'Real' wages fell at record speed in Germany last year
Record-breaking inflation in 2022 saw 'real' wages in Germany fall more sharply than at any time since the current statistical analyses began in 2008.
Real wages are salaries which are adjusted for inflation or, in other words, calculated in terms of the number of goods and services that can be bought. Last year, they fell in Germany at the sharpest rate for nearly fifteen years.
Although there was an increase of 3.4 percent for nominal wages in 2022, the record-breaking inflation rate of 7.9 percent completely wiped out the increase as it pushed purchasing power into negative territory.
According to preliminary evaluations by the Federal Statistical Office, there has been an average year-on-year decline of 4.1 percent for real wages.
READ ALSO: Germany sees record post-war inflation in 2022
2022 was also the third consecutive year that real wages declined in Germany. In 2020 the increased use of short-time work - or Kurzarbeit - due to the pandemic, in particular, contributed to the negative nominal and real wage development.
In 2021 and especially in 2022, however, high inflation was the main factor which eroded nominal wage growth.
According to experts, the outlook for 2023 is more positive, as all leading economic institutes expect inflation to fall.
The Kiel Institute for the World Economy (IfW), for example, predicts an inflation rate of 5.4 percent, falling to 2.2 percent in 2024. The German Federal Ministry of Economics expects gross wages and salaries per employee to increase by 5.2 percent this year year.
The economy as a whole is expected to grow in 2023, albeit by only 0.2 percent.
READ ALSO: Which sectors are looking to hire in Germany?
Wage increases - some of them substantial - have also been agreed upon in many sectors. The approximately 3.9 million employees in the metal and electrical industry, for example, will receive an 8.5 percent increase in two steps, as well as a one-time payment of €3,000.
Other sectors, such as the postal service, have been striking for wage increases of 15 percent in response to inflation, while widespread public sector strikes may soon be on the horizon in Germany as unions campaign for a 10.5 percent pay increase for rubbish collectors, kindergarten teachers, nurses, doctors, lawyers and bus drivers - among others.
READ ALSO: Why Germany could soon see widespread public sector strikes
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Real wages are salaries which are adjusted for inflation or, in other words, calculated in terms of the number of goods and services that can be bought. Last year, they fell in Germany at the sharpest rate for nearly fifteen years.
Although there was an increase of 3.4 percent for nominal wages in 2022, the record-breaking inflation rate of 7.9 percent completely wiped out the increase as it pushed purchasing power into negative territory.
According to preliminary evaluations by the Federal Statistical Office, there has been an average year-on-year decline of 4.1 percent for real wages.
READ ALSO: Germany sees record post-war inflation in 2022
2022 was also the third consecutive year that real wages declined in Germany. In 2020 the increased use of short-time work - or Kurzarbeit - due to the pandemic, in particular, contributed to the negative nominal and real wage development.
In 2021 and especially in 2022, however, high inflation was the main factor which eroded nominal wage growth.
According to experts, the outlook for 2023 is more positive, as all leading economic institutes expect inflation to fall.
The Kiel Institute for the World Economy (IfW), for example, predicts an inflation rate of 5.4 percent, falling to 2.2 percent in 2024. The German Federal Ministry of Economics expects gross wages and salaries per employee to increase by 5.2 percent this year year.
The economy as a whole is expected to grow in 2023, albeit by only 0.2 percent.
READ ALSO: Which sectors are looking to hire in Germany?
Wage increases - some of them substantial - have also been agreed upon in many sectors. The approximately 3.9 million employees in the metal and electrical industry, for example, will receive an 8.5 percent increase in two steps, as well as a one-time payment of €3,000.
Other sectors, such as the postal service, have been striking for wage increases of 15 percent in response to inflation, while widespread public sector strikes may soon be on the horizon in Germany as unions campaign for a 10.5 percent pay increase for rubbish collectors, kindergarten teachers, nurses, doctors, lawyers and bus drivers - among others.
READ ALSO: Why Germany could soon see widespread public sector strikes
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