As expected, high inflation is leading to falling real wages in Germany – in the third quarter they are falling more than ever before. According to the Federal Statistical Office, the loss of purchasing power could ease in the coming year.
High inflation is causing real wages in Germany to fall more than ever before. From July to September, gross monthly earnings including special payments grew by an average of 2.3 percent compared to the same quarter of the previous year. “However, consumer prices rose by 8.4 percent in the same period,” said the Federal Statistical Office.
From this it calculated a real drop in earnings of 5.7 percent. “This means that employees in Germany have had to accept a loss in real wages for the fourth quarter in a row,” it said. “Furthermore, it is the strongest and longest-lasting drop in real wages since the time series began in 2008.” Real wages fell 4.4 percent in the second quarter, 1.8 percent in the first quarter and 1.4 percent in the final quarter of 2021.
Many employees are threatened with a loss of purchasing power over the year as a whole. In the coming year, however, the chances are not bad that the decline will be at least significantly smaller. The economists expect that the inflation rate will weaken slightly – from an average of 8.0 percent in the year that is coming to an end to 7.4 percent. In addition, the trade unions in many sectors have also been able to push through strong wage agreements in view of the sharp rise in prices. The approximately 3.9 million employees in the metal and electrical industry, for example, will receive 8.5 percent more money in two steps and a one-off payment of EUR 3,000 net.
The European Central Bank (ECB) wants to prevent prices and wages from mutually oscillating and inflation from becoming entrenched. So far, economists see no evidence of a wage-price spiral in Germany. At 10.4 percent, the rate of inflation in Germany is currently higher than it has been since 1951, because energy has become significantly more expensive as a result of the Russian war against Ukraine. Groceries are now much more expensive.