inflation in the U.K. followed a similar pattern in the decade after the oil crisis, with an eye-popping 24.2% increase in consumer prices in 1975. Wages increased to match, and at times exceed, the rate of inflation. For example, in 1975, average wages in the U.K. grew by 29.4%, exceeding the (already high) rate of inflation.

Inflation was only curbed by high interest rates. Upon taking office in 1979, then-U.S.-Fed Chair Paul Volcker sharply increased interest rates. Then-U.K. Prime Minister Margaret Thatcher did the same, hiking interest rates to a high of 17% in 1979. While inflation was brought under control, Thatcher and Volcker’s efforts sent the U.K. and U.S. economies into recession—the “hard landing” that today’s central bankers are desperately trying to avoid.

Johnson may be trying to avoid hiking interest rates to that level by hiking them sooner.

“When a wage-price spiral begins, there is only one cure, and that is to slam the brakes on rising prices with higher interest rates,” Johnson said.

Is there a wage-price spiral today?

While wages are growing, they are doing so more slowly than consumer prices.

In the U.S., wages grew an average of 5% in the first quarter, below the 8.5% rate of inflation recorded in March. 

The U.K. Office of National Statistics noted that average weekly earnings increased in the U.K. by 7.0% in the first three months of the year—and by 9.9% in March alone. Remove bonuses from the equation, however, and earnings only increased by 4.2% in the first quarter—below the 7.0% inflation recorded in March.

Economists argue that today’s inflation is driven by high commodity prices, including for energy, and thus not by demands for wage increases.

If supply constraints ease, that might help bring down prices and thus reduce some of the pressure to increase wages. The U.S. Federal Reserve is also acting more quickly to combat inflation than in the 1970s, which may prevent inflationary expectations from setting in.

Other economists point to one significant difference between the 1970s and now: far weaker unions. 

“Back when unions played a much larger role in the economy, many contracts were tied to inflation,” Joe Brusuelas, economist at consulting firm RSM, told Marketplace in May. In the 1970s, at least one in four American workers were part of a labor union. Only one in ten are now.