Real wages fall across Europe for first time in three years due to energy shock
Real wages in the euro zone have fallen for the first time in three years, as May inflation hit 3.2% year-on-year, outpacing an expected 2.6% rise in negotiated wages, Eurostat and ECB data showed on Tuesday. The decline, also seen in the United States and the United Kingdom, comes as households were still recovering from the 2022-2023 inflation shock. In the third quarter of 2025, only half of OECD countries had regained their end-2021 average wage levels, with euro zone pay still 2% below that benchmark.
Real wages fell across Europe for the first time in three years, as May inflation in the euro zone reached 3.2% year-on-year, according to Eurostat data published on Tuesday 2 June. The rise in prices outpaced wage growth, which is expected to be 2.6% this year, according to the ECB's collective bargaining index tracking negotiated pay across the continent.
The decline also occurred in the United States and the United Kingdom, and comes as households were still recovering from the 2022-2023 inflation shock. After two years of steep real-wage losses, pay had begun a gradual recovery of lost purchasing power. In the third quarter of 2025, only half of OECD countries had regained their end-2021 average wage levels. In the euro zone, average pay remained 2% below the end-2021 level. In France, average pay was about 1% below the end-2021 level.