Watch the webinar - #AskTheExpert: How to help workers struggling with inflation?

After a long period of price stability, inflation has made a remarkable comeback in the EU. In the aftermath of the COVID-19 pandemic, the energy crisis spurred by Russia’s war of aggression against Ukraine and the disruption of the international supply chain, among other factors, have driven up the prices of commodities and goods. While nominal wages picked up in 2021 and 2022, real wage growth has remained below inflation, affecting mainly low-income groups. Even though EU institutions expect inflation to slowly decline by 2025, many collective bargaining rounds have barely been able to keep up with the rapid increase in prices in 2022. Consequently, trade unions’ demands for compensation and pay increases in collectively agreed wages put pressure on some sectors. Updating minimum wages (in line with the directive on adequate minimum wages) plays a key role in protecting the purchasing power of low wages. With wages not keeping up with inflation rates, tensions may resurface in social dialogue and collective bargaining over the coming years.

This report addresses the impact of the COVID-19 crisis on social services in the EU. While the pandemic negatively affected social services, it nevertheless provided lessons on how to adapt them in response to new challenges and social risks. One lesson, for instance, is that policies should be developed to make better use of digitalisation in the sector, to improve access to new technologies and training for both workers and services’ target groups. And, most importantly, there is a need for clear contingency plans and funding for adaptation in times of crisis.

An increase in public expenditure on social protection, healthcare and education was a critical part of the pandemic response. However, there is uncertainty about the future development of social services in the context of the overarching policy interest and investment in the green and digital transition. This implies that the contribution of social services to the resilience of European societies needs to remain in the policy debate and that policies should be further fine-tuned.

The 2023 annual review of minimum wages was prepared in the context of unprecedented inflation across Europe. While this led to hefty increases in nominal wage rates in many countries, it was in many cases not enough to maintain workers’ purchasing power. Based on developments over the last decade, this report shows that, overall, minimum wage earners in nearly all countries saw their purchasing power rising, the gap between their wages and average wages narrowing, and to some degree growth exceeding labour productivity development. Despite the short-term losses in real terms, these longer-term gains did not disappear in 2023. Even in the context of rising inflation, the processes of wage setting did not change substantially. But the early impacts of the EU directive on adequate minimum wages are noticeable, with more countries electing to use the international ‘indicative reference values’ mentioned in the directive – 50% of the average or 60% of the median wage – when determining their targets for new levels. This year’s report presents, for the first time, an in-depth insight into net minimum wages for single adults, through the EUROMOD tax–benefit microsimulation model, while presenting the latest research findings on minimum wages, published during 2022.