Minimum wage indexation did not protect low-income Europeans from inflation

Regular indexation of minimum wages (minimum wages, the Russian counterpart – minimum wage) by the countries of the eurozone could not protect the poorest segments of the population from rising prices. This conclusion was made by the experts of the Organization for Economic Cooperation and Development (OECD) in the report “Minimum wages in a period of rising inflation.”

The real incomes of minimum wage recipients in 18 eurozone countries that use such an instrument in their social policies fell by 3.3% from January 2021 to September 2022 (a population-weighted average), Vedomosti calculated based on OECD data. The organization’s experts took January 2021 as a starting point, since approximately from that moment inflation began to grow rapidly everywhere. The nominal level of the minimum wage for the same period was indexed by an average of more than 10%.

“Inflation has reached levels not seen in recent decades in most OECD countries, hitting the most vulnerable, poorest households disproportionately,” the organization said in a report. While a high degree of uncertainty and a significant slowdown in economic growth may lead countries to be cautious about further indexation of the minimum wage, some OECD members have reserves to continue to follow this policy and at least partially protect the most vulnerable workers from rising prices, experts of the organization insist.