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Automatic 2.5% wage rise unlikely in 2022, says Statec

Automatic 2.5% wage rise unlikely in 2022, says Statec

by John MONAGHAN 2 min. 26.10.2021 From our online archive
Wage indexation measure is "not forecast" to kick in next year, despite rising inflation, economists tell parliamentary committee meeting
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Another wage increase in line with inflation for Luxembourg workers is not predicted to take place next year, representatives of the country’s official statistics agency Statec told a parliamentary committee on Monday.

Salaries in Luxembourg rose by 2.5% earlier this month, under a measure known as the automatic wage indexation, which was introduced in 2006 and kicks in every time prices for consumer goods and services jump by more than a certain threshold, normally 2.5%.

Consumer prices are on course to rise by 2.7% this year, Statec said at the time of the wage indexation announcement on October 1.

The question of whether a pay rise for employees will be on the cards again next year – with inflation continuing to increase due to record energy prices – was raised by deputies during the closed door session of the Finance and Budget Commission on Monday.

“Following questions from several deputies, economists from Statec explained that no wage indexation is forecast in 2022, unless the rate of inflation remains consistently above 3% next year”, according to a report of meeting, published on the parliament’s website.

Difficulties linked to the pandemic – such as the shortage of materials and high energy prices – are expected to be “temporary”, the economists said.

The wage indexation measure has faced opposition from the country’s businesses. Luxembourg’s decision earlier this month was criticised by a lobby group representing the country's private employers, who warned it will have a negative impact on the competitiveness of businesses.

Companies in Luxembourg find themselves competing with firms in neighbouring countries which are “not subject to the same constraints, such as salary indexations or adaptations to the minimum wage”, the Union des Entreprises Luxembourgeoises (UEL) said in a statement.

Luxembourg’s minimum wage increased by 2.8% at the start of the year, despite strong criticism from business groups. The basic minimum gross monthly salary for unskilled workers currently stands at €2,201.93, rising to €2,642.32 for employees with qualifications. 

The Luxembourgish economy is performing well “in comparison to other EU countries”, Statec’s representatives told the parliamentary meeting, with tax revenues jumping by more than 18% this year compared to 2020.

Annual growth is forecast at 3.5% for 2022 and unemployment is set to rise to around 6.3%, up from the estimated current level of 5.5%, according to Statec. 

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