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Public wage and pension indexation in the euro area: an overview

Author

Listed:
  • Checherita-Westphal, Cristina
  • Domingues Semeano, João
  • Ahonen, Elena
  • Stinglhamber, Pierrick
  • Van Parys, Stefan
  • Clemens, Johannes
  • Urke, Katri
  • Soosaar, Orsolya
  • Vergou, Maria
  • Flevotomou, Maria
  • Staunton, David
  • Martínez-Pagés, Jorge
  • Avgousti, Aris
  • Zelionkaite, Gintare
  • Delobbe, Olivier
  • Henne, Florian
  • Brusbārde, Baiba
  • Farrugia, John
  • Attard, Juergen
  • Renzi, Fabrizio
  • Savegnago, Marco
  • Prammer, Doris
  • Reiss, Lukas
  • Eijsink, Gerard
  • Italianer, Jip
  • Campos, Maria Manuel
  • Kastelec, Andreja Strojan
  • Palášthyová, Barbora
  • Pisca, Vratislav
  • Kivistö, Jarkko

Abstract

If the responses of wages – both private and public – and of pensions to an increase in inflation lead to second-round effects, this can make an inflationary shock more persistent, especially in the presence of automatic wage and pension indexation. This occasional paper presents an overview of the indexation schemes and other mechanisms for setting public wages and pensions across the euro area countries. It concludes that price indexation of public wages is relatively limited in the euro area, while public pensions are overwhelmingly automatically indexed, either fully or partially, to prices and wages. JEL Classification: E62, J3, H55, E31

Suggested Citation

  • Checherita-Westphal, Cristina & Domingues Semeano, João & Ahonen, Elena & Stinglhamber, Pierrick & Van Parys, Stefan & Clemens, Johannes & Urke, Katri & Soosaar, Orsolya & Vergou, Maria & Flevotomou, , 2022. "Public wage and pension indexation in the euro area: an overview," Occasional Paper Series 299, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2022299
    Note: 1790315
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    References listed on IDEAS

    as
    1. Afonso, António & Gomes, Pedro, 2014. "Interactions between private and public sector wages," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 97-112.
    2. Gyourko, Joseph & Tracy, Joseph, 1989. "The Importance of Local Fiscal Conditions in Analyzing Local Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 97(5), pages 1208-1231, October.
    3. Gonzalo Fernández-de-Córdoba & Javier Pérez & José Torres, 2012. "Public and private sector wages interactions in a general equilibrium model," Public Choice, Springer, vol. 150(1), pages 309-326, January.
    4. Attinasi, Maria Grazia & Berardini, Francesco & Palazzo, Alessandra Anna, 2019. "Do public wages in the euro area explain private wage developments? An empirical investigation," Working Paper Series 2231, European Central Bank.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Bańkowski, Krzysztof & Checherita-Westphal, Cristina & Jesionek, Julia & Muggenthaler, Philip & Frutos, Mario Alloza & Avgousti, Aristoklis & Briodeau, Clémence & Brusbārde, Baiba & Caprioli, Francesc, 2023. "The effects of high inflation on public finances in the euro area," Occasional Paper Series 332, European Central Bank.
    2. András Simonovits, 2023. "Unexpected inflation and public pensions: the case of Hungary," Public Sector Economics, Institute of Public Finance, vol. 47(4), pages 505-520.
    3. Pallotti, Filippo & Paz-Pardo, Gonzalo & Slacalek, Jiri & Tristani, Oreste & Violante, Giovanni L., 2023. "Who bears the costs of inflation? Euro area households and the 2021–2022 shock," Working Paper Series 2877, European Central Bank.

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    More about this item

    Keywords

    and Labor Costs; Compensation; Fiscal policy; Inflation; Social Security and Public Pensions; Wages;
    All these keywords.

    JEL classification:

    • E62 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - Fiscal Policy; Modern Monetary Theory
    • J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
    • H55 - Public Economics - - National Government Expenditures and Related Policies - - - Social Security and Public Pensions
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation

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