Wage growth will continue to fuel inflation in the euro zone even after the shocks linked to the Covid-19 pandemic and the war in Ukraine have passed, the chief economist of the European Central Bank estimated on Friday.
Even after the energy and pandemic factors fade from inflationary dynamics, rising wages will be the main driver of rising prices over the next few years, writes Philip Lane in a blog published on the ECB’s website.
As inflation exceeded 10% this fall in the region, the ECB fears that a wage-price spiral could set in, which could derail its scenario of a gradual return of inflation to its 2% target. .
This phenomenon, however, is not being observed at the moment, with the latest contract negotiations having generally resulted in an average salary increase of 3.8% for 2022 and 3.5% for 2023, notes Mr Lane.
In Germany, nearly 4 million employees in the industrial sector, in electronics and metallurgy, obtained on Friday a salary increase of 8.5% over two years.
These increases are certainly seen as higher than normal, but they largely reflect the process of catching up following the fall in real wages that has taken place since the middle of 2021, when the prices of energy and raw materials soared. headline inflation and eroded purchasing power.
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Going forward wages will continue to rise but this should not be interpreted as a permanent change in nominal wage dynamics, according to Mr Lane.
Once the wage catch-up phase passes, we can expect nominal wages to rise at the rate corresponding to the sum of the growth in labor productivity and the inflation target of 2%, he concludes.