Employees record real wage losses despite pay rise
The collective wage agreements in 2023 will be characterized by table increases and one-off payments of up to 3,000 euros. However, the Böckler Foundation, which is close to the trade union, believes that many will still have too little left over.
Despite falling inflation and rising collectively agreed wages, many employees will effectively have less money in their pockets this year. According to an analysis by the Institute of Economic and Social Sciences (WSI) of the trade union-affiliated Hans Böckler Foundation, collectively agreed wages will have risen by an average of 5.6 percent in nominal terms in 2023 compared to the previous year. "In view of an expected increase in consumer prices of 6.0 percent for 2023 as a whole, this would result in an average decrease in collectively agreed real wages of 0.4 percent," the researchers explained.
In order to alleviate the consequences of inflation for employees, the German government had agreed with employers and trade unions to provide tax and duty-free collectively agreed special payments of up to 3,000 euros in 2023 and 2024. Taking these one-off payments into account, the financial balance for some employees is likely to be more positive - in some cases, inflation is said to have been exceeded, explained Thorsten Schulten, Head of the WSI Collective Bargaining Archive. However, due to the complexity of the calculations, the inflation compensation premiums could not be "fully" taken into account, according to the WSI.
"The purchasing power of employees covered by collective agreements could be approximately secured in 2023," explained Schulten. "However, the considerable real wage losses of the two previous years remain, which cannot be compensated for within a single round of collective bargaining." In addition, the one-off payments could have a strong dampening effect on wage development in subsequent years, according to the archive manager.
Real wages have fallen sharply in the last two years
In 2021 and especially last year, inflation caused real wages in Germany to shrink sharply. According to the WSI, real wages fell by 4.7 percent last year - "a historically high figure in Germany".
While collectively agreed wages had risen continuously in real terms in the 2010s and the real wage gain amounted to 14% in 2020 according to the WSI, prices rose significantly more than wages in 2021 and especially in 2022. As a result, almost half of the real wage growth was lost again.
In price-adjusted terms, pure collectively agreed wages "are now back at the level of 2016", the researchers explained. However, the situation looks better in many sectors this year due to the tax and duty-free inflation compensation bonuses. The reason for this is that these one-off payments were taken into account in the WSI calculations, but not the taxes and duties saved. This was not possible due to the complexity.
Exception: wage increase in the public sector of 9.8 percent
Instead, the WSI researchers prepared model calculations for individual wage sectors. The result: "If the 'gross-for-net' effect of inflation compensation premiums is taken into account, the collective wage increases in 2023 will be significantly higher in some sectors." In the public sector, for example, there would be an average wage increase of 9.8 percent - three percentage points more than the regular result.
The inflation premiums had also led to "a disproportionately high wage increase for lower wage groups", the researchers added. This was exacerbated by many agreements in 2023 that combined percentage increases with fixed minimum amounts. "The parties to the collective agreement have thus taken account of the fact that the lower wage groups are suffering particularly badly from the high rates of price increases," explained Schulten.
Outlook for the 2024 collective bargaining rounds
With a view to collective bargaining rounds next year, Schulten said: "In view of significantly declining inflation rates, the pressure on the parties to the collective agreement should ease again somewhat in 2024". However, there is still a need to catch up due to the real wage losses of previous years, as according to Böckler calculations, current real wages are back to the 2016 level after three years of decline.
"Rising real wages are also important in order to stabilize the weak economic development in Germany." However, employer representatives warn against overburdening companies financially during the economic downturn.
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Despite the wage increases and one-off payments resulting from collective bargaining agreements in 2023, the Hans Böckler Foundation, an institute affiliated with the trade unions, predicts that many employees will still struggle with insufficient purchasing power due to inflation.
The collective bargaining agreements in 2023 aim to mitigate the impact of inflation on employees through tax and duty-free special payments worth up to 3,000 euros. However, according to the Institute of Economic and Social Sciences at the Hans Böckler Foundation, these one-off payments may not fully compensate for the anticipated inflation rate of 6.0%.
The upcoming collective bargaining rounds in 2024 may see a reduction in pressure due to decreasing inflation rates, allowing for a possible catch-up in real wages, as noted by Thorsten Schulten, Head of the WSI Collective Bargaining Archive. However, the significant real wage losses experienced in the previous years might still require attention, as indicated by calculations from the Hans Böckler Foundation.
Source: www.ntv.de
