Wage Deductions to Extend Europe’s Inflation Struggle | – #Wage #Deductions #Extend #Europes #Inflation #Struggle

FRANKFURT, 10 March (Reuters) – “We’ve been short-changed for too long,” Europe’s top unions this year labour makes demands for rights and promises industrial action if these demands are not heard.

165 million euro zone workers, faster than companies’ spending growth prices despite raising profits, it has watched its salaries lag behind inflation for the third year running.

Now, record high employment and widespread labor shortages are giving workers rare leverage — and many see an opportunity to regain some of the spending power lost in past years. Central bank although their superiors sympathize, it also increases their problems.

“Part of the wage increase is understandable,” said Jens Ulbrich, chief economist at the German Bundesbank.

“It’s a partial hold and there’s an increase in economic output,” he said of efforts to reduce inflation from the current 8.5%. labour the share of the fee does not increase. However, these trends point to more sustainable inflation and slow disinflation.

Sharing the euro 20 real per hour from the beginning of 2021 for workers in the country compensation decreased by more than 7%. That, combined with the fact that employment is at a record high — 3.6 million above the pre-pandemic peak — gives them solid grounds for a push for growth.

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However, the current ongoing fast labour fee increase Europe That would hamper the Central Bank’s efforts to return inflation to its 2% target and possibly force it to keep interest rates higher for longer.

Due to the effect of past inflation compensation union demands are of particular concern to monetary policymakers because backward-looking wage setting leads to higher inflation in the long run.

Thousands last summer cancellation Amsterdam’s Schiphol, which has a flight and a waiting time of 4-5 hours Weather The port can be an example of how employees use their power.

FNV, the largest trade union in the Netherlands, last week secured an 8% wage increase for this year and a one-off payment of €2,000, among other benefits, at Schiphol.

“Higher (corporate) profits are largely offset by consumers facing rising prices,” said FNV’s José Kager. “Everything is becoming more expensive, but salaries are lagging behind. “Wages have been lagging for a long time, so it’s time for working people to get their share.”

“We’re taking the first step, but more is needed to reverse years of wage growth,” Kager said.

The deal comes as Schiphol is still forced to curtail traffic below 2019 levels due to staff shortages.

Labor shortages in some of the eurozone’s largest countries are reducing output.

More than half of companies in Germany are struggling to fill vacancies, a record high, despite the recession in Europe’s biggest economy, the German Chambers of Commerce and Industry said.

This gives power to workers and strikes become more widespread.

The United Services Union ver.di approximately 2.5 million federal and local government employees of his salary 10asks for a 5% increase. Weather from ports to public transport, workers have staged warning strikes in response to wage offers worth only a fraction of their demands.

“Inflation trend, food and especially energy prices it creates deep gaps in the budgets of employees,” he said. “Many of them don’t know how to support themselves and their families, and some can no longer afford rent and heating costs.”

Ver.di has already warned that Germany faces “another chaotic summer” if wage deals fail, referring to last year’s debilitating bottlenecks in the service sector.

Meanwhile, on Thursday, most workers at German mail and parcel firm Deutsche Post ( DPWGn.DE ), the parent of DHL, voted in favor of an indefinite strike after demands for a 15% pay rise were not met.

Labor markets in southern Europe are not as tight, and even there movement is evident. In Spain, the percentage of workers covered by collective agreements with indexation provisions has almost doubled in the last two years to over 27%.

In the euro zone, inflation-adjusted wages have fallen since the start of 2021.

Although the much-feared “wage-price spiral” will not continue as inflation is still slowing, price increases will be more sustainable.

This “stickiness” is why markets have rapidly increased their rate hike bets over the past month. Investors now see the peak rate above 4%, up another 1.5 percentage points, which could signal interest rate hikes throughout the summer. offer does.

Philip Lane, the ECB’s chief economist, said the wage adjustment process could put upward pressure on inflation over the next two or three years, but expected a return to normality after that.

“The high wage growth forecast for 2023 and 2024 can be expected, with wages becoming an increasingly dominant driver of core inflation in the euro area,” Lane said.

Commerzbank economist Joerg Kraemer points stubbornly to higher core inflation and further ECB interest rate hikes, suggesting that more expensive labor will reduce material costs. compensation has a less benign view, claiming that he will.

“Unless there is a deep recession, labor will remain unusually scarce, especially in the core countries of the Eurozone, also for demographic reasons,” Kraemer said. “The bargaining position for unions and workers must remain strong.”

Additional by Anthony Deutsch, Chris Steitz, Klaus Lauer, Belen Carreno and Leigh Thomas report; Edited by Mark John and Catherine Evans

Our standards: Thomson Reuters Trust Principles.

2023-03-10 11:55:34
Source – reuters

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