ECB Wage Tracker: One-off Payments Behind Wage Growth in 1Q

23 May 2024

By Isabel Teles – FRANKFURT (Econostream) – The recent increase in wage growth in the euro area was due to one-off payments, according to a blog post published on the website of the European Central Bank on Thursday, the same day the ECB wage tracker was updated with data from the first quarter of 2024.

Wage growth in the euro area increased from 4.5% in 4Q23 to 4.7% in 1Q24, putting it back at the level registered in 3Q23, according to the new data.

‘These developments reflect the staggered nature of the wage adjustment process as workers continue to recoup real wage losses from past price shocks, as well as the important role of one-off payments in this process’, the ECB said in the blog post. ‘Such one-off payments are also behind the increase in euro area negotiated wage growth in the first quarter.’

The ad-hoc one-off payments were aimed at compensating inflation developments that were not accounted for in the previous wage agreements, according to the ECB.

‘Euro area negotiated wage growth including one-off payments increased from 1.4% in 2021 to 4.5% in 2023 – with inflation catch-up being a central motive in wage negotiations recently’, the ECB said.

Wage pressures have moderated since 2023 and should moderate further, even with wage growth projected remain be high during 2024, the ECB said.

‘Overall, negotiated wage growth is expected to remain elevated in 2024, which is in line with the persistence that has been factored into Eurosystem staff forecasts and reflects the multi-year adjustment process for wages’, the ECB said. ‘However, wage pressures look set to decelerate in 2024. ECB wage tracker data for the first few months of the year, when most agreements take place, indicate that negotiated wage pressures are moderating.’

New wage data will be available by the June Governing Council meeting, the ECB noted.