Should wages be increased to match inflation? We ask an expert | DW News

Rosalía Vazquez-Alvarez of the International Labour Organisation gives us the numbers and provides an insight into what can be done.

Well yes we’ve heard that it’s something
that’s happening all around the world
workers calling for uh price uh wage
increases amid the price rises so let’s
talk to an expert rosalia vasquez
alvarez from the international labour
organization thank you very much for
joining us and we’ve seen the strikes
today by lufthansa workers as we had
christie talking about just there it’s
an example of many pay strikes recently
just how hard is the rising cost of
living hitting the average worker
okay so for for what we observe in our
data sets we see that erosion of wages
uh real wages is actually happening
everywhere in just about all all the
different countries around the world
just to give you some examples in the us
japan and mexico wages have declined by
two percent in real terms since the
beginning of the year but in countries
like sweden and of the netherlands for
example if we compare wages real wages
from 2020 january 2020 to today we
observe a five percent decline so
clearly what we observe is that wages
are not keeping up with inflation and
this is actually eroding the purchasing
power of families around the world
okay so there is a genuine concern but i
guess it depends on the region as to how
hard it’s hitting but there is the
concern a lot of discussion among
economists about the possibility of a
wage price spiral so when wages go up
workers demand more goods driving up the
cost of those goods
is the fear of rising wages driving
inflation is that justified what would
you say
we wouldn’t say that that’s justified
not according to the data that we see
for example if we look at which growth
across the world in the past 10 years
what we observe these wages have
actually increased by only one percent
if you look at high income countries
that’s even less than one percent but
even more than that what’s the telling
figure is that if you look at
productivity growth and you look at wage
growth there is a growing gap between
the two and productivity growth is what
actually should drive wage growth and
there is actually growing up that it’s
about 10 approximately in terms of a
percentage point so clearly there is no
such thing as a wage price spiral wage
prices parallel is usually associated
with the situation where you have low
unemployment followed by high aggregate
demand followed by high wage demands but
the wage bargaining process it’s
actually been relatively weak in the
past decades so clearly there is no such
thing as a situation where wage prices
spiral may actually drive higher wage
growth and higher inflation rates in
fact inflation is actually driven by the
fact that you have uh
the supply chain
supply chain probably in the process and
that actually is what drives high
inflation but it’s not necessarily true
that the data is telling us today that
there is going to be a an actual wage
crisis going on in the near future
nowhere anywhere in the world okay so
can you give us some good news here just
briefly are things going to get better
anytime soon
well it depends very much on the kind of
combination of
policies that you that you put in place
if you have only uh tight interest rates
tight monetary policy without any other
type of policy going on such as uh
reassuring that wages are actually
keeping up with inflation then clearly
you may actually erode uh wages even
further that will actually decrease
aggregate demand that will have a
significant impact at reducing
employment levels and so that is not
necessarily the case that only thai
monetary policy should be put in place
government has to look into the whole
process and put together policies that
help also
particularly low-income families who are
more hated by inflation that the average
family in the population

 

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