MNI INTERVIEW: Eurozone Workers Losing Bargaining Power
MNI (ROME) - Bargaining power has “slowly but surely” shifted from eurozone workers towards employers in recent quarters and will continue to do so in a labour market that is gradually weakening, though without signs of “falling off the cliff for now", an economist responsible for the Indeed Wage Tracker, closely followed by the ECB, told MNI.
While wages growth is still relatively high, as unions push to recover spending power eroded during the recent inflation bout, indicators like Indeed’s and the European Central Bank’s forward-looking negotiated wage tracker already suggest that the balance is tipping away from workers, Indeed’s Director of EMEA & APAC Economic Research Pawel Adrjan said in an interview.
The private wage tracker has started to see declines “which are fairly consistent across various economies” in the eurozone, like Germany, France and the Netherlands, Adrjan told an MNI Podcast. (Listen here or here)
“When we look at Germany, indicators like salary transparency … you know that was previously rising because salary transparency is something candidates tend to look and demand … that has stopped growing”, he said.
The wage spiral that ECB policymakers feared “doesn’t seem to have materialised,” he said, adding that “tension will shift away from wage growth, trending in the right direction, towards other aspects of the labour market like the slowdown in hiring”.
This gradual labour market deceleration is likely to continue in 2025, but without any abrupt slowdown, Adrjan said, adding that unemployment rates in some European countries “will continue to increase into next year.”
Recent employment reading surveys have tended to be weak in France and Germany, though the eurozone overall has held up better, he said. (See MNI INTERVIEW: ECB Agrees On Gradual Cuts To Neutral - Centeno)
The Indeed Wage Tracker shows French wage growth below 2%, in line with pre-pandemic levels, while the eurozone as a whole saw a 3.4% annual rate in October job postings.
END OF LABOUR HOARDING
Record labour force participation was in part “probably driven by labour hoarding,” Adrjan said, noting that many firms calculated that past economic weakness was temporary.
“If price increases are eroding the cost of labour, then why not hold on to your workers or why not even hire new ones?” he said, adding that a fall in hiring showed that hoarding was already dissipating.
Other factors pushing participation higher included more women joining the labour force and a decline in the working age population in some countries. But unemployment is now likely to rise somewhat and those who who leave the market could find it harder to re-enter, Adrjan noted.
It is still hard to discern any impact of global trade uncertainty in the labour market, following threatened tariffs by U.S. President-elect Donald Trump, he said, noting that while weaker manufacturing rather than services PMIs would be in line with the likely greater impact of tariffs on physical goods trade, real labour market data does not point to any divergence across sectors.