Rising inflation is seen in almost every part of the world. However, most workers don’t get wage increases or get lower salary growth compared to the rising inflation. This decreases the purchasing power, meaning people can actually buy less. The latest victims are the workers in the European Central Bank (ECB) in Frankfurt.
ECB’s staff mad over unfair salary conditions
The employees of the ECB got mad after the central bank refused to meet the staff’s demand for an equivalent salary increase to the rise of inflation. The International and European Public Services Organisation (IPSO), the ECB’s staff union based in Frankfurt, is extremely dissatisfied with the 4.71% salary increase proposed by the bank’s management for 2023.
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The projected inflation rate in Germany for the coming year is nearly double the suggested salary increase – 7.5%, but now it is 10%. The fact that wage increases for ECB employees have been relatively low so far this year has only added fuel to IPSO’s fire.
“With inflation in Germany and the euro area likely around 8.5% this year, a lack of a pay rise means a substantial reduction in purchasing power,” IPSO Vice President Carlos Bowles told Bloomberg.
Several other central banks, including the Bank of Japan and, perhaps most notably, the Central Bank of Brazil (BCB), have experienced similar disputes in recent months. BCB employees ended their several months-long strikes in July, which had severely hampered the country’s ability to collect and analyze its own economic data.
This may make you wonder whether the Fed is the next. However, this is a pretty common event in times of economic turmoil or recession. The ECB’s employees also went on to protest in 2009 after suggested benefit cuts by the central bank. However, the ECB’s president Christine Lagarde argues this is necessary so the situation won’t get out of control even more.
“Persistently high inflation could lead to de-anchored inflation expectations, which then become ingrained in wage negotiations and price setting,” she explained.
She may have a point as more than necessary higher salary increases could cause another wave of inflation. However, it’s wrong that the lower class and middle class are the ones who have to pay the price because of the inflation crisis. On the other hand, one of the main causes of the inflation is the excessive money printing by the likes of ECB, so one can state that they have shot themselves in the foot.