Real wages are rising moderately: a ray of hope or gloomy business?

Real wages are rising moderately: a ray of hope or gloomy business?

In the first quarter of 2025, real wages in Germany rose for the eighth time in a row, although with a moderate increase compared to previous quarters. Loud Rhine Palatinate the increase in real wages was 1.2 percent compared to the previous year. Nominal wages grew by 3.6 percent, while consumer prices rose by 2.3 percent.

The slow wage development is due to the fact that the tax- and duty-free inflation compensation bonus, which was up to 3,000 euros and could be paid out until December 31, 2024, is no longer being paid. In 2024, these one-off payments contributed significantly to the strongest increase in real wages in 16 years, which was 3.1 percent at the time daily news reported.

Strongest wage increases for low earners

People with low earnings in particular benefited from wage increases in the first quarter of 2025. Nominal wages in the bottom fifth rose by a remarkable 7.2 percent. On average, full-time employees recorded a gross wage increase of 3.6 percent. In comparison, the highest wage increases in 2024 were in the IT and communications sectors as well as in health and social services, by 6.9 and 6.5 percent, respectively.

In contrast, wage increases in other sectors, such as real estate and housing, agriculture and mining, were less pronounced, with increases ranging between 4.1 and 4.6 percent. This shows that collective bargaining agreements have varied greatly in recent years.

Consumer climate and economic uncertainty

Although real wages have risen, there are signs of a deteriorating consumer climate. The consumption barometer fell to minus 24.7 points, which indicates a cautious mood among consumers. A survey of 2,000 consumers shows that there are no signs of a recovery in consumer sentiment. Concerns about the job situation and weak income expectations have a significant impact on the propensity to consume.

Experts are calling on the new government to make bold decisions to improve consumer sentiment and create planning security. The challenges of the economic situation are complex and require targeted measures to regain consumer trust.