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No second wage rise next year in any scenario, says deputy
Inflation

No second wage rise next year in any scenario, says deputy

by Yannick HANSEN 2 min. 16.05.2022
Government will not introduce another increase next year beyond one already agreed regardless of rising inflation, says member of ruling DP
Gilles Baum, parliamentary leader of the ruling DP party, made the comments during an interview on Monday
Gilles Baum, parliamentary leader of the ruling DP party, made the comments during an interview on Monday
Photo credit: Guy Jallay

Future wage indexations will be pushed back until 2024 or 2025 regardless of rising inflation in the next year, the parliamentary leader of the ruling Democratic Party said on Monday, just weeks after the government said there would only be one such indexation in 2023.

Although the government has committed to at least one increase to wages and pensions in 2023 - having already postponed it from later this year - there will be no further indexation beyond that until 2024 at the earliest, said deputy Gilles Baum, a member of Prime Minister Xavier Bettel's Democratic Party.

Another 'tripartite' meeting between government, employers and trade unions - held to reach agreement on such pay increases - is likely to take place towards the end of next year to decide on postponing any future indexation, potentially pushing it back to 2024 or 2025.

"If future wage indexations are due, they will be pushed back until 2024", Baum told broadcaster RTL on Monday. "What I would like to stress, and what is very important and I think people on the outside sometimes forget, is that no wage indexation will be cancelled", Baum said, adding that it was difficult to predict how inflation might evolve.  

Under Luxembourg law, all wages and pensions rise automatically by 2.5% if inflation hits a certain threshold, with the measure last taking effect at the start of April. 

In April, the annual rate of inflation hit 7%, the country's official statistics agency Statec said, hitting its highest level in years, due to higher wages and fuel prices. The war in Ukraine and supply chain problems linked to the economic bounceback from the pandemic have been blamed for the spike.  

In 2023, inflation is predicted to be at 2.8%, up from an initial forecast of 1.3%, Statec said two weeks ago. 

In March, following protracted negotiations which saw one union walk out, the government, employers and trade unions agreed to delay a second indexation this year, which economic forecasts had predicted would be due in July as a result of spiralling inflation. 

Postponing the measure until next year, the government said that only one such increase would happen in 2023. 

Instead of a second wage indexation this year, the government has put together a support package for households and businesses that will see the state pay out tax credits of up to €84 a month for lower incomes between August and April, and subsidise fuel to the tune of 7.5 cents per litre. The package will cost taxpayers over €830 million.  

Tax credits could come a month earlier than expected after Statec revised its inflation forecast upwards. All tax credits are tax free, unlike the automatic wage indexation.


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