Huge real wage losses across Europe

authorsdiary13 August 20221 Mins read85 Views

According to a study, significant real wage losses for employees in all EU countries are likely this year due to the high inflation rate. The study was carried out by the union-related Institute for Economic and Social Sciences (WSI) of the Hans Böckler Foundation. According to this, the development of effective gross wages across the EU should be 2.9 percent lower than price increases. "A process that is unique in the past decades," is the conclusion of the study.

Is there a wage-price spiral?

In Germany, too, there is a risk of real wage losses of this magnitude. The authors do not see the danger of a so-called wage-price spiral, as there is still wage restraint: "In view of the continued restrained development of nominal wages, there are no signs of overheating wage dynamics, which in turn could increase inflation. "

According to data from the EU Commission, real wages in Germany rose by just 3.4 percent last year. The increase in wages is therefore well below the general increase in prices. For the current year, a similar development is emerging for Germany as a whole. And the EU-wide growth in nominal wages is likely to "remain moderate" at an expected 3.7 percent.

High payouts to shareholders

At the same time, many companies reported strong profits and distributed billions in dividends. The current year could therefore be characterized by a redistribution at the expense of employees, as the study authors Malte Lübker and Thilo Janssen write. This leads to a higher share of corporate and property income in national income.

Against this background, high wage demands in sectors with good profit development are quite justified and can also be coped with by the companies. For both Germany and the European Union, there is an overall economic potential for wage increases of around six percent.

According to the researchers, the state also has a special responsibility to cushion the social and distributional effects of inflation. This could indirectly alleviate the pressure of expectations on the bargaining parties.