The issue of wage restraint in a time of inflation has reached the ranks of the European Central Bank, which has launched a staff pay review that will consider proposals for semi-automatic pay increases when prices rise.
Union officials have called for the review after contesting this year’s one salary increase by just over 4% by the ECB, which left employees with a pay cut in real terms after inflation averaged 8.4% in the eurozone last year.
Wage supply was double the ECB’s inflation target and is in line with wage growth across the eurozone.
The controversy puts the ECB in an awkward position after it raised interest rates for the seventh consecutive time last week to try to tame the biggest rise in inflation in a generation, urging workers and employers not to go too high wages and prices.
Carlos Bowles, deputy chairman of the Ipso union which represents ECB staff, told the Financial Times that he “asks for a more balanced approach” to setting staff salaries, such as “the one in place at the European Commission”.
The pay of EU employees has increased by 6.9% this year, with part of the increase driven by an automatic adjustment mechanism designed to maintain the relative purchasing power of civil servants across Europe. About 2.5% of the increase is also due to a late payment from 2020.
ECB President Christine Lagarde repeated it earlier on Thursday warning against a tit-for-tat dynamic in which workers and employers try to avoid losses from rising inflation by pushing up wages and prices.
He said this would increase the “risk of something that is much more difficult” by keeping price pressures elevated and calling for “more active measures in monetary policy”.
The central bank’s current methodology for adjusting the pay of all its staff is based on wage dynamics at the 20 national central banks in the euro area, the European Commission, the European Investment Bank and the Bank for International Settlements .
The 4.07% wage increase introduced since January compared to a 1.48% increase the previous year, when inflation in the eurozone was 2.6%. The ECB said staff turnover was just 1.3% last year, suggesting most employees weren’t too dissatisfied.
The union is in dispute with the ECB over claims that the central bank has not followed its existing methodology correctly. It also launched an internal appeal against the calculations underlying the 2022 offer, signed by 373 employees. Bowles said the appeal was “the first step paving the way for a court case, which we will definitely do.”
The ECB said: “Every three years an interested party can request a review of the general salary adjustment. Last year a recognized union asked for it, so a review is underway this year. Decisions on the GSA are taken by the Governing Council of the ECB”.
The revision – only the second in the ECB’s history – is expected to last beyond the end of this year, when it expects annual inflation will have fallen from 7% in April to below 3%, meaning a wage hike is likely be smaller, regardless of the methodology used.
The ECB said: “While we respect diversity of views, Ipso does not necessarily represent the majority opinion of ECB staff.”
The European Commission said its annual salary adjustment for EU staff was “calculated by Eurostat on the basis of the evolution of the purchasing power of national civil servants”.
If inflation exceeds a certain level in Belgium and Luxembourg, the commission can also grant EU staff a mid-year pay raise backdated to the beginning of the year.
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