SDG 8: Decent Work and Economic Growth | SDG 17: Partnerships for the Goals | SDG 9: Industry, Innovation and Infrastructure
Institutions: Reserve Bank of India (RBI) | Ministry of Finance | Ministry of Commerce and Industry
The European Central Bank (ECB) has released its latest wage tracker data, showing a clear signal that negotiated wage growth across the Euro Area is decelerating and becoming more stable as 2026 approaches. This trend is crucial because it suggests that a major source of upward pressure on inflation—the cost of labor—is receding.
Peak and Fall: Negotiated wage growth (the headline indicator including temporary payments) is projected to drop to 3.2% in 2025, a notable decrease from 4.7% recorded in 2024.
Structural Easing: More significantly, the underlying, structural component of wage growth (which excludes temporary, one-off payments) is also expected to ease, falling from 4.2% in 2024 to 3.9% in 2025.
2026 Stability: Forward-looking agreements indicate further stabilization, with the structural growth rate estimated at 2.4% for the third quarter of 2026.
The downward momentum partially reflects the fact that many large, one-off payments (often emergency compensation for past inflation) were concentrated in 2024 and are not continuing. This stabilization supports the ECB’s goal of returning inflation to its target, but data for 2026 must be viewed cautiously as employee coverage drops significantly (to 19.4% by Q3 2026).
Policy Relevance for India
Inflation Outlook (RBI): The easing of structural wage pressure in a major global economy suggests that imported inflation pressures, particularly for goods and services trade with Europe, should stabilize. This provides comfort to the Reserve Bank of India (RBI) when formulating its domestic monetary policy.
Export Competitiveness: Lower and more stable wage pressures in the Euro Area can stabilize manufacturing costs there. This affects the cost competitiveness of Indian goods and services exported to the region, making the data vital for trade policy formulation.
Global Financial Stability: Softening labor data supports the ECB’s broader disinflationary narrative, contributing to a more predictable global financial environment. This can influence foreign institutional investor (FII) flows into Indian markets.
What is the significance of the “wage tracker excluding one-off payments” for central banks? → The wage tracker excluding one-off payments is crucial for central banks like the ECB because it reflects structural or permanent increases in labor costs. This indicator helps policymakers gauge the durability of inflation pressure—a fall in this figure suggests that the underlying, long-term costs that feed into prices (the wage-price spiral) are subsiding.
Follow the full update here: Eurozone Wage Growth