Where in Europe have wages fallen most?

While governments and central banks often talk about inflation, few citizens have a real understanding of how price increases and fluctuations in the value of money affect their daily lives.

So research by the European Trade Union Institute (ETUI), which says workers in nine European Union member states earned less in 2017 than they did in 2010, may come as an unpleasant shock to many.

Worse, people in six of those countries – Italy, the UK, Spain, Belgium, Greece and Finland – also earned less in 2017 than they did in 2016, according to ETUI’s report Benchmarking Working Europe 2018.

The figures, calculated by ETUI from independent data published in February 2018, aim to reflect the value of earnings – known as “real wages” – after inflation and living costs have been taken into account.

Measuring employment and inflation

The number of employed people in the bloc is calculated by means of the Labour Force Participation Survey. This measures the percentage of working people (roughly those aged 15 to 64 years old) in a country compared to the total population.

One of the biggest problems for workers has been that wages have often stagnated while prices of everyday goods have risen, giving many a pay cut in real terms. The value of home-nation currencies against others can also make buying goods from abroad, including food stuffs and fuel, more expensive. If the value of your currency falls, prices are likely to rise.

This is particularly true if the US dollar is high compared to your nation’s currency as most international transactions are valued in dollars.

Economic crisis and wage growth

The Hans Böckler Foundation, which provides research for the German Trade Union Federation, said last year that the lack of real-wage growth since 2010 “shows that the consequences of the [2008-10] euro crisis are far from over”.

“Real wage levels are still below the crisis-year 2009 level in 10 EU countries,” the Foundation said, adding that Greece, Cyprus, Portugal and Croatia were among those that had suffered most.

It added that, due to higher food and fuel prices over the coming year: “In Italy, Spain, the UK, Belgium, Finland and Cyprus, workers will even have to expect real wage losses in 2017.”

The British example

In spite of this analysis, the Bank of England said in March that UK wages had risen at their fastest rate in more than two years during the three months to December. Some public sector workers are also likely to have above-inflation level pay rises of 6.5% this year.

However, any joy is likely to be dissipated by the fact that for the past seven years public-sector pay increases have been capped at 1% while inflation has increased at an average of about 2.71% over the same period.

Meanwhile, the overall rise in wages in the UK is likely to mean that the country’s historically low interest rates will go up in May. The resulting increase in payments for things like home loans may well offset any happiness that wages have gone up.

According to a New Statesman article, a National Health Service nurse has had a pay cut in real terms of about £3,200 ($4,550) since 2011, while the new pay rise is likely to represent a salary increase of just a third of 1% by 2020-21, if official inflation forecasts are correct.