"Trend reversal possible in 2023": Wages no longer keep pace with prices

High inflation in the first three months of the year more than offset wage growth: Real wages fell by 1.

"Trend reversal possible in 2023": Wages no longer keep pace with prices

High inflation in the first three months of the year more than offset wage growth: Real wages fell by 1.8 percent in the first quarter. Already in the past year, the high inflation had eaten up the rise in wages completely.

The high inflation leads to a significant decline in real wages in Germany. According to the Federal Statistical Office, wages increased significantly in the first quarter by 4.0 percent compared to the same period last year. However, consumer prices increased even more strongly in the same period at 5.8 percent. This results in a real, price-adjusted drop in earnings of 1.8 percent.

"Inflation thus more than consumed the rise in nominal wages in the first quarter of 2022," the statisticians summarized the results. As a result, many employees have less purchasing power. The Institute for Macroeconomics and Business Cycle Research (IMK), which is close to the trade unions, assumes that the real wage losses will continue at least until the end of the year.

"A trend reversal is possible in the coming year," said the scientific director of the IMK, Sebastian Dullien. "However, even then, not all real wage losses resulting from the high inflation in 2022 should be made up immediately." It is therefore important that politicians help with targeted relief packages to stabilize the purchasing power of private households. The previous relief packages should noticeably relieve many households of the additional burden of more expensive energy for the current year, but some households such as those of pensioners and students have been left out. "Furthermore, the relief does not yet cover the increased food prices," Dullien said. "Since real wages in 2023 are likely to be below the level of 2021, further one-off government payments are also necessary for the coming year."

Agreed wages also rose by an average of 4.0 percent in the first quarter. This includes collectively agreed basic salaries and special payments determined by collective bargaining agreements. The increase in the areas of "education and teaching" (plus 5.0 percent), "agriculture and forestry; fisheries" (plus 4.9 percent) and "public administration, defence; social security" (plus 4.6 percent) fell well above average percent) off. In these areas, the corona bonuses, which both public employees in the federal states and most state and local civil servants received, were particularly noticeable.

The above-average wage development in the manufacturing industry of 4.8 percent can also primarily be attributed to special payments, especially in the metal and electrical industry. A corona premium was also paid in the construction industry (plus 4.7 percent) at the beginning of the year. Below-average growth in negotiated wages, including special payments, was particularly evident in energy supply (plus 0.7 percent), financial and insurance services (plus 1.3 percent) and water supply and waste disposal (plus 1.9 percent).

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