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Many German employees still face real wage losses in 2023 – WSI
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BERLIN (Reuters) – Despite falling inflation and rising collectively agreed wages, many Germans face a reduction in spending power this year, data from the Institute of Economic and Social Research (WSI) of the Hans Boeckler Foundation showed on Thursday.
BERLIN (Reuters) – Despite falling inflation and rising collectively agreed wages, many Germans face a reduction in spending power this year, data from the Institute of Economic and Social Research (WSI) of the Hans Boeckler Foundation showed on Thursday.
Collectively agreed wages will have risen by an average of 5.6% in nominal terms in 2023 compared to the previous year but in view of an expected inflation rate of 6.0% for 2023, this would result in an average decrease in collectively agreed real wages of 0.4%, the data showed.
“The purchasing power of employees covered by collective agreements could be almost secured in 2023,” said Thorsten Schulten, head of the WSI collective agreement archive, an information centre on trade union policy on collective bargaining.
“However, the considerable real wage losses of the two previous years remain,” Schulten said. While collectively agreed wages had risen continuously in real terms in the 2010s, prices rose significantly more than wages in 2021 and 2022.
The WSI experts emphasized that their calculation for 2023 could not fully take into account the effect of some inflation compensation measures agreed in many sectors.
“For some employees, the financial balance is therefore likely to be more positive,” they noted.
In many collective bargaining sectors, the inflation compensation payments had helped “not only to secure real wages, but also to increase them significantly in some cases”, said Schulten.
“However, as these are one-off payments, they have a strong dampening effect on wage development when they expire in subsequent years,” he noted.
One advantage of inflation bonuses, however, is their social component, as lower wage groups have benefited more from them, he noted.
Regarding collective bargaining rounds next year, Schulten said that in view of significantly declining inflation rates, the pressure for higher wages should ease again somewhat in 2024.
(Reporting by Klaus Lauer, writing by Maria Martinez; Editing by Toby Chopra)
Inflation is the rate at which the general level of prices for goods and services rises, eroding purchasing power. It indicates how much more expensive a set of goods and services has become over a certain period.
Purchasing power refers to the amount of goods and services that can be bought with a unit of currency. It is affected by inflation and wage levels.
Inflation compensation measures are adjustments made to wages or benefits to help employees maintain their purchasing power in the face of rising prices.
Real wage loss occurs when the increase in nominal wages is outpaced by inflation, resulting in a decrease in the purchasing power of those wages.
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