The average wage has increased, but that does not bode well for inflation. Tensions are growing between central banks – worried about inflation and Governments, who want happy voters and zero social conflicts

Employees in shipping (passenger and cargo) and food industry workers had the biggest increases in net pay in March, the month in which Easter was also celebrated, a holiday accompanied by the rule and the granting of extra bonuses, the data showed INS.

All wage earners saw their wages rise in March, just at very different rates. The smallest increases were seen in real estate transactions, where levies were only 0.5% higher than in March 2022, making their purchasing power fall the most.

At the opposite pole, the wage cards of employees in shipping, food and agriculture have seen increases of more than 33% in the past year.

• In March 2023, the average net salary was 4,554 lei, up by 284 lei (+6.7%) compared to February 2023.

The highest values ​​of the net salary were recorded in the manufacture of tobacco products (10,989 lei), and the lowest in hotels and restaurants (2,430 lei).

In the budgetary sector, in March 2023, the average net salary increased compared to the previous month in education (+6.8%), public administration (+3.1%), respectively in health and social assistance (+1.8 %), mainly as a result of the granting of vouchers (holiday vouchers).

Wages are rising all over the world, the pressure on employers to “cover” the inflationary costs of employees is huge

In the US, everyone is watching how Walmart, the largest private employer in the US, pays. It raised the minimum wage to $14 an hour, effectively setting a new pay level in many US states.

On the other side of the Atlantic, in the UK, wage growth in the private sector was around 7% and in the public sector 5.3%. In Hungary and Poland, wage growth reached double digits.

Even in Japan, where many people haven’t seen their wages rise in years, big employers are looking at how to change pay structures so people keep more money in their hands.

But these wage pressures are causing headaches for central bankers, who are fighting to lower inflation, fueled in large part by wage inflation.

“Even after the pressure from energy and the pandemic fades. . . wage inflation will be a major driver of price inflation over the next few years,” warned Philip Lane, chief economist at the European Central Bank.

Central banks are not yet facing the “price-wage spiral” of the US in the 1970s, which was “solved” by then-FED chief Paul Volcker, but at the cost of a deep recession.

“We don’t see yet [o spirală salariu-prețuri]. But the point is. . . once you see it, you already have a serious problem,” US Federal Reserve Chairman Jay Powell told reporters after the Fed’s latest rate hike, adding: “This is something we cannot allow to happen.” .

The big unknown now is whether labor markets slow enough to dampen wage growth – or whether central banks will feel the need to raise interest rates further and keep them high for longer to generate job losses and financial pain, writes FT.

The latest data from France, Germany and Spain also point to persistent inflationary pressures in the euro area. There, wage growth was surprisingly weak in 2022 but is expected to pick up this year as unions renegotiate multi-year sectoral agreements covering large parts of the workforce in some countries.

Christine Lagarde, the president of the ECB, said last week that the central bank is “looking at wages and has negotiated wages very, very closely.” Isabel Schnabel, a member of the executive board, warned that a likely wage increase of 4 to 5 percent in the coming years was “too high to be consistent with our 2 percent inflation target.”

In all countries, however, there is a growing tension between central banks – concerned about inflation – and governments, which want to defend the living standards of their constituents and avoid any social conflict.

In Europe, many governments have tried to solve this by raising the minimum wage. The minimum wage increased by 12% on average in the EU in 2022, double the pace of the previous year. This was partly due to the recovery in the states of eastern and central Europe, but the minimum wage threshold increased by 22% in Germany, 12% in the Netherlands and by about 5-8% elsewhere in the EU bloc.

Both France and Germany have also offered tax breaks that incentivize companies to offset lower-than-inflation wage increases by giving out bonuses.

Taming Inflation: Whose Job Is It?

Some argue that wages should rise to protect living standards. But this could only happen if companies agreed to absorb the inflationary shock by accepting lower profits – which is unlikely.

Raising interest rates remains the standard recipe for dealing with these pressures – at the cost of reducing the pace of economic growth.

Olivier Blanchard, former chief economist at the IMF, argued that how to resolve the price-wage problem should be managed between the state, firms and employees, but in practice, Blanchard notes, central banks are almost always left to resolve the conflict. “One can dream of a negotiation between workers, companies and the state. . Unfortunately, that takes more trust and that’s just not happening.”