European Real Wages Remain Below 2021 Levels in One-Third of Countries

Across the 27 European economies examined in the OECD Employment Outlook 2026, real wages—pay adjusted for inflation—have fallen in nine countries between Q1 2021 and Q1 2026. The euro-area as a whole recorded a 1.8 % decline, while a third of the analysed nations still sit below their 2021 purchasing-power levels.

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The pandemic, Russia’s invasion of Ukraine, soaring energy prices and a record-high inflation wave in 2022-2023 created a “cost-of-living crisis” that strained household budgets throughout Europe. Sectoral collective-bargaining agreements are staggered and rarely renewed annually, slowing the transmission of wage increases to workers.

European Real Wages Remain Below 2021 Levels in Economic Warning Sign

• Largest declines: Italy - 6.1 %; Czechia - 5.8 %; Sweden - 4.8 %; Denmark - 2.1 %; Spain - 2.0 %.

Real wages remain below 2021 levels in a third of European countries

• Euro-area average: - 1.8 % over the five-year span.

Real wages remain below 2021 levels in a third of European countries

• Modest falls: Slovakia, Finland, Ireland and Switzerland each slipped between 0.7 % and 1.4 %.

Real wages remain below 2021 levels in a third of European countries

• Positive outliers: Turkey - 78.6 % (inflation ? 32 %); Hungary - 29.8 %; Poland - 16.5 %; Lithuania (EU) - 14.8 %.

Real wages remain below 2021 levels in a third of European countries

• Other gains: Latvia 4 %, Slovenia 6.6 %, Portugal 5.6 %, Greece 4.7 %, Luxembourg 4.1 %.

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• Major economies: The United Kingdom led the five largest economies with a 3.6 % rise; Germany 0.9 % and France 0.1 %.

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Andrea Bassanini, editor of the OECD Employment Outlook, said that the lingering effects of the 2022-2023 cost-of-living shock continue to depress real wages, and that statutory minimum-wage policies have generally kept pace with price growth. Ronald Janssen highlighted that delayed collective-bargaining rounds and heightened job-insecurity concerns have weakened workers’ negotiating power. Richard Grieveson and Meryem Gökten noted that Turkey’s dramatic real-wage surge largely reflects a post-crisis catch-up rather than a genuine rise in living standards. Péter Virovácz attributed Hungary’s strong performance to labour-market tightness, aggressive minimum-wage policy and a compensatory response to earlier inflation.

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Janssen argued that employers’ systematic postponement of new agreements and the erosion of trade-union bargaining strength have been key drivers of wage erosion in Italy and other lagging economies. Michele Bavaro added that Italy’s historically long contract-renewal cycles slowed nominal-wage recovery after the inflation spike.

European Real Wages Remain Below 2021 Levels in Economic Warning Sign

The reliability of Turkey’s official inflation figures is disputed; opposition parties allege statistical manipulation, casting doubt on the exact magnitude of the 78.6 % real-wage increase. The OECD data stop at Q1 2026, before the energy-price surge triggered by the US-Israeli attacks on Iran and Tehran’s retaliation, leaving a gap in the most recent wage-impact assessment.

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Stagnant or falling real wages reduce disposable income, limiting households’ ability to meet basic costs and to remit earnings abroad. Remittance-sending workers in the United Kingdom, Germany and Italy constitute a vital foreign-exchange source for African economies; a contraction in their purchasing power can tighten inflows to nations such as Kenya and Nigeria, amplifying global financial stress.

European Real Wages Remain Below 2021 Levels in Economic Warning Sign

• “Real wages were still affected by the cost-of-living crisis of 2022-2023 even in Q1 2026,” — Andrea Bassanini, editor, OECD Employment Outlook

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• “While subsequent collective bargaining rounds in the years following the great inflation outbreak tried to restore the purchasing power of wages, workers and trade unions saw their bargaining power hampered by the job insecurity concerns resulting from several years of stagnating economic growth, fears of de-industrialisation because of Chinese competition and a US-led tariff war undermining access to a major European export market,” — Ronald Janssen, former chief economist, ETUC and TUAC

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• “Turkey's 79% real wage increase is arithmetically correct but overstates the increase in living standards,” — Richard Grieveson and Meryem Gökten, Vienna Institute for International Economic Studies (wiiw)

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• “The strong growth of real wages in Hungary over the past five years reflects a combination of structural labor shortages, government wage policies, and a compensatory process following the inflation spike,” — Péter Virovácz, chief economist, ING

Real wages remain below 2021 levels in a third of European countries

• “A first important factor is the growth of statutory minimum wages, which have been higher than inflation by government decision in both Germany and the UK and about the same as inflation in France and Spain,” — Andrea Bassanini, editor, OECD Employment Outlook

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