The latest OECD Wage Bulletin, published on 13 March, shows that real wages have finally started to grow on a yearly basis in a majority of OECD countries, after the sharp decline caused by the 2021-2022 inflation surge.
In Q3 2023, real wage growth was positive in 25 of the 35 countries with available data, at 1.4%. However, real wages remain below the 2019 levels in most of those countries.
The OECD confirms that the current rise in unit labour costs does not imply a higher risk of a wage-price spiral: “These developments were largely expected as they reflect the ongoing recovery of purchasing power by wages […], rather than a warning sign of wage-price spirals.”
In fact, profits have been so high in recent years that there is ample room for further absorption of pay increases: “Moreover, in many countries, the growth in unit profits over the last three years allows for more buffering against the inflationary pressures stemming from the recovery of real wages”, according to the report.
“The fact that real wages are recovering is positive news for workers who lost a high degree of purchasing power during the cost-of-living crisis of recent years. Hopefully, this is a turning point for the labour share of income, which has been in steady decline in many countries for several decades."
In at least half of OECD countries, real wages performed better for lower-paid workers than higher-paid workers. One of the reasons behind this was increases to the minimum wage in countries which had a national statutory minimum wage in place. In January 2024, the median real value of the statutory minimum wage was 9 percent higher than at the end of 2019 across the 30 OECD countries that have a national statutory minimum wage.
However, the Wage Bulletin also hints at slowing economic activity, decelerating employment growth and a slightly increasing unemployment rate, which could have negative implications for wage development in upcoming years.
Read the complete OECD’s Wage Bulletin here.
Image credit: OECD
