Wages continue to rise sharply. The highest wage increases in thirteen years were agreed in April. Low incomes benefit the most.
Last month, an average wage increase of 3.4 percent was agreed in new collective labor agreements. “We have been seeing wages rise faster every month since spring 2021,” says Jannes van der Velde of employers’ association AWVN.
This trend has various causes, according to the employers. First, the economy picked up considerably after the lockdowns were lifted. In the early period of corona, wage increases were very modest. “After that, there was a shortage on the labor market,” said Van der Velde. Wages rose quickly, especially in sectors with a major shortage of personnel. And recently high inflation has been a reason for higher wage demands.
More agreements are made about cents instead of percentages
low incomes
It is striking that the low incomes benefit more from wage increases than higher incomes. “More agreements are being made about cents instead of percentages,” says Van der Velde. This means, for example, that it is agreed that everyone will receive an additional 100 euros. For low incomes this is relatively a larger wage increase than for higher incomes.
“Slightly more than thirty new collective labor agreements have recently been concluded and agreements have been made in a fifth of those collective agreements about gross amounts. That varies from 30 to 150 euros,” says Van de Velde. A wage increase in percentages is often agreed with a minimum amount as a floor. If the wage increase is less than the minimum amount, it is automatically increased to the minimum amount. Lower incomes benefit more from this.”
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Purchasing power
According to AWVN, employers are aware of the declining purchasing power of their employees. And the economy is doing well and most companies are making decent profits, so there is money for the staff too. But repairing the entire purchasing power through wage increases is not possible, say the employers. “Everyone must make a contribution, employers and employees and the government,” says Van de Velde.
There seems to be no end to wage increases. “The first signs do not point to lower wage increases,” says Van der Velde. Logical now that companies are still running well and screaming for staff. But the future is uncertain, warns Van de Velde. “There is still the shadow of a new corona outbreak in the autumn. People seem to have forgotten that now.”
But even the short term already creates a lot of uncertainty about the strength of the economy. The war in Ukraine is causing high inflation. “And don’t forget the damage caused by the lockdowns in China,” warns Van de Velde. High inflation forces central banks to raise interest rates. The fear is that higher interest rates will lead to an economic recession. If that happens, companies will balk at wage increases.
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