German Wage Gains at Decade High Raise Hopes for Economy

(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 agreements between January and June point to a 5.6% jump for 2024 as whole, the Institute of Economic and Social Sciences at the Hans Boeckler Foundation — known as WSI — said Tuesday. That’s a 3.1% rise in real terms, it said.

While salary developments in Germany and the the euro area have been under scrutiny as the European Central Bank weighs how quickly to cut interest rates, healthy pay increases are essential to support an economic recovery following the inflation shock.

Strong real wage increases this year “will clearly compensate for the massive real wage decline in 2021 and 2022, and the small minus in 2023,” said Thorsten Schulten, a researcher at the Hans Boeckler Foundation, which has ties to the Confederation of German Trade Unions.

“Collective-wage developments still have a lot of catching up to do,” he said. “Significant real wage increases also make economic sense in order to stabilize economic development.”