IMK: Inflation premium reaches 26 million employees and stabilizes consumption
The German government granted employers in Germany the opportunity to pay their employees an additional inflation bonus tax-free and exemption from social security contributions, up to a maximum of 3000 Euro, in autumn 2022. This measure was intended to alleviate the economic consequences of the Ukraine war. The measure is still in effect until the end of this year.
Labor representatives view the bonus critically. They feared that instead, permanent wage increases would be missing and that companies would limit themselves to a one-time payment.
According to an IMK study, the bonuses managed to stabilize purchasing power "without triggering a price-wage spiral." Therefore, it can be concluded that the special payment "made a significant contribution to the financial relief of many employees, the stabilization of purchasing power in Germany, the reduction of cost pressure through second-round effects on wages, and the improvement of trust in political institutions," write researchers Jan Behringer and Sebastian Dullien.
This was particularly true for the phases of high inflation in 2022 and 2023. According to the study, which is based on the survey of around 9600 socially insured employees in January and February, 69 percent of the interviewees stated that they had received at least one inflation bonus since autumn 2022. On average, they received a total of 1953 Euro. When calculated for all socially insured employees, including civil servants, there were 25.8 million beneficiaries who received a total of 52.5 billion Euro.
Many households were financially relieved by the bonus, according to the researchers. Approximately two-thirds of those who benefited from the payment stated that the premium was a medium or large financial relief for their household. However, 40 percent of those without a bonus were concerned about their situation and 42 percent had no trust in the government. Among employees with a bonus, only 30 percent were concerned and one-third had no trust.
Overall, purchasing power was stabilized through the bonuses: According to the IMK, interviewees with bonuses were less likely to plan to restrict consumption in the future for all surveyed consumption categories. The positive effect was particularly strong in the areas of travel and vacation, leisure time, entertainment and culture, guest house and restaurant visits, and housing maintenance.
However, the IMK also pointed out the "gap," that the bonus will expire at the end of the year. Now, the wage negotiating parties are being asked to ensure wage increases to strengthen purchasing power further, demanded IMK director Dullien. "Because without noticeable growth in private consumption, the German economy cannot free itself from the current stagnation."
- The inflation adjustment premium granted by the Federal Government to German employers in autumn 2022 was intended to mitigate economic consequences resulting from the Ukraine war.
- The Hans Böckler Foundation and the Institute for Macroeconomics and Business Cycle Research (IMK) conducted a study on the impact of these inflation bonuses.
- According to the IMK study, the inflation bonuses managed to stabilize purchasing power without triggering a price-wage spiral, benefiting over 25 million employees in Germany.
- During the high inflation phases of 2022 and 2023, 69% of interviewees in the study reported receiving at least one inflation bonus, with an average payout of 1953 Euro each.
- Employees who received the bonus benefited significantly, with approximately two-thirds stating that it provided medium-large financial relief for their household.
- The IMK study also highlighted that the bonus expiry at the end of the year could leave a "gap" in purchasing power, urging wage negotiating parties to push for wage increases to strengthen purchasing power further.
- The influences of inflation on consumption were significant, as reported by IMK director Sebastian Dullien. Without a noticeable growth in private consumption, the German economy might remain stagnant, he suggested.
