Wage growth is accelerating in six major eurozone economies, including Germany and France, according to a new salary tracking based on real-time data from online job postings.
The median salary quoted in the ads was 5.2% higher at the end of October than a year earlier – compared to an annual growth of 4.2% in June and more than three times the average of 1.5% for 2019, the first year analyzed by the tracker, a collaboration between the Central Bank of Ireland (CBI) and job search site Indeed.
CBI economist Reamonn Lydon and Indeed economist Pawel Adrjan pointed to “extraordinarily strong” wage growth in Germany, where October posted wages were 7.1% higher than a year earlier. Wage growth in France was 4.7% over the same period.
As workers seek to offset soaring food and energy prices, the European Central Bank is on the lookout for signs of bigger wage increases that could prolong high inflation. Eurozone inflation reached a record 10.7% last month and the central bank fears a 1970s-style “wage-price spiral” could develop if workers and businesses come to expect double-digit inflation.
Wage growth has been more modest in the eurozone than in the United States and the United Kingdom, where unemployment rates are lower and post-pandemic labor shortages more acute. But the ECB expects average wage growth to rise from 4% in 2022 to 4.8% in 2023, reflecting tight labor markets, minimum wage increase in some countries and compensation for rising costs exacerbated by Russia’s war in Ukraine.
Fabio Panettaone of the more dovish members of the ECB’s board, said last week that wage pressures had so far been contained but that the central bank, which has raised interest rates by a record 200 basis points in its last three meetings, had to be “extremely vigilant”.
Paul Hollingsworth, chief economist for Europe at BNP Paribas, said that while there was still little evidence of a price-wage spiral, “we cannot say that the risk has passed” and the hawks of the ECB would be alert to any signs of an increase. inflation begins to influence wage and price setting. He added that a trend of rising industrial action suggested there had been “a shift in bargaining power in favor of workers”.
The tracker is more timely than the latest Eurostat data, which showed in the second quarter the hourly cost of labor has increased 4.0% in the euro zone compared to the period of the previous year. It is less comprehensive, as the proportion of ads citing compensation varies by country. But because the tracker reflects new hires, it is able to capture shifts in the labor market faster than the ECB’s negotiated wage measure – which covers collective agreements that take months to materialize.
France and Germany have raised the minimum wage several times over the past year and offered employers tax breaks for one-off payments to help staff cope with the rising cost of living . Unions have also been increasingly assertive on wages, with industrial action closing oil refineries in France last month and IG Metall in Germany starting warning strikes as he targets an 8% pay rise for nearly 4 million workers.
The new tracker points to 4% wage growth in Ireland and Italy, 3.9% in Spain and 3.8% in the Netherlands, although all have similar inflation rates to Germany, implying a greater decline in living standards. Posted wage growth in the UK, where vacancy rates are higher, has been above 6% since June.
Lydon said the data showed the biggest acceleration in wages had taken place this summer, but pressures were broadening across countries and sectors and appeared increasingly driven by inflation rather than shortages. labor. Although posted wage growth was highest in areas such as food preparation and driving, where employers struggled to recruit, it was now above 3% in more than 60% of occupational categories .
But the researchers also said there were early signs of plateauing or slowing wage growth as the economic outlook deteriorates in some eurozone countries.
Lydon said this slowdown was most visible in higher-paying sectors such as IT and finance, where employers were making a long-term investment when hiring and may be more sensitive to economic uncertainty, and in human ressources.