The European labor market is in a state of flux, with real wages still below 2021 levels in a third of the countries analyzed. This is a stark reminder of the challenges faced by millions of European households in the face of rising living costs. The COVID-19 pandemic, Russia's invasion of Ukraine, soaring energy prices, and record inflation have all put pressure on wages across the continent. But what does this mean for the future of work in Europe? And what can be done to address this issue? In my opinion, the story of real wages in Europe is a complex one, with a multitude of factors at play. One thing that immediately stands out is the impact of the 2022-2023 cost-of-living crisis. As Andrea Bassanini, editor of the OECD Employment Outlook, points out, real wages were still affected by this crisis even in Q1 2026. This is because sectoral collective agreement renewals do not take place every year and are usually staggered, meaning that negotiated wages have taken time to recover. In Italy, for example, real wages fell by more than 6%, with employers systematically delaying new agreements and the weakening bargaining position of trade unions contributing to this decline. What many people don't realize is that statutory minimum wages have largely kept pace with prices. This is a crucial detail, as it suggests that the issue of real wage decline is not solely due to minimum wage policies, but rather a combination of factors. From my perspective, the acceleration of inflation in 2021-2022 in the eurozone is a significant factor. As Ronald Janssen points out, workers and trade unions saw their bargaining power hampered by job insecurity concerns resulting from several years of stagnating economic growth. This raises a deeper question: how can we ensure that workers' bargaining power is not undermined by external factors such as inflation and economic stagnation? Another interesting angle to consider is the role of productivity. Richard Grieveson and Meryem Gökten from the Vienna Institute for International Economic Studies (wiiw) point to weak productivity and subdued economic growth in Italy as contributing factors to the real wage decline. This raises a broader question: how can we boost productivity and economic growth in Europe to support real wage growth? One thing that stands out is the outlier of Turkey, which recorded the highest real wage growth at 78.6% despite an inflation rate of 32% in mid-2026. This is arithmetically correct but overstates the increase in living standards, as real wages started from a low level in 2021. The main driver of the sharp increase in 2022-2023 was the double minimum wage hikes, largely election-driven. This raises a question about the reliability of Turkey's inflation data, as opposition parties have alleged that the official figures are manipulated. In Hungary, which ranks second at 29.8%, the strong real wage growth over the past five years reflects a combination of structural labor shortages, government wage policies, and a post-inflation catch-up process. This is an interesting comparison to Turkey, as it suggests that government wage policies can play a significant role in real wage growth. Within the eurozone, Lithuania recorded the strongest real wage growth at 14.8%, while no other country saw a double-digit increase. This raises a question about the factors that contribute to real wage growth in different countries. Among Europe's five largest economies, the UK led with an increase of 3.6%, while Germany and France saw less than 1% growth. This raises a question about the role of minimum wage policies in real wage growth, as the UK has a comparatively flexible wage-setting system and persistent recruitment difficulties. In conclusion, the story of real wages in Europe is a complex one, with a multitude of factors at play. From the impact of the cost-of-living crisis to the role of productivity and government wage policies, there are many angles to consider. As we look to the future, it is clear that addressing the issue of real wage decline will require a comprehensive approach that takes into account the unique challenges faced by different countries and regions. Personally, I think that this issue highlights the need for a more flexible and responsive approach to wage-setting, one that takes into account the changing economic landscape and the needs of workers. What makes this particularly fascinating is the role of government policies and the impact of external factors such as inflation and economic stagnation. From my perspective, the key to addressing this issue lies in finding a balance between supporting real wage growth and ensuring that it is sustainable and equitable for all. This will require a combination of policies and initiatives that support productivity, boost economic growth, and protect the bargaining power of workers.
