Real wages fell sharply due to high consumer prices

Real wages fell sharply due to high consumer prices

Wiesbaden Over the past year, real wages have been in Germany dropped more than ever since the beginning of the statistical time series in 2008. The comparatively high inflation of 7.9 percent for the year as a whole completely wiped out the 3.4 percent increase in nominal wages and also pushed the purchasing power of employees into negative territory.

According to preliminary evaluations, the Federal Statistical Office said on Tuesday that real wages had fallen by an average of 4.1 percent compared to the previous year.

The value had been declining for two years during the Corona crisis. In 2020, the use of short-time work initially led to a negative wage trend. Then, in the past two years, the rapid rise in consumer prices has been the main reason for the decline in real wages. Due to a change in the calculation scheme, the Federal Office does not see itself in a position to show the development for individual economic sectors.

For the current year, experts expect a less negative balance. All leading institutes are expecting a decline in inflation. The Kiel Institute for the World Economy (IfW), for example, predicts an inflation rate of 5.4 percent, which is expected to fall to 2.2 percent in 2024. The Federal Ministry of Economics assumes that gross wages and salaries per employee will increase by 5.2 percent in the current year.

Wage increases, some of them significant, were agreed in many sectors. The approximately 3.9 million employees in the metal and electrical industry, for example receive 8.5 percent more money in two steps as well as a one-time payment of 3000 euros net. The union is currently demanding earnings because of high inflation, a wage increase of 15 percent for twelve months for Deutsche Post employees.

Nevertheless, experts are assuming that private consumption will act as a brake on the economy in view of persistently high inflation. The federal government also expects private consumer spending to fall this year in real terms. Nevertheless, the economy as a whole is expected to grow, even if only by 0.2 percent.

More: How much more money will you get in 2023?

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