(Bloomberg) -- Inflation-adjusted wages in Germany will advance at the fastest pace in more than a decade this year, according to a study.
Collective-bargaining salaries will increase 5.5% in 2024, the Institute of Economic and Social Sciences at the Hans Boeckler Foundation — known as WSI — said Friday. That’s a 3.2% rise in real terms, it said.
“The strong real wage increases this year made it possible to compensate for around half of the purchasing power losses of the three previous years,” said Thorsten Schulten, a researcher at the institute that has ties to the Confederation of German Trade Unions.
Salary developments in Germany and the euro area as a whole are currently under particular scrutiny for two reasons: The European Central Bank sees a moderation in still-elevated pay growth as a precondition for sustainably reaching the 2% inflation target and further interest-rate cuts. At the same time, healthy increases are essential to support consumption and a struggling economy.
In the third quarter, negotiated wages in Germany rose 8.8% from a year ago, the quickest rate since 1993, but that pace is unlikely to last and the recent IG Metall key settlement for the manufacturing sector already locked in relatively moderate pay growth for the next two years.
According to WSI, the inflation-adjusted level of negotiated wages is well below the peak of 2020.
“The reduced purchasing power of employees is a key reason for the weak economic development in Germany,” said Schulten. “Even though employees’ incomes have made up ground again this year, there is still a lot of catching up to do.”
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