Shielding competitiveness: Germany’s wage policy during the inflation shock years in comparative perspective

Martin Höpner, Donato Di Carlo and Anke Hassel
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Martin Höpner: Max Planck Institute for the Study of Societies, Cologne, Germany
Donato Di Carlo: London School of Economics, European Institute, UK
Anke Hassel: Hertie School, Berlin, Germany

Transfer: European Review of Labour and Research, 2024, vol. 30, issue 3, 299-317

Abstract: We analyse wage developments in Germany during the inflation shock years of 2021–2023 from three perspectives: cost of living, supply-side cost pressure, and relational. With an export-led growth model, Germany is dependent on a favourable real effective exchange rate. Because of its above-average exposure to the energy crisis and low unemployment, Germany was particularly vulnerable to strong wage demands, putting at risk its cost competitiveness. In response to the inflation crisis, moderate collective bargaining outcomes have resulted from widespread use of one-off payments, longer duration of collective agreements, and ‘zero-month’ clauses, which have delayed wage increases. As in all other eurozone countries, employees have suffered real wage losses, but nominal wage increases at the lower end of the labour market fared better than average. Major competitiveness shifts have occurred in the eurozone, particularly to the detriment of Eastern European countries and the Baltics, but not Germany.

Keywords: Germany; energy crisis; growth models; competitiveness; collective bargaining (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:sae:treure:v:30:y:2024:i:3:p:299-317

DOI: 10.1177/10242589241300114

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