The average gross wage growth accelerated to 9.2% in the fourth quarter of last year, reflecting a strong labour market, unaffected by a large decline in GDP volumes. Wage growth was vigorous and broad-based. The average wage rose the most in tourism and real estate, where the number of working hours increased compared to a year ago. Wage growth was modest in construction and health care, where the number of working hours decreased.
There are numerous factors behind the rapid wage growth. Very high inflation makes people ask for a higher pay to soften the blow to their living standards. Although the labor shortage has eased somewhat due to the economic recession, finding various workers is still difficult. According to a survey by the Institute of Economic Research, service companies want to hire more employees, while in industry and construction, demand for labour has decreased. The 12.0% increase in minimum wage last year and another +10.9% this year will also have a positive impact on wages.
According to Swedbank, the average gross wage will increase by 8.5% this year. Wage growth is boosted by a higher minimum wage, wage increases in the public sector and still high inflation. Last year, the average wage earner lost a tenth of his purchasing power due to the rapid increase in prices. The decline in living standards should end this year, as prices and wages are expected to rise by around the same pace. However, according to current calculations, the 2021’s standard of living will be reached again in four years’ time.
