- The government is proud that the average wage in Poland is growing at a rate of several percent annually. In fact, however, real wages are falling for the second month in a row
- In total, since 2005, inflation ate almost 2.5 thousand. PLN of national average
- The outlook is not optimistic. In the following months, inflation will accelerate to about 17%, in contrast to the dynamics of wage growth, which will remain around 12.5-13%.
- The real fall in wages and salaries will have an effect on consumption. ING’s chief economist hopes the government won’t want to go after inflation at any cost, because it will hurt everyone
- More such information can be found on the home page of Onet.pl
The Central Bureau of Statistics reported on Wednesday 13% average salary increase in medium and large companies year on year. That means big increases, but unfortunately they don’t make up for the 15.5 percent faster price increase.
What does this mean in practice? The average Kowalski, despite a theoretically significant increase in earnings, can afford less than in the corresponding period of the previous year. The purchasing power of wages (real wages) decreased by 2.5%. (This is due to a simple subtraction of 15.5% inflation from the 13% increase in average wages.)
June was the second month in a row when real wages in Poland fell, compared to the year-over-year statistics. Of course, this is not the first case of its kind, especially if we follow the past dozens or so of years, as well as analyze changes in prices and wages in successive months.
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Business Insider Polska conducted such an analysis. We used data from January 2005 as a reference point (since then the Central Bureau of Statistics has compiled detailed data on inflation and average wages in one place). conclusions? It turns out that For more than 17 years, inflation ate 2.5 thousand. PLN of average gross salary.
how did that happen? In January 2005, the average gross salary in Poland was 2,385 PLN. Now it has officially exceeded 6.5 thousand. Total PLN. However, if we adjust the salary for price changes every month, the average salary will be less than PLN 4,000. Total PLN. This is clearly shown in the chart below.
Negative real salary goes to the register
It’s bad and it will get worse. ING Bank Śląski’s chief economist, Rafał Benecki, indicated in an interview with Business Insider Polska that in the second half of the year wages will grow more slowly (at a rate of about 12.5%). At the same time, inflation will remain at around 15.5%. Unfortunately Prices may rise in the first quarter of 2023, after which it will be 17 percent, with wage dynamics at 13 percent.
The expert points out There hasn’t been a low real wage growth rate in Poland (up to -4 percentage points) in two decades.
Real wage dynamics (year by year)
In the second half of the year, inflation will grow faster than total wages. This scissors opens more and more. Inflation should accelerate until the beginning of 2023, and the pace of year-on-year wage growth will stabilize – comments Beneke.
Pekao economists also point to a contraction in real wages and predict that such a situation could persist at least until the end of the year.
They note the deteriorating mood in the labor market, which is also reflected in the employment statistics.
We are witnessing the first signs of calming the labor market. Especially in employment. At the moment, it is difficult to determine whether this is the effect of the economic slowdown or rather the issue of refugees from Ukraine included outside the statistics of the Central Statistical Office. Added to this is the fact that Companies will increase wages more slowly due to the expected reduction in personal income taxWhat employees will get in terms of net worth. A large mandatory increase in the minimum wage from the new year will also discourage wage increases. Employers will want to make room in wage budgets for statutory increases – says Rafa Beneke.
The Polish Economic Institute (PIE) sees a similar phenomenon. He points out that fewer companies are planning to raise wages and open new jobs.
We must tighten our belts
Economists analyze the latest data in terms of its impact on consumption, which has been the main driver of the Polish economy for years. BOŚ Bank experts estimate that the real income growth rate will decline further in the second half of the year, which, with the post-pandemic savings surplus, will fall further. It will reduce the dynamics of household consumption.
The government appears to be downplaying the problem. This is evidenced, for example, by The last words of PiS leader Jaroslav KaczynskiHe downplayed high inflation, emphasizing similar and high wage growth.
He has forgotten or consciously overlooked the fact that the average wage is growing at a double-digit pace, and not everyone can count on an increase in the past twelve months, especially such a high one. It is worth mentioning that Nearly 8.6 million Poles earn less than the national average. Meanwhile, everyone has to pay more in stores jointly.
– I expect politicians to prepare society for the need to tighten belts. Now it is better for wages to rise more slowly than for inflation to rise. This may not appeal to the public, but it is an investment in the future decline in inflation. If we were to chase inflation with wage increases at all costs, we would end up with permanently high inflation – warns the economist ING.
He asserts that it will take several years to undo this, and that during that time interest rates should remain high.
– The economy will lose, all citizens will lose, and the prospects for catching up to the rich countries will once again be abandoned. He points out that real wealth comes from a booming economy.
author: Damian Somsky, Journalist at Business Insider Polska
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