While the minimum wage goes up on paper, in the past year, high inflation has meant that real wages in Germany have fallen by 4,0 percent compared to 2021, a much sharper drop than was previously predicted.

Inflation reduces real wages across Germany

According to figures published by the Federal Statistical Office (Destatis) on Thursday, real wages for workers in Germany have seen the sharpest decline since 2008 and the third negative figure published by the organisation in a row.

Experts had predicted a real wage loss of minus 3,1 percent for 2022, after the first two years impacted by the coronavirus pandemic, 2020 and 2021, saw respective losses of minus 1,1 and minus 0,1 percent.

In simplified terms, real wage losses are calculated by comparing the absolute growth in wages to the increase in consumer prices. 2022, however, saw some changes to the way that these figures are calculated, as smaller companies, full-time and part-time workers, trainees and employees who are partially retired were also considered in the statistics. 

In 2022, employees’ monthly earnings before tax only rose by 2,6 percent on average, compared to the 3,5 percent it would have risen by if calculations had considered the same factors as previous years.

Gas prices sink but consumer prices remain high

In Germany, consumer prices rose by an average of 6,9 percent during 2022, significantly more than wages. "While in 2020 the increased use of enforced short-time work (Kurzarbeit) in particular had contributed to the negative nominal and real wage development, in 2021 and especially in 2022 high inflation ate up nominal wage growth," Destatis authors explained.

This May, several energy suppliers are set to lower their prices to below the 12-cent per kilowatt hour limit set by the gas price cap (Gaspreisbremse), thanks to the fact that prices on the wholesale market have now been down for a few months. While inflation in Germany recently hit its lowest level since August 2022 (7,4 percent), the weekly shop is still the biggest expense for people living in Germany right now, with economic forecasters predicting that it could still be a number of months before food reaches more recognisable prices.

The latest real wage loss figures come with the background music of recurring strikes across Germany. After Deutsche Post won their pay rise battle back in March, strikes continue at German airports and on public transport, with workers and unions demanding a pay rise in line with inflation rates.

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