European workers are not asking for wage increases despite the falling cost of living

Workers in Europe’s largest economies will be the least likely to seek wage increases next year, despite feeling the most pressure from rising prices.

That’s according to a global survey conducted by YouGov Plc and shared exclusively with Bloomberg News. It could allay central bank concerns about the potential for spiraling wage inflation.

The survey, which covered 18 countries and in which 20,000 people took part, found that only one in five workers in Spain and one in four in Germany plans to ask for a pay rise. In the UK, where policymakers are particularly concerned about higher wage deals, the figure is 30 per cent. This compares to 40 percent in the US and more than 70 percent in Indonesia, India and the United Arab Emirates.

With inflation soaring around the world and likely to continue to rise due to the fallout from the war in Ukraine, central bankers are increasingly concerned about so-called second-round effects on inflation. Here, higher prices translate into demands for higher wages, which then force companies to raise prices even further.

Bank of England Governor Andrew Bailey has been particularly vocal about the risk, fueling controversy by urging staff to exercise restraint in their wage demands.

Federal Reserve Chair Jerome Powell has expressed a similar uneasiness, albeit in a less inflammatory way.

The picture is slightly different in the eurozone, where policymakers have repeatedly stated that overall wage growth remains subdued despite inflation hovering at almost 6 percent.

Bundesbank boss Joachim Nagel said last week that there are currently “no signs” of a wage-price spiral.

This view applies to the numbers from the YouGov poll conducted between February 22nd and March 8th. Also these those seeking higher pay will make relatively small demands. Around the world, 35 percent said they would ask for an increase of between 2.1 percent and 5 percent.

In the UK, where inflation is already 5.5 per cent and could hit double digits later this year, more than half of respondents said they would want an increase of less than 5 per cent.

In all countries except Denmark, the majority of those who did not seek a raise said it was because ‘my employer had no chance of giving a raise’.