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Wednesday, June 19, 2024

Workers in Europe are clamouring for higher wages as inflation continues to soar

The European Central Bank’s primary responsibility is to keep inflation under control. In recent years, the cost of everything from petrol to food has risen to record highs, prompting the bank’s staff to join workers throughout Europe in seeking something that hasn’t been seen in previous years: a significant salary boost.

It seems to be a contradiction, but the European Central Bank is not safeguarding its own employees against inflation, according to Carlos Bowles, an economist at the central bank and vice president of IPSO, a trade union that represents employees. Workers are demanding for a pay increase of at least 5 percent in order to keep up with the record inflationary rise that has resulted from the lifting of pandemic lockdowns across the country. The bank has said that it would not move from its projected 1.3 percent rate rise.

Mr. Bowles, whose union represents 20 percent of the bank’s workers, says that simply will not be enough to compensate for inflation’s effects.

Inflation in Europe, which has been largely calm for over a decade, has erupted in labour contract negotiations as a run-up in prices that began in the spring continues to ripple through the economy and into daily life.

Austrian metalworkers have negotiated a 3.6 percent salary increase for the year 2022. According to Irish employers, they anticipate having to raise salaries by at least 3% in the next year. The new German administration has also boosted the minimum wage by a stunning 25 percent, bringing it to 12 euros (about $13.60) an hour, the country where the European Central Bank has its headquarters.

Hourly wages declined for the first time in ten years in the second quarter compared to the same period a year earlier, according to experts, but they note that government shutdowns and employment furloughs make it difficult to draw a precise picture. European Union earnings climbed by an average of 1.9 percent per year during the decade before the pandemic, when inflation was at its lowest point, according to Eurostat.

The European Central Bank and the Bank of England are expected to discuss the rate hikes this week at their respective policy meetings. Policymakers at the European Central Bank (ECB) have insisted for months that the recent spike in inflation is a temporary phenomenon brought on by the reopening of the global economy, labour shortages in some industries, and supply-chain bottlenecks that cannot last indefinitely, among other factors. Energy costs, which soared by a whopping 27.4 percent in November compared to the same month the previous year, are also projected to fall.

With annual inflation aiming to stay below 2 percent, the European Central Bank has refrained from boosting interest rates to curb rising prices, reasoning that by the time such a policy takes effect, inflation would have reduced on its own.

Officials in the United States, where the government announced on Friday that inflation increased by 6.8 percent in the year through November, the highest rate in almost 40 years, are less certain. In testimony before Congress last week, Jerome H. Powell, the chairman of the Federal Reserve, said that the term “transitory” would no longer be used to characterise how long high inflation would endure. According to him, the Omicron strain of the coronavirus might exacerbate supply bottlenecks and cause inflation to rise.

Workers claim that they have not reaped the benefits of such improvements, and that inflation has made matters worse by causing their buying power to be drastically reduced. Companies, on the other hand, are leery of tying compensation to inflation, a strategy that also makes the European Central Bank concerned, according to the Financial Times.

The cashier at France’s biggest home improvement retailer, Justine Negoce, staged an unprecedented companywide strike in Paris last month to seek a substantial rise as increasing costs ate away at her meagre salary.

“The topic of the buying power of our employees has always been at the core” of the firm’s worries, according to a statement from Sephora. The company claims that just a tiny fraction of employees are striking for greater salaries.

Employees at the European Central Bank have expressed concerns about their personal buying power, despite the bank’s expectation that inflation would begin to decline.

According to a spokesperson for the central bank, the 1.3 percent salary rise scheduled for 2022 is based on wages paid at national central banks and will not be altered in any way.

However, with inflation in Germany already around 6 percent, Mr. Bowles predicts that the bank’s employees in Frankfurt would be impacted particularly hard.

David Faber
David Faber
I am a Business Journalist of The National Era
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