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Inflation and the response of public wages in the euro area

Author

Listed:
  • Checherita-Westphal, Cristina
  • Vlad, Aurelian

Abstract

This box reviews Eurosystem staff projections of public wages, focusing on their response to inflation. It concludes that, after experiencing a large cut in real terms in 2022, public wages are projected to grow cumulatively over the period 2023-25 at rates higher than inflation. It also shows that projections of public wages reflect substantial heterogeneity at country level. Projected nominal public wage growth is stronger in countries that have experienced high levels of inflation in the recent past, even in the absence of institutional arrangements for automatic price indexation of public wages, but is more restrained in countries with high levels of public debt. JEL Classification: E62, J3, H55

Suggested Citation

  • Checherita-Westphal, Cristina & Vlad, Aurelian, 2023. "Inflation and the response of public wages in the euro area," Economic Bulletin Boxes, European Central Bank, vol. 5.
    • Handle: RePEc:ecb:ecbbox:2023:0005:8
    Note: 1790315
    as

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    More about this item

    Keywords

    fiscal policy; fiscal projections; public 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

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