Inflation: The ECB expects a strong increase in wages

Inflation: The ECB expects a strong increase in wages

The European Central Bank (ECB) has forecast a “very strong” wage increase in the European Union in 2023 to offset rising inflation in the old continent since 2021, according to an article published on Monday.

This is news that should please European workers. The European Central Bank (ECB) has forecast a “very large” wage increase in the European Union in 2023 to offset rising inflation since 2021, according to an article published on Monday.

“Wage growth is expected to be very strong in the coming quarters compared to historical averages. This reflects the strength of the labor market, the increase in national minimum wages and some catching-up between wages and high inflation rates,” the ECB underlined on Twitter.

After eighteen months of steady growth, consumer price inflation has fallen back below the symbolic 10% mark. However, European experts recalled that “real wages are much lower today” than in 2019, before the Covid-19 pandemic. The ECB has produced forecasts showing gross wage growth in the euro zone of the order of 4.5% in 2002 and 5.2% in 2023.

In the second quarter of last year, the real annual growth rate of wages in the euro zone was negative at -5.2%. According to the ECB article, this situation could lead unions to “demand higher wage increases in the next round of negotiations”, especially for low wages.

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Wage increase demanded in Germany

In Germany, the Verdi services union is demanding a 15 percent wage increase for all 160,000 employees at Deutsche Post. A pay increase of 10.5 percent was also negotiated for the 2.5 million federal and local employees. For the ECB, the sharply expected wage increases reflect the good state of the labor market, despite the economic slowdown.

In the medium term, “downward pressures” from the economic slowdown linked to the war in Ukraine are forecast to weigh on wage growth again.