This has recently jumped to its highest level since the mid-1970s, a time when inflation in many sectors was compensated for with high prices. Compared to that time, however, the economic situation has changed – and with it the starting point for the talks.Vienna. The background to the high price increases in the 1970s was – similar to today – a military conflict. In response to developments in the Yom Kippur War, some Arab OPEC countries cut oil production. As a result, the price of the important raw material rose massively in many places, and other goods such as food followed suit. In 1975, the annual average inflation rate in this country was around 8.5 percent.
As far as the development and origin of the inflation at that time is concerned, the Wifo inflation expert Josef Baumgartner recognizes parallels to the current situation. Because historically shows that “the phases in which the inflation rate has risen very sharply coincide with phases in which energy prices have risen sharply,” he said in an interview with the APA. Something similar can be observed today with the prices for gas, electricity and fuel, which have risen sharply in the course of the Ukraine war.
Other signs
However, the economist sees other signs for the development of salaries and wages in the present. “Several things came together back then that can hardly be compared with today.” For example, the international integration of the economy and the opportunities for companies to outsource their production to other countries were significantly lower. “There was little or no import competition and the potential threat of relocating to other countries,” Baumgartner explained. In addition, the degree of organization of the trade unions was significantly higher. “All of this makes it much more difficult today to push through higher wages like it was possible in the 1970s.”
In Austria, the 1970s were characterized by significant growth in gross wages for employees. In 1974, for example, according to an analysis by the Economic Research Institute (Wifo), these rose by 16.5 percent year-on-year, and in 1975 by a further 12.2 percent. During this time, collective bargaining agreements of 10 percent or more were not uncommon in many segments. In retail, for example, an increase of 12 percent was achieved in 1974, and in 1975 there was a whopping 13 percent on top.
Austria at that time a “catching-up country”
The IHS economist Helmut Hofer points out in this regard: “Wages are also determined by productivity and it has risen relatively sharply during this time,” he explained to the APA. That is no longer the case to this extent. In addition, “Austria was still catching up at the time”, now it is “a progressive industrial country” in which the wage level is significantly higher.
For this reason, it is more difficult to take into account the high inflation in nominal wages. “Now you also have increased competition, which can lead to a loss of competitiveness,” added Hofer. With imported inflation, as we see it today, there is also the problem that part of the money that consumers pay goes abroad and is therefore less easy to distribute. “The higher I then make the wages, the more I have to take away from the company.”
According to Baumgartner, it is difficult to compare the effects of inflation on people with the current situation – despite the positive real wage development for a long time and higher interest rates on savings. “How the state intervened this year and will intervene next year to cushion these effects was not the case in the 1970s and not to the same extent in the 1980s.” The economist argues that something like an electricity cost brake or similar measures to compensate for inflation did not exist at that time or only to a very limited extent.
In any case, the workers’ representatives at the metalworking shop do not want to be satisfied with the packages that have been decided to cushion inflation: In view of the impending loss of purchasing power, they are demanding a wage and salary increase of 10.6 percent.
Source: Nachrichten
