Germany sees sharpest rise in real wages in over 2 years

  • World
  • Thursday, 30 Nov 2023

BERLIN, Nov. 29 (Xinhua) -- Real wages in Germany in the third quarter (Q3) of 2023 rose by 0.6 percent compared to the previous year, the sharpest increase in over two years, the Federal Statistical Office (Destatis) said on Wednesday.

This continued the trend of wage development from the second quarter of 2023, when a slight increase of 0.1 percent was recorded, according to Destatis. Nominal wages in Q3 rose by 6.3 percent, therefore more strongly than consumer prices.

The "strong increase in nominal wages and the subdued inflation trend led to real wage growth in the third quarter of 2023," Destatis said.

The rise in wages was also due to an increase in the minimum wage to 12 euros (13.17 U.S. dollars) an hour, and an inflation compensation premium paid out by the German government, Destatis said. Until the end of 2024, employers can pay a tax and levy-free bonus of up to 3,000 euros per staff member.

2023 has been a "particularly intensive collective bargaining year ... which was accompanied by sometimes difficult and controversial negotiations with extensive warning strikes," the Institute of Economic and Social Research (WSI) said on Tuesday.

Although there were numerous agreements, negotiations are still ongoing in some large sectors such as retail, wholesale, and foreign trade. According to the WSI, collective pay agreements for almost 12 million employees will expire in the next 12 months.

"By 2024 at the latest, nominal wages are likely to rise significantly faster than consumer prices," said Dominik Groll, head of labor market analysis at the Kiel Institute for the World Economy (IfW Kiel), on Wednesday.

"With a bit of luck, the real wage losses that have accumulated between 2020 and 2022 could then be made up for," Groll stressed. "However, the pre-crisis trend -- meaning the real wage level that would be realistic without the pandemic and energy crisis -- will still be a long way off next year."

Europe's largest economy is on the brink of recession, also because the crucial support of private consumption is missing. Economic institutes and the German government expect the country's economy to continue to shrink in 2023, before picking up again in 2024. (1 euro = 1.10 U.S. dollar)

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