The European Country Phenomenon: Fantastical Wage Increases That Are Illusory

The phenomenon of European countries: Fantastical wage increases but illusory

Jakarta, CNBC Indonesia - Wage increases often feel “illusory” because they are eroded by inflation. However, a more relevant measure is real wages, namely wage growth after deducting price increases.

The latest data from the Organisation for Economic Co-operation and Development (OECD) shows that since 2010, several countries have successfully recorded the fastest real wage growth, reflecting changes in the economic direction.

Wages Still Small Despite Increases Up to 77%

Several countries have experienced fantastical real wage increases, such as Latvia and Lithuania with rises of up to 77% and 67%.

The highest wage increases are dominated by Eastern European and Baltic countries. These wage rises serve as indicators of increased productivity and shifts to higher value-added industries.

Nevertheless, the annual real wages in Eastern European and Baltic countries remain relatively low, especially when compared to Western and Nordic European countries.

Not All Countries Enjoy Real Wage Increases

The phenomenon of wage increases is not evenly distributed worldwide. There are countries that have instead experienced a decline in wages. Greece has seen the largest wage decline (-21.20%), followed by Italy (-7.10%), Ireland (-6.10%), the Netherlands (-5.10%), and Spain (-2.80%).

For these Southern European countries, the decline reflects the prolonged effects of the Eurozone debt crisis and uneven recovery. However, Ireland has other reasons, so this wage decline is not significantly related to the strength of the country’s GDP growth.

On the other hand, although not experiencing a decline in wages, some countries have seen relatively low wage increases.