"Germany, real wages will increase by 3.2%" - The increase will compensate half of the losses of purchasing power
Inflation-adjusted real wages in Germany will advance at the fastest pace in more than a decade this year, according to a study.
Collective bargaining wages will increase by 5.5% in 2024, the Institute of Economic and Social Sciences at the Hans Boeckler Foundation said. This is an increase of 3.2% in real terms, he said.
"Strong real wage increases this year made it possible to offset about half of the purchasing power losses of the previous three years," said a researcher at the institute linked to the Confederation of German Trade Unions.
Wage developments in Germany and the eurozone as a whole are currently under particular scrutiny for two reasons. On the other hand, the European Central Bank sees a moderation in the still high wage growth as a prerequisite for reaching the 2% inflation target and further lowering of interest rates. At the same time, healthy growth is essential to support consumption and a struggling economy.
In the third quarter, negotiated wages in Germany rose 8.8% from a year earlier, the fastest rate since 1993, but this pace is unlikely to last and IG Metall's latest key resolution for the manufacturing sector already is locked in relatively moderate wage growth for the next two years.
According to the Institute of Economic Sciences, the inflation-adjusted level of negotiated wages is significantly below the 2020 peak.
"The reduction in the purchasing power of employees is a major reason for the weak economic development in Germany. Although employee incomes have increased this year, there is still a lot of work to be done," the Institute announced.
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