Since the latest economic and financial crisis, Germany has had an expansive wage policy. Whereas between 2000 and 2008 labour costs and productivity were still moving in line, since 2009 labour costs have increased at a higher rate. At present, indeed, German wage policy is not only more expansive than it was before the crisis, but also more expansive than its counterparts in other Eurozone countries. Between 2008 and 2013 real unit labour costs per employee increased by 4 per cent in Germany as a whole, while there were falls of between 4 and 10 per cent in Ireland, Greece, Portugal and Spain. German wage policy has thus contributed significantly to reducing wage and price divergence in the Eurozone. However, given the limited scope currently available to German exporters’ in their price-setting, the continuation of an expansive wage policy oriented not only on productivity growth but also on the European Central Bank’s inflation target is not to be recommended.
The subject of this Analysis is the forms that wage-price spirals can take and how they influence macroeconomic stability and inflationary trends in Germany.
This analysis examines the connection between collective wage bargaining in Germany and the adjustments to the statutory minimum wage determined by the Minimum Wage Commission since June 2020.