Rising inflation without indexation: workers' wages diminish and poverty grows

By the EESC Workers' Group

Measures must be taken so that workers and families already having difficulties making ends meet do not end up in complete poverty as inflation eats up the value of their wages each month.

Inflation is a complicated process with several causes. But its effects are clear and direct: workers and families across Europe are now seeing their salaries effectively shrink and their savings wane. As is usually the case, the most vulnerable are also the most severely hit, as their margins were already narrow (if any). In addition, the price hike we are experiencing is particularly marked in basic goods for most workers, including food, electricity, heating and fuel. 

ECB data shows that in 2008 there was some sort of automatic indexation between the rising cost of living and wages (Belgium, Spain, France, Cyprus, Luxembourg, Malta and Slovenia) or non-automatic but still with some guidelines (Greece, Italy, and Finland). After the austerity measures following the 2008 crisis, only Belgium and Luxembourg kept and currently have automatic indexation. Meanwhile, Italy, Cyprus, and Malta have some sort of non-automatic indexation (ECB). These measures are usually based on the general cost of living, and while they help, they can hardly cushion the blow dealt by the price hike in the basic goods listed above.

However, most of the EU does not have any of these systems. It is therefore even more important to provide additional assistance to the most vulnerable, and to tackle the roots of the rising prices as much as possible. In the short term, some of the causes of inflation are not controllable, namely the Russian invasion of Ukraine. Structural limitations to global supply chains after COVID-19 must also be addressed, amidst growing uncertainty. Long-term solutions are necessary. Meanwhile, measures must be taken so that workers and families already having difficulties making ends meet do not end up in complete poverty as the value of their wages diminishes each month. (prp)