Smallest collectively agreed wage increase recorded in twenty years

17/01/2006 14:00

CCollectively agreed wage rates rose 0.8 percent in 2005, as against 1.3 percent in 2004. It is the smallest collectively agreed wage rise since 1984. The downward trend set in in 2002 and reached a trough in April 2005 (0.5 percent). In the latter half of 2005 wages began to rise again and in the fourth quarter of 2005 a wage rise of 1.1 percent was recorded.

Collectively agreed wage increase dips under inflation rate

In 2005, the increase in collectively agreed wages dipped under the level of inflation, unprecedented since 1996. In the period 1997-2004, the annual collectively agreed wage rise was on average 0.6 percent above the inflation rate. Last year, the inflation rate of 1.7 percent was no less than twice the collectively agreed wage rate. This does not imply that employees’ incomes as such were falling. After all, actual wages are also affected by differences in employees’ social insurance contributions (including contributions to pension schemes), wage levies and private circumstances.

Collectively agreed wages, 1996-2005
Collectively agreed wages, 1996-2005

Smallest rise in public sector

Collectively negotiated wages in the private sector as well as in the subsidised sector rose by 0.8 percent. The lowest wage rise was recorded in the public sector (0.4 percent). This was also the case in 2004.

Increase wage costs well below 2004 level

Contractual wage costs obviously did not increase at the same rate as in 2004, namely 1.3 percent in 2005, only half the rise over 2004. A positive difference between the rise in contractual wages and collectively negotiated wages is an indication that employers’ premiums for social costs rise faster. The difference dropped to 0.5 percent in 2005 and is now in the same range as in 2002 and 2003. In 2004, the difference was relatively high, but in 2005 it decreased again, mainly due to a reduction in employer-paid disablement benefit contributions.

Increase collectively agreed and contractual wage costs, 2001-2005
Increase collectively agreed and contractual wage costs, 2001-2005

Most substantial rise in wage costs in public sector

Just like in 2004, the most substantial rise in wage costs (1.7 percent) was found in the public sector. The smallest rise in wage costs was found in the private sector; the smallest gap between collectively negotiated wages and wage costs (0.3 percent) was also recorded in this sector. Just like in 2004, the largest gap was found in the public sector. In 2005, the increase in wage costs in the public sector topped the increase in collectively negotiated wages in this sector by 1.3 percent. This is mainly due to higher employer-paid contributions to pension schemes.

Increase collectively agreed wages and contractual wage costs by sector, 2001-2005
Increase collectively agreed wages and contractual wage costs by sector, 2001-2005

Nathalie Peltzer