The COVID-19 pandemic, Russia's invasion of Ukraine, soaring energy prices, record inflation, and other factors have intensified pressure on wages across Europe. The rising cost of living has hit millions of European households hard. Real wages, that is, adjusted for inflation, have declined in a third of the European countries included in the analysis over the five years leading up to the beginning of 2026. Which countries have experienced the largest decline in real wages between the first quarters of 2021 and 2026? Where has the growth in real incomes been the highest? Why, against the backdrop of an overall decline in the eurozone, have some countries become notable exceptions? According to the OECD Employment Outlook 2026 report, which covers 27 European countries, but not all EU members, the aggregate decline in real wages between the first quarters of 2021 and 2026 occurred in nine countries. ## ## Impact of the 2022–2023 cost of living crisis "Even in the first quarter of 2026, real wages continued to feel the effects of the 2022–2023 cost of living crisis," said Andrea Bassanini, editor of the OECD Employment Outlook report, to Euronews Business. "Since the renewal of sectoral collective agreements does not happen every year and usually takes time, agreed wages have been recovering very slowly and have not fully returned to previous levels," he added. He also noted that the legislatively mandated minimum wage has mostly kept pace with rising prices. ## ## In Italy, real wages fell by more than 6% Italy showed the most significant decline: real wages decreased by 6.1%. According to Ronald Janssen, former chief economist of the European Trade Union Confederation (ETUC) and the Trade Union Advisory Committee to the OECD (TUAC), this was facilitated by systematic delays by employers in concluding new agreements and a weakening of union positions in negotiations. Economist Michele Bavaro from the Scuola Normale Superiore in Pisa noted that historically long delays in updating contracts in Italy have slowed the recovery of nominal wages after the inflation spike. Richard Grivson and Meryem Gokten from the Vienna Institute for International Economic Studies (wiiw) also pointed to weak labor productivity, sluggish economic growth, and relatively slow adjustments of nominal wages in Italy. In the Czech Republic and Sweden, the declines were 5.8% and 4.8%, respectively. In Denmark, real wages fell by 2.1%, and in Spain, by 2%. Overall, in the eurozone, they decreased by 1.8% during this period. In Slovakia, Finland, Ireland, and Switzerland, small declines were noted, ranging from 0.7% to 1.4%. ## ## Acceleration of inflation and growing job security concerns Ronald Janssen reminded about the acceleration of inflation in the eurozone in 2021–2022. "Although subsequent rounds of collective bargaining in the years following the spike in high inflation attempted to restore purchasing power, the negotiating power of workers and unions was limited by concerns over job security. These fears were related to years of stagnating economic growth, risks of deindustrialization due to competition from China, and the tariff war waged by the United States, undermining access to one of Europe's key export markets," he explained in a conversation with Euronews Business. In Belgium, real wages remained unchanged, while in France and Estonia, there was a symbolic increase of only 0.1%. ## ## Turkey: a striking exception Turkey stands out as the most notable exception: it recorded the highest growth in real wages — 78.6% — with inflation at 32% by mid-2026. "The 79% increase in real wages in Turkey is arithmetically correct but overstates the actual improvement in living standards," Grivson and Gokten noted in a comment to Euronews Business. "In 2021, real wages were low, still depressed after the currency crisis of 2018, so part of the growth was actually a recovery," they explained. According to them, the main factor behind the sharp increase in 2022–2023 was the doubling of the minimum wage, largely driven by electoral motives. "After the 2023 elections, indexing was again conducted once a year and has since lagged behind inflation," Grivson and Gokten added. They also questioned the reliability of inflation data in Turkey, citing statements from opposition parties about manipulation of official statistics. ## ## Hungary: the highest growth in the EU Hungary ranks second in terms of real wage growth — 29.8% — and is itself an outlier within the EU. In Poland, real wages increased by 16.5%. All three leading countries are outside the eurozone. "The strong growth of real wages in Hungary over the past five years reflects a combination of structural labor shortages, government wage policies, and a compensatory process following the inflation spike," said ING chief economist Peter Virovatz. He stated that Hungary's exceptional real wage figures are explained not by an unusual leap in labor productivity, but by the cumulative effect of labor market tensions, aggressive minimum wage policies, ongoing income alignment processes, and workers' desire to restore purchasing power after the inflation shock. Among eurozone countries, Lithuania showed the highest growth in real wages — 14.8%. No other countries saw double-digit increases. Real incomes also grew in Latvia by 7.4%, in Slovenia by 6.6%, in Portugal by 5.6%, in Greece by 4.7%, and in Luxembourg by 4.1%. ## ## Largest economies: the UK leads in real wage growth Among the five largest economies in Europe, the UK emerged as the leader with a real wage increase of 3.6%. In Germany and France, real wages increased by less than 1% — by 0.9% and 0.1%, respectively. Italy recorded the sharpest decline among all countries included in the analysis, while Spain saw a decrease of 2%. "The key factor was the increase in the legislatively mandated minimum wage, which, by government decision, outpaced inflation in Germany and the UK, while in France and Spain it was comparable to its level," Bassanini noted. Grivson and Gokten emphasized that the relatively flexible wage formation system in the UK and persistent recruitment challenges allowed nominal wages to respond to inflation more quickly than in several eurozone countries. The report notes that the data for the first quarter of 2026 pertains to a period before the recent spike in energy prices, which followed coordinated strikes by the US and Israel against Iran and Tehran's retaliatory actions.
