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

Martin Hoepner, Donato Di Carlo and Anke Hassel

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

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; collective bargaining; competitiveness; energy crisis; growth models (search for similar items in EconPapers)
JEL-codes: E24 F16 J31 J51 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2024-12-06
New Economics Papers: this item is included in nep-eec
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Published in Transfer: European Review of Labour and Research, 6, December, 2024. ISSN: 1024-2589

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