FRANKFURT, Germany, June 1 (Xinhua) -- Despite a significant increase in wages, German households experienced a marked decline in purchasing power during the first quarter of 2023. However, economists still expect real wages to fall in 2023.
Data released on Tuesday by the Federal Statistical Office (Destatis) revealed that despite the largest gain in nominal wages since 2008, real wages in Germany, which reflect the purchasing power of wages and salaries, were 2.3 percent lower than a year ago.
The trend observed in 2022 is persisting, as high inflation is expected to significantly offset wage growth for employees, leaving them with limited real income gains, Destatis said.
In 2022, real wages in Germany experienced the third consecutive and most substantial decline to date, falling by approximately 4.0 percent. The rapid rise in consumer prices has been the primary factor contributing to the decline in real incomes since 2021, Destatis said.
In response to falling real wages, several trade unions have demanded high wage and salary increases this year and have largely won them, which may lead to a turnaround in real wages, the Business Insider Deutschland said.
Regardless of the circumstances, the ifo Institute for Economic Research maintained its expectation of a continued decline in real wages this year, extending the trend of successive annual decreases for the fourth year in a row.
Furthermore, even after accounting for government measures and inflation compensation premiums, German consumers' net incomes are predicted to decrease by two to three percent in 2023 compared to 2021, according to a study published by the Hans Boeckler Foundation on Thursday.
"Since we started the year with very high inflation, there could still be a slight drop in real wages on average in 2023," Sebastian Dullien, research director at the Macroeconomic Policy Institute of the Hans Boeckler Foundation, told Reuters. He added that he hoped "it will be much better in 2024."
