Wages are going up at more than three times their pre-pandemic rate across euro area countries, according to a new study published by the Central Bank.
However, the study also finds that wage growth may have levelled off in some countries as employers face "an increasingly uncertain and deteriorating economic outlook".
Central Bank economist Reamonn Lydon has teamed up with online jobs website Indeed to compile a new monthly series which will track wages offered in millions of job adverts across six euro area countries and the UK.
The report says finding accurate wage growth data is difficult and it hopes this series will help fill the gaps in what is an important factor in forecasting the outlook for inflation.
"The tracker will give policy-makers and employers a comprehensive overview of wage trends when making decisions that impact interest rates, the labour market and workers," said Pawel Adrjan, Economist with Indeed.
The six euro area countries are Germany, France, Ireland, Italy, the Netherlands and Spain. This group comprises 81% of total euro area employment.
The report analysed data from 24 million job adverts between January 2018 and October 2022 which represented jobs from across 7,000 different occupational titles.
It found the annual rate of wage growth across the euro area economies was 2.5% in January. This accelerated to 4.2% in June and hit 5.2% in October. This compares to an average 1.5% increase in wages in 2019. The annual wage growth in the UK was 6.2% in October.
However, the study also found that within the euro area countries, wage growth varied from an annual rate of 7.1% in Germany to 3.5% in Spain. Ireland’s rate in October was 4.7%.
The study found that, on average, 60% of job categories were seeing an increase in nominal wages of 3% and above. In the UK, that figure was 87%.
The study says there are "early signs" that wage growth rates may have begun to level off and even fall in some economies. This coincides with a decline in the number of job adverts which the report puts down to "an increasingly uncertain and deteriorating economic outlook."
Wage increase rate 'not surprising'
Chief Executive of the Irish Small and Medium Enterprise Association (ISME) has said the rate of increase in wages is not surprising as there has been "substantial wage growth over the last year" since the pandemic.
Speaking on RTÉ's Morning Ireland, Neil McDonnell said that "since the beginning of the year, we've experienced a significant degree of commodity and energy price inflation, so a lot of businesses have been getting squeezed on that, and so that rate of increase is not surprising, but it's also not surprising to hear that both job offers, and wages are starting to plateau.
"Because I would suggest we're probably at the peak of that cycle now."
He said wages have increased in technology jobs as well as in sectors that were trying to recover post-pandemic and were trying to entice workers back, such as in hospitality and services.
Mr McDonnell said that jobs like chefs and restaurant staff had seen significant pay rises but those sectors are also those that are now most acutely feeling the price squeeze.
He said that these areas will likely moderate quite quickly as well.
"Those employers who can pay more have been paying more. Those who can't have really struggled to hire labour. So, one thing we have seen nationwide, most especially outside the M50 belt, is that employers are providing accommodation through either renting or buying accommodation for their employees to live in, because otherwise they simply won't be able to recruit.
"And indeed, within the M50 belt, we are now hearing that the availability of affordable accommodation is a significant negative factor."
Mr McDonnell said it is difficult to estimate how many employers are providing accommodation to workers as "there's a certain element of grey economy to this. Unfortunately, the likelihood is it's not fully declared to the Revenue, but we're aware of hundreds of employers with thousands of employees who are in employer provided accommodation".