The eurozone can expect “very strong” wage growth in the coming months as wages catch up to galloping inflation, the European Central Bank predicted Monday.
Wage growth expected to be very strong by historical standards in coming quarterswrote the ECB in its monthly bulletin.
The authors predicted “some catch-up between wages and high inflation rates” since 2021, in the wake of the Covid-19 pandemic.
“Robust labor markets” next to it “increases in national minimum wages” and “unions demanding higher wage increases” are also likely to put upward pressure on wages.
In December, inflation in the eurozone fell below 10%,
However, the report explains that “real wages are significantly lower than pre-pandemic” in 2019 as inflation has eroded consumer power, with annual wage growth for the second quarter of 2022 in the Eurozone at -5.2% .
The service sector, which is facing “severe labor shortage”bucked that trend, with wages “above pre-pandemic levels”.
Unions are expected to push for wage increases “particularly in lower wage sectors”.
In Germany, the Verdi union demanded a 15% wage increase of the approximately 160,000 employees of the mail giant Deutsche Post and 10.5% of the 2.5 million federal, state and municipal employees.
The healthy labor market appears poised to accompany further wage increases, despite a likely slowdown in economic growth.
In December, the ECB forecast wages to grow by 5.2% in 2023, after already growing by 4.5% in 2022.
Luis de Guindos, Vice President of the ECB, predicted that wage increases would not lead to a “price-wage spiral”.
In the longer term, the ECB indicated that wage growth would face more constraints, namely “the expected economic slowdown in the eurozone and uncertainty about the economic outlook”, partly due to the ongoing war in Ukraine.
Source: DN
