Indexation leads to 2.5% pay rise

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From 1 June 2002, all wages, pensions and benefits in Luxembourg have increased by 2.5%, as result of the country's automatic indexation system.

Luxembourg has an automatic indexation system whereby all wages, pensions and benefits are automatically adjusted one month after the average of the cost-of-living index over the previous six months has gone up by 2.5% (LU9911115F). According to the Central Statistical and Economic Research Service (Service Central de la Statistique et des Études Économiques, STATEC), the six-monthly average of consumer prices exceeded the 2.5% figure on 1 May 2002, and all wages, pensions and benefits have therefore gone up by 2.5% from 1 June 2002.

The employers traditionally claim that the automatic indexation system endangers the competitiveness of the Luxembourg economy, which faces foreign competitors that do not have this'burden'. The trade unions have always argued for the preservation of a system that'provides an absolute minimum, and does not undermine the competitiveness of enterprises because of the contribution it makes to industrial peace.'

In the statement of its programme issued on 12 August 1999 (LU9909111N) by the current coalition government, composed of the Social Christian Party (Chrëschtlech Sozial Vollekspartei, CSV) and the Democratic Party (Demokratesch Partei, DP), the Prime Minister said that he would be maintaining the indexation system in respect of pensions, thereby rejecting a recommendation from theOrganisation for Economic Cooperation and Development (OECD) that Luxembourg should get rid of automatic pension indexation.

As a result of the new index-linked pay rise, the statutory monthly minimum wage for unskilled workers rises to EUR 1,322,47 on the basis of a 40-hour week. The monthly minimum wage for skilled workers rises to EUR 1,598,96.