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That’s how long inflation can eat your salary increase

Negotiations on a new wage agreement between Swedish trade unions and employers within the  industry department are in full swing. The agreed wage increases will set the level for the rest of the labor market in Sweden. Lars Calmfors, researcher at IFN, told SVT that wage increases probably will be far from inflation.

The entry requirement from the unions was a 4.4 percent wage increase in one year, the employers responded with 2 percent plus a lump sum of SEK 3,000. Inflation in the past year has also been much higher, in February the Riksbank’s inflation figure was 9.4 percent.

Swedes hope for higher saleries, but Lars Calmfors, researcher at IFN, believes that the wage increases will ultimately be far from inflation.

– When inflation is high and you start to expect it to continue to be high, you raise wages sharply, and then companies have to raise their prices and it becomes a spiral where wages and prices chase each other. That’s what happened in the 1970s, says Lars Calmfors.

Read the article here.