Pay developments: Pay - Q2 2014 (EurWORK topical update)

Snapshot of pay developments

Wage growth slow in most Member States

In the majority of Member States for which data are available, gross wages and salaries have been on the rise in both nominal and real terms; they increased slightly in real terms in the first quarter of 2014, compared with the first quarter of 2013 (Figure 1).  The exceptions are Bulgaria, the Czech Republic, Hungary, Slovakia and Spain.

Figure 1: Gross wages and salaries; Q1 2013, Q1 2014, real Q1 2014

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Source: Eurostat, Quarterly national accounts. Data are seasonally adjusted, and adjusted by number of working days.

In Greece, where there was a major decline in wages and household income during the crisis, a KPMG survey points to a slight improvement in the wage situation compared with 2013. While the majority of companies (58%) have still not increased pay, 75% of companies that have a performance bonus scheme paid those bonuses in 2013, and the outlook for average wage growth in 2014 is – at 2% – more optimistic than in recent years.

Recovery in pay – uneven and unequal

Despite growth in real terms, however, the recovery of wage levels in many Member States has been uneven, and pay differentials are increasing. 

In Ireland, a Central Bank study on pay for new university graduates, ‘On the Slide? Salary Scales for New Graduates 2004-2012’ (443 KB PDF), pointed out that while downward wage adjustments in the overall economy have been small, graduates’ pay has been affected more strongly and they have responded to this situation by leaving the country.

In Poland, a study found that more than half of young workers (57%) receive some of their pay in the form of undeclared wages.  

Meanwhile, in Hungary, workers in the automotive industry and in retail sectors dominated by multinationals earn 25%–33% of the wages of fellow workers in the home countries of these multinationals. These low wages have led to a labour shortage in several professions.

In Norway, the Tariff Board is currently consulting on the extension of six collective agreements to guard against substandard wages and working conditions for foreign workers.

In Finland, the trade union SAK has criticised the high increase of CEOs’ earnings (+55% over four years), in contrast with the pay moderation generally observed in collective agreements.

High wage growth in ICT sector

One sector that is bucking the trend of sluggish or non-existent wage growth is the information and communications (ICT) sector, where scarcity of labour translates into high wages in some countries.

In the Czech Republic, according to the national statistical office (CZSO), the average gross monthly salary for ICT specialists is about 60% higher than the national average. In Malta, a report from independent business strategy consultants MISCO for January–March 2014 states that the ICT sector has recently created a number of new positions, and that compensation packages for IT managers, engineers and database administrators have increased.

In Lithuania, wages are forecast to increase in ICT and in construction. This is due to the recovery of the economy, increasing wages in neighbouring countries and emigration of workers.

Developments in wage-setting

Collective wage-bargaining resumes

Collective wage bargaining seems to be on the rise again (with some notable exceptions such as in Belgium, the Netherlands and Portugal).

In some instances, governments are stepping back from intervening in the wage-setting process. In Luxembourg, after a meeting on 25 June with employers and trade unions, the government announced a return to the full wage indexation system, which had been ‘modulated’ between 2012 and 2014 – adapting it slightly during the crisis. In Hungary, the government followed the recommendation of sectoral social partners in the construction sector regarding the minimum level of hourly overhead rate.

In Germany, the introduction of a statutory minimum wage – as reported in the previous quarter – has already had a positive effect on collectively agreed low wages. In 11 out of the 14 industries concerned, hourly wages are now above the level of €8.50 per hour throughout most of Germany.

In Spain, social partners are starting to discuss a new central salary agreement. It seems that employers support the idea of approving salary increases in sectors that are recovering from the crisis.

Figures from the UK’s Office of National Statistics for 2013 (outlined in a report from June 2014), indicate that union-agreed rates are on average better than non-union agreed rates; moreover, this ‘trade union wage premium’ ranges from 16.9% to 19.8% in the public sector and from 5.8% to 7.0% in the private sector.

Public sector pay freezes coming to an end

Pay moderation and freezes that have dominated the public sector seem to be coming to an end in some countries. In Bulgaria, wage increases have been agreed in the education sector and for the police. In the Czech Republic, pay rises have been approved for civil service employees while in Slovenia negotiations for 2015 continue – although in the context of further reductions in employment. In Romania, public sector employees are set to receive vacation vouchers. However, in Hungary, wage prospects are not promising: in the public sector, only teachers have been awarded a base salary increase.

Statutory minimum wage developments

New debates on minimum wage in Finland and Italy

As reported in quarter 1, the introduction of a statutory minimum wage in Germany has triggered debates in other countries. In Finland, the main employer organisation representing SMEs, Yrittäjät – although not itself not involved in collective bargaining – has called for the introduction of a differentiated statutory monthly minimum wage ranging from €1,000 to €1,500. In Italy, the Jobs Act anticipates the possibility of minimum wages after consultation with social partners.

Discussions take place on minimum wage for 2015

While discussions on the level of the minimum wage for 2015 have only just begun in some countries – for example, Estonia, Latvia and Slovakia – negotiations are advanced in others.

• In Lithuania, the tripartite working group's proposal on minimum wage increases for 2015 has not been accepted.
• In the Czech Republic, social partners and the government have agreed to increase the national minimum wage, with the goal of fixing it at 40% of average wages within the next four to ten years.
• In Poland, the annual 2015 increase is likely to be 4.2%.
• In Malta, the government has announced a one-off top-up to minimum wages.
• In the UK, the debate on the minimum wage has been linked to the issue of a ‘living wage’. The government has asked the Low Pay Commission to assess whether the economy is strong enough to sustain above-inflation rises.

Wage-setting mechanisms for minimum wage debated

In a number of countries, social partners, governments and others are examining the way minimum wages are set.  

• The Polish parliament has debated changing the pay-setting mechanism in the country.
• Ireland’s Deputy Prime Minister Joan Burton has proposed the introduction of an independent Low Pay Commission.
• In April 2014, President of the Spanish Employers’ Circle, Mónica Oriol, suggested that the minimum interprofessional salary should be differentiated by education and training levels.

Spotlight on gender pay gap

Women and men’s expectations of salary in the Czech Republic differ significantly, according to an analysis by recruitment agency Profesia.cz (in Czech). An analysis of over 50,000 CVs found that women ask for considerably lower monthly earnings than men when applying for the same position – by as much as 32% when applying for top managerial positions. 

In the UK, the gender pay gap for full-time employees narrowed in all regions between 1997 and 2013, according to figures recently released by the Office for National Statistics. However, in 2013 the gap increased for the first time in five years, rising from 9.5% to 10%. And, while the two sets of data are not comparable, the gap is much greater between self-employed people, as Acas notes, self-employed women earning 40% less than self-employed men in 2012.

The role of the social partners is investigated in a German study, Kollektive Lohnverhandlungen und der Gender Wage Gap (245 KB PDF), which finds that bigger unions are more likely to introduce measures to review collective agreements for discriminatory elements than are smaller unions and employer organisations.

Government initiatives undertaken to reduce gender pay gap

• In Finland, a government-initiated equal pay plan aims to reduce the gender pay difference to 15% by 2015.
• In the Netherlands, a parliamentary bill proposes strengthening information rights for works councils (in Dutch) by requiring medium-sized and large firms to publish information on the pay of women and men separately in their annual accounts, and to explain the difference.
• In the United Kingdom, the employer organisation the Confederation of British Industry (CBI) published a position paper, Building on Progress (268 KB PDF), calling for a UK target to be set for reducing the gender pay gap. The CBI argues that setting a clear target would raise awareness of the issue and make it possible to measure progress towards that target openly and transparently.

About this article

This article is based mainly on contributions from Eurofound’s network of national correspondents. Further resources on pay developments can be obtained from Eurofound’s European Working Conditions Survey (EWCS), European Company Survey (ECS), and its collective wage bargaining database.

For further information, contact Christine Aumayr-Pintar: cau@eurofound.europa.eu