Income and Inflation: Wages rise faster than consumer prices

Wages in Germany once again rose faster than consumer prices in the third quarter of this year. The Federal Statistical Office puts the increase in real wages at 2.9 percent compared to the same period last year. The nominal wage increase of 4.9 percent was offset by a 1.9 percent increase in consumer prices during this period.

Real wages have increased for the sixth quarter in a row. Employees are increasingly making up for the losses in purchasing power from the period of high inflation, especially in 2022. Previously, the Corona lull had also caused real wages to stagnate or fall.

Among other things, the agreed inflation compensation bonuses once again drove wage development. According to the Federal Office, there were above-average nominal increases in retail and vehicle repair shops at 6.9 percent, as well as in storage and transport at 6.4 percent. Things went below average for employees in the energy supply, who only achieved an increase of 2.3 percent during this period.

Catch-up process soon over?

According to labor market expert Dominik Groll, the catch-up process in wages will soon be over. The relationship between fees and prices has largely normalized, says the scientist from the Kiel Institute for the World Economy (IfW).

In the future, wages will have to be based more closely on labor productivity, which has not increased for years amid economic stagnation. The first indication is the most recent collective agreement in the metal and electrical industries with significantly weaker salary increases than in previous years.

Once again, the trend continues that salaries are being increased particularly sharply, especially at the lower end of the wage scale. The fifth with the lowest earnings achieved increases of an average of 7.3 percent. In the top fifth, however, there was only 4.3 percent more wages.

Communication from Destatis real wages Q3/2024