MNI BRIEF:  Pay Catch-Up Set To Spur Strong Wage Growth - ECB

Post-pandemic wage growth has remained relatively moderate but is expected to strengthen significantly in the near term, according to the latest ECB Economic Bulletin. Consumer real wages remain substantially below those pre-pandemic as a result of high inflation, possibly leading to increased negotiated wage demands.

However, government measures to cushion the impact of the Covid-19 pandemic have caused exceptionally high volatility in wage growth indicators, making wage developments much harder to assess, the bulletin pre-releases notes.

“Wage growth over the next few quarters is expected to be very strong compared with historical patterns. This reflects robust labour markets that so far have not been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation. Beyond the near term, the expected economic slowdown in the euro area and uncertainty about the economic outlook are likely to put downward pressure on wage growth.”