Wage developments during and after the high inflation period

Colm Bates, Katalin Bodnár, Peter Healy and Marc Roca I Llevadot

Economic Bulletin Articles, 2025, vol. 1

Abstract: This article describes developments in wage indicators during and after the high inflation period. It illustrates that, following high volatility during the pandemic, all wage indicators recorded levels well in excess of historical averages in 2023-24. The drivers of wage growth, namely inflation, labour market tightness and productivity growth, also developed differently from how they have developed in the past, and there is a need to reassess how they are reflected in wage developments. Using the augmented wage Phillips curve we find that the inflationary shock was the main driver of wage growth dynamics in the period under investigation, while labour market tightness supported workers in recovering real wage losses. We illustrate the link between wage growth and inflation in the euro area through the lens of the Bernanke-Blanchard model. ECB wage tracker data confirm the important role of catching up in recent wage growth and point to labour market institutions having a strong role in the speed of pass-through of prices to wages. Meanwhile, wage pressures are expected to ease as real wage catch-up becomes less significant and labour demand eases. JEL Classification: E24, J30, J52

Keywords: compensation per employee; wage Phillips curve; wages (search for similar items in EconPapers)
Date: 2025-02
Note: 2881411
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.ecb.europa.eu//press/economic-bulletin ... 2~05fb781826.en.html (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbart:2025:0001:2

Access Statistics for this article

More articles in Economic Bulletin Articles from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().