Inflation premiums, a higher minimum wage and declining inflation caused the purchasing power of German employees to increase in the spring quarter for the first time in two years – albeit only minimally. From April to June, their gross monthly earnings including special payments grew by 6.6 percent compared to the same period last year, more than ever since these statistics began in 2008. Consumer prices rose somewhat more slowly at 6.5 percent, as reported by the Federal Statistical Office. This results in a slight increase in real wages of 0.1 percent. “They have increased slightly for the first time in a total of two years,” was the conclusion of the statisticians.
At the beginning of the year, real wages fell by 2.3 percent, and in the third and fourth quarters of 2022 by as much as 5.4 percent each. Since then, inflation, which was still 8.7 percent in January and February, has eased noticeably, even if it remains at a high level. According to the statisticians, “the payments of the inflation compensation premium also contributed to the slight gain in purchasing power”. This can be up to 3000 euros and is tax and duty-free. The increase in the minimum wage to twelve euros per hour in October 2022 will also have a positive effect on overall wage growth, according to the statisticians.
According to the Kiel Institute for the World Economy (IfW), it is not yet clear whether real wages will also rise on average over the year. “A slight plus is just as conceivable as a slight minus,” said IfW expert Dominik Groll. “By next year at the latest, nominal wages will in all likelihood rise much faster than consumer prices.” With a bit of luck, the real wage losses that accumulated between 2020 and 2022 could even be made up for.
“In the coming year, however, we would still be a long way from the pre-crisis trend – i.e. the real wage level that would be realistic without the pandemic and energy crisis,” Groll expects. Irrespective of the slight increase in purchasing power, private consumption is unlikely to stimulate the economy for the time being. Real consumer spending in 2023 is likely to be around 1.25 percent below the previous year’s figure, according to the new economic forecast of the employer-oriented Institute of the German Economy (IW Köln).
This is also indicated by the bad mood among consumers: the GfK consumer researchers predict their barometer will fall by 0.9 points to minus 25.5 points for September. “The chances that consumer sentiment can sustainably recover this year are dwindling more and more,” says GfK expert Rolf Bürkl. “Persistently high inflation rates, especially for food and energy, ensure that the consumer climate is currently not making any progress.”
Marginally employed had the strongest increase in nominal wages at 9.7 percent. This is mainly due to the increase in the mini-job earnings limit from 450 to 520 euros per month, which has been in effect since October 1, 2022, as well as the increase in the minimum wage to twelve euros. There was also a sharp increase in wages for part-time employees (+7.2 percent) and trainees (+8.4 percent). The nominal wages of full-time employees rose slightly below average at 6.3 percent: Here, the fifth with the lowest earnings had the strongest wage increases at 11.8 percent.
In the hospitality industry, nominal wages rose particularly sharply in the past quarter at 12.6 percent, as did in the arts, entertainment and recreation sector at 11.9 percent. Employees in the areas of transport and warehousing also benefited from an above-average increase in wages (+10.0 percent). This includes, for example, aviation. “These increases are also due to catch-up effects, since the sectors were particularly hard hit by the lockdown and short-time work during the Corona crisis,” according to the statisticians.