Inflation-proof wage rises
Audio 03:32
In a context of returning inflation, wages are skyrocketing in some countries.
Getty Images - PM Images
By: Dominique Baillard Follow
3 min
In the United States, as in other developed countries, wages are skyrocketing.
In the context of a return to inflation, we wonder about the nature and consequences of this improvement.
Will it fuel the rise in prices as was the case in the 1970s?
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This wage improvement is very clear in the United States and the United Kingdom.
On the eve of the end of the year holidays, Amazon is intensely looking for help to deliver the gifts and therefore offers hyper tempting conditions with bonuses of $ 3,000.
These bonuses are in addition to salaries of between $ 18 and $ 22 per hour, well above the base salary of around $ 15.
British employers are also offering record hiring bonuses and Boris Johnson's government is pushing for wage increases.
In Germany, the future coalition government is on the same line, it wants to boost the minimum wage by 25% and the unions are now negotiating to obtain a 5% increase in construction, banks or the public service.
In these countries, inflation is high, from 4 to 5%.
Is this the driving force behind this wage improvement?
Wages are rising mainly because of the lack of job demand: unemployment is low and labor shortages are increasingly acute.
In the United States, wages rose more than 5% year on year according to the latest figures for September.
Unheard of since 1982. A record increase after decades of sluggish wage growth.
But beware, in real terms, there is not really a significant improvement in the income of employees, it is rather a catching-up after the reductions that occurred in 2020 because of the confinements.
The increases mainly benefited low wages, people working in personal services and logistics, two activities that are exploding with the rebound in consumption.
But it is not yet a pendulum swing favorable to all employees.
This is also true for Germany where unions have always sacrificed wages to preserve jobs.
They are asking for increases of 5% while inflation is at 4%, a demand after all relatively moderate.
But employers believe it could lead to an inflationary spiral
They remember the years 70-80, when the joint rise in prices and wages ended up causing recession. In the background, the barrel of oil was blazing and today the prices of gas and electricity are soaring. Employers claim that if they increase wages, they will lose room for maneuver to invest and that this will break growth. The IMF, and of course the central banks, are very concerned about this risk, especially since this infernal spiral, a bit like the progression of Covid-19, is very difficult to predict and even more difficult to control.
On the other hand, market analysts are much less alarmist.
Because, in most developed economies, companies have achieved productivity gains during the pandemic: they have done just as well with fewer employees.
They therefore have room for maneuver to increase wages without cutting back on their investments, and even on their profits!
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Otherwise the Chinese markets are gloomy today.
They are trending downward, because of the surge in Covid-19.
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Employment and Work