During a demonstration in support of striking Royal Mail postal workers in Parliament Square, London December 9, 2022. DANIEL LEAL / AFP
On the ground floor of the European Central Bank (ECB), in one of the huge, cavernous foyers of the forty-one-storey skyscraper dominating East Frankfurt, Germany, Ipso union members hung a poster: “A 7.5% loss in purchasing power. We can do better! The 4,000 or so employees of the monetary institute are protesting the offer of a pay rise of just 4%, while inflation in the country is now over 11%.
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Biting irony that this standoff between unions and employers at the heart of the ECB… In the same tower, on Thursday December 15, its President, Christine Lagarde, warned of the risks of excessive wage hikes across the eurozone. ” [Nous prévoyons] that wages will rise well above their historical average, leading to a rise in inflation over our forecast horizon [de trois ans]. »
The ECB’s concern is the development of a wage inflation spiral similar to that of the 1970s: prices are rising, forcing workers to demand higher wages, forcing companies to raise prices to offset the loss of profits caused by even more inflation… However, the truth is that, like the ECB staff, this spiral is far from materializing.
First blow in a century
On the contrary, Europeans are currently experiencing a sharp decline in their purchasing power – within the euro area, but also across the entire old continent. According to the ECB itself, wages are expected to increase by 4.5% in 2022 and 5.2% in 2023. Inflation is expected to average 8.4% this year and 6.3% in 2023. “I don’t see a wage inflation spiral,” said Frederik Ducrozet, director of economic research at Pictet Wealth Management, a wealth management firm.
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Pavel Adrjan is an economist and works for Indeed, a job advertising website that is present in most of Europe. So he knows in real time how much the recruiters’ salaries are, while the official statistics often come very late – in the eurozone these currently end in the second quarter. “We are seeing wages rising at a historically high level, but remaining below inflation and starting to stabilize,” he notes.
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