Explanation:

An escalator clause is also known as an escalation clause, where the provision allows for an automatic increase in the wages or prices. The increase in the wages and prices are included in contracts such that they must be activated when certain conditions occur, such as when the cost of living or inflation increases.
The main objective of the escalator clause is to ensure that the people enter long-term contracts without having to worry about the changes in the markets rates in the future that could potentially affect them. The escalation clause is made a part of the contracts so that the contract remains fair and updates itself based on the external criteria.

Generally, labour unions make sure to adopt this criterion as they believe that wages must increase in-line with the rate of inflation, and that must be stated in employment contracts. Such clauses are also seen in business contracts where companies supply goods and services that involve a lot of price fluctuations, such as in the shipping sector that carries oil.