High inflation has pushed real wages down more than ever this year, although tax reform is dampening the decline. This is especially true for people with low incomes. 2023 gets better.
Economic researchers expect paid wages to rise by 3.4 percent in 2022. But the sharp price increases, especially for energy and food, are eating up everything. According to Wifo, net real income would fall by 2.3% if annual inflation were assumed to be 5.8% in 2022.
Thanks to the tax reform (2nd tax bracket will be reduced from July, family allowance will go up) and various government measures to combat inflation, the decrease is reduced to 1.1% (see chart, blue). But it is still the biggest purchasing power decline in twenty years.
Of course, these are average values that affect certain groups differently. “Anyone with a stable employment relationship tends to suffer less from loss of income than those who frequently change jobs,” says Wifo’s Christine Mayrhuber. In general, it is mainly the low earners who feel the loss of purchasing power the most.
Saving less after record high corona
The necessary cost of living in the lowest income third of households accounts for more than they earn. Mayrhuber: “They finance their consumption with savings or with loans.” B. Retirees, transfer recipients and employees in sectors with low collective agreements. Conversely, the savings rate is highest for the top third, even in bad times. The experts assume that after the Corona record, less will be saved this year because there is a backlog of demand, e.g. there are holidays and personal services.
“Less impact on low earners”
The first wage rounds in the spring already showed higher settlements than in the autumn of more than three percent, but “here too the effects on low earners are less” (Mayrhuber). But there are even sectors like the hospitality industry that have decided to renegotiate deals already closed as inflation rises. In the electricity and paper industry, the union is negotiating with demands of more than six percent.
Employers, on the other hand, want only “core inflation” to be taken into account and not to take into account energy price increases. However, higher increases are expected by the pay rounds in the autumn at the latest, so that gross wages per capita will increase by almost 5% in 2023. That would equate to a net profit of more than 3.3% in real terms as inflation falls again. The experts do not currently see the danger of a ‘wage-price spiral’, whereby higher wages lead to even higher prices. Manfred Schumic
Source: Krone
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
