High inflation in Germany has led to historically high real wage losses this year. In 2022, collectively agreed wages increased by an average of 2.7 percent compared to the previous year. Given an expected inflation rate of 7.8 percent for the full year, this results in an average fall in real wages of 4.7 percent, according to data from the wage archive of the Economic and Social Science Institute (WSI) of the Hans Stichting Böckler .
This is a “real loss of wages that is unique in the history of the Federal Republic of Germany,” said the head of the WSI collective bargaining archive, Thorsten Schulten. The huge rise in inflation poses completely new challenges for wage policy, to which it can only respond with some delay. “On the one hand, there were no collective agreements in many sectors in 2022 due to long-term collective agreements. On the other hand, as now agreed, significantly higher rate increases and inflation premiums will often only take effect from 2023,” the expert explains.
Purchasing power loss for the second year in a row
According to the WSI, the average collective labor agreement increase in 2022 is a total of 2.7 percent above the corona years 2020 (2.0 percent) and 2021 (1.7 percent). At the same time, however, it lags behind the wage increases of the two boom years of 2018 and 2019 (3.0 and 2.9 percent respectively). “After 2021, there was a significant loss of purchasing power in collective labor agreement wages in 2022 for the second year in a row,” concludes the WSI.
Significantly higher growth is expected in 2023
Significantly higher rate increases are expected for 2023. This is evident on the one hand from a number of current wage agreements, such as in the chemical industry, in the metal and electrical industry. In addition to percentage increases in tariff payments, these also provide for the payment of so-called inflation compensation premiums, which are tax-free and tax-free up to an amount of 3,000 euros. These deals go into next year and 2024. In addition, there is a tendency towards significantly higher collective bargaining requirements in upcoming collective bargaining negotiations, such as in the public sector (federal and local governments), at Deutsche Post or in the food industry.
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.