Wage growth in Eurozone it is expected to be “very strong” this year, breaking historical records and partially reversing inflation, which has collapsed since 2021, according to the article. European Central Bank (EKT) published today.

“Wage growth in the coming quarters is expected to be very strong compared to historical trends,” said the authors of an article published in the monthly bulletin of the monetary institution.

This increase will reflect “some convergence between wages and inflation growth” seen since 2021, they note.

in the Eurozone, annual consumer price growth fell below 10% in December after a year and a half of continuous improvement.

But due to the erosion of wages by prices, “real wages are much lower today” than they were in 2019, “before the Covid-19 pandemic,” the authors of the article explain.

According to their article, in the second quarter of 2022, the annual growth rate of real wages was negative at -5.2% in the euro area.

The authors add that this could lead to unions “demanding larger wage increases in future rounds of negotiations”, especially in low-wage sectors.

In Germany, the service workers’ union Verdi is currently demanding a 15% pay increase for about 160,000 employees of the postal giant Deutsche Post and 10.5% for 2.5 million state and local civil servants.

EKT estimates that a significant increase in wages will also reflect the good state of the labor market, despite the economic downturn.

Eurozone gross wages rose by 4.5% in 2022 and are expected to rise by 5.2% this year, according to the latest ECB forecasts.

In the medium term, “downward pressure” will again affect wage growth due to the economic downturn and uncertainty amid Russia’s war in Ukraine, the authors of the ECB document conclude.

Source: APE/MEB