Real minimum wages will 'barely grow' this year, report suggests

Eurofound reported a reduction of up to 2% in purchasing power among minimum wage earners in over a third of EU countries, including Ireland

Eurofound says that significant losses in the purchasing capacity of minimum wage earners will become a dominant theme this year unless support measures are introduced.

Minimum wage workers in 15 EU countries, including Ireland, reported a decline in their real term wages in 2021, according to a new Eurofound report.

The EU agency’s ‘Minimum Wages in 2022: Annual Review’ studied the impacts of inflation on low-wage earners and was published shortly after the European Parliament and the EU Council agreed that member states would update statutory minimum wages at least every two years.

The report suggests that the agreement is having a positive impact, with Germany deciding to uprate its minimum wage to €12 per hour in October.

The review found that statutory minimum wages increased in most Member States in 2021.

The percentage increase in statutory rates reached 19.5% in Hungary and more than 10% in Lithuania, Estonia, Romania, and Croatia.

Increases ranged between 4% and 6% in Portugal, Spain, and Belgium.

In Ireland, there was a 2.9% year-on-year increase in the minimum wage, rising from €10.20 per hour in January 2021 to €10.50 per hour in January 2022, making it the third-highest in the EU after France and Luxembourg.

However, Eurofound said that inflation has reversed the impacts of these increases.

A reduction of up to 2% in purchasing power among minimum wage earners was found in over a third of EU countries, including Ireland.

“If present inflation trends continue, minimum wages will barely grow in real terms in any country in 2022, and significant losses in the purchasing capacity of minimum wage earners will become a dominant theme – unless the issue is addressed by additional uprates or other support measures for low-paid employees during the year,” the agency said.

Commenting on the publishing of the report, Eurofound Executive Director Ivailo Kalfin said: “This research makes clear that, while there have been substantial nominal changes to minimum wages in several Member States, these are unlikely to be adequately felt in real terms by low-wage earners.

“We must ensure that low-wage earners are as protected as possible from the wide-ranging impacts of inflation across Europe.”