Real wage growth still robust —setback ahead
Dr. Dominik Groll, labor market expert at the Kiel Institute, comments on the latest figures released by the Federal Statistical Office on wage developments in the first quarter of 2026, which show that real wages increased by 1.8 percent year-over-year.
"Gross monthly earnings per employee increased by a nominal 4.1 percent in the first quarter of the current year, matching the strong growth recorded in the preceding quarter. As consumer price inflation remained largely unchanged at 2.2 percent, real wages continued to rise by and large at an undiminished pace of 1.8 percent.
In the current second quarter, however, gains in purchasing power for employees are likely to face a setback. Consumer price inflation accelerated noticeably in March and April as a result of sharply higher energy prices in the wake of the Iran conflict. This development is expected to persist through May and June. While a temporary fuel tax reduction is in effect for these two months, even a full pass-through of the tax reduction would offset only part of the conflict-related increase in diesel and gasoline prices.
Overall, the rise in energy prices associated with the Iran war remains far less severe than the surge observed during the Ukraine war in 2022. While price increases for gasoline, diesel, and heating oil are comparable in magnitude, natural gas prices and electricity prices have thus far been much less affected. Consequently, employees’ purchasing power is unlikely to decline outright—as it did at that time—but rather to grow at a more moderate pace."
