Inflation and wages; the responses of governments and the demands of workers
This overview article analyses the trends in respect of wages as well as current debates in a context of high inflation in the countries examined in this issue (United States, United Kingdom, Germany, Austria, Belgium, Spain, Ireland, Italy, Sweden). It analyses the causes and changes in inflation since 2021 as well as the redistributive challenges arising therefrom. It then presents the measures taken by states to protect the purchasing power of households, while limiting wage increases. Finally, the article details reactions in the labour sphere in the face of a huge, unprecedented fall in real wages.
Keywords: wages, inflation, public measures, purchasing power, wage-price setting, price-profit setting, redistribution.
Rising disputes, unionization and worker demands in a time of economic uncertainty
The US economy saw declining growth and high rates of inflation in the first half of 2022. In the face of almost full employment, upward pressure on wages has remained strong in the private sector. Meanwhile, a resurgence of disputes and a rise in union membership have allowed unions to occupy a position of strength in wage negotiations in 2021 and especially in 2022. But the policy of rising interest rates orchestrated by the American central bank, as a main pillar of the fight against inflation, may result in a labour market decline and a flipping of the power dynamic to the detriment of workers.
Keywords: United States, inflation, labour market, wages, disputes, unionization.
Chaotic management of the unforeseen and an explosion of conflictuality
In autumn 2021, the UK government predicted rapid growth leading to pressure on the labour market. Before long, the situation would worsen in unforeseen ways. Rising inflation caused household purchasing power to fall, only partially mitigated by a series of varied measures implemented in a hurry. Rapidly rising inflation hands the impetus back to wage demands, which are accompanied by a proliferation of strikes.
Keywords: United Kingdom, inflation, wages, cost of living, strikes.
Inflation outstripping wage negotiations
This article examines the upsurge of demands in relation to wages and working conditions since the end of Covid-19 restrictions in Germany. With the economic forecasts becoming increasingly gloomy, the government has decided to intervene to support households and businesses. Wage increases dominate the trade union agenda, with the aim of securing purchasing power against inflation. But, with the exception of low-wage sectors, they are struggling to fulfill this role. In parallel, the subject of working conditions continues to make inroads, against a backdrop of labour shortages and disengagement, as a defining theme of public sector collective bargaining.
Keywords: Germany, inflation, wages, working conditions, purchasing power.
No reason to hold back in wage negotiations?
At a time of almost full employment and flight of precarious labour to Germany, fuelled by a dramatic increase in that country’s minimum wage, Austrian unions are issuing heightened demands to address price hikes. In response, bosses are arguing for the significant assistance measures implemented by the government to be deducted from the demands, and that energy and food price inflation be excluded... but are backing down in some sectors in the face of worker mobilization.
Keywords: Austria, inflation, wages, wage negotiations, collective action.
Rising nominal wages, ad hoc assistance and loss of purchasing power
Bernard CONTER and Jean FANIEL
Against a backdrop of unusually high inflation, Belgian unions are challenging the law enshrining biannual salary negotiations. Belgium’s automatic wage indexation protects the income of employees and benefits recipients. But it does not prevent the loss of real earnings, and blocks employees from negotiating rises. The government is sticking with the current legal framework, while taking measures to assist households and businesses in the face of price rises, particularly with respect to energy prices.
Keywords: Belgium, inflation, wages, automatic indexation, public measures.
A government grappling with inflation but limited wage disputes so far
Since the summer of 2021, Spain has seen higher inflation than the European average, due to its dependence on other countries for energy. The left-wing coalition government reacted to the consequences of inflation in early 2022 with a classic set of assistance programmes for household purchasing power. The only novelty is a windfall tax, adopted in July 2022. Union organisations consider the government measures to be insufficient, and criticize employers as too reluctant to agree to wage increases. It took until autumn 2022 for union action demanding wage increases to develop.
Keywords: Spain, inflation, purchasing power, public measures, windfall tax, wages.
In the face of falling purchasing power, temporary public measures and insufficient wage increases
The Republic of Ireland is not immune from the inflationary pressure and uncertainty weighing on the world economy. Now in a situation of near full employment, the country is also faced with unprecedented labour shortages and a significant drop in real wages. In these circumstances, temporary public measures, essentially targeted at energy costs, and the outcomes of wage negotiations, ever more frequent since 2020, are proving insufficient to compensate for rising prices.
Keywords: Ireland, inflation, wages, purchasing power, public measures.
A policy of tax bonuses and an absence of wage demands under the Draghi government
This article analyses the public policies implemented by the Draghi government to support household purchasing power (2021-2022), but also the debates seen across public opinion and unions. The policy of tax handouts and bonuses remains the favoured response. Whereas other countries have had debates about wage increases, often accompanied with industrial action, Italy seems untouched by this process.
Keywords: Italy, inflation, wages, purchasing power, bonus.
Mainly budgetary measures to offset rising energy prices and the historic decline of real wages
The surge in inflation triggered by energy prices is causing an unprecedented fall in real wages. Rising energy prices for households and businesses are partially offset by mainly budgetary measures. Some more structural provisions are being put in place: a reform of employment protection combined with collective agreements promoting career transitions; rules limiting access to work permits for foreigners.
Keywords: Sweden, inflation, energy, real wages, public measures, reform, labour market.