Introduction

Wages and labour costs developments in the EU and its Member States

Despite the recent rebound in real wages, wage adequacy, a key component of job quality, remains a concern in some Member States and for certain groups of workers. Real wages edged up in 2024, after losses in 2022 and 2023 and are set to exceed their pre-pandemic levels of 2019 in 2025. However, significant differences are observed across Member States, sectors and groups of workers. The outlook for wage growth is subdued as the macroeconomic context remains challenging, characterised by low productivity growth and high economic uncertainty in a context of increased geopolitical and trade tensions. As a result, concerns have grown about the adequacy of wages and the vulnerability of certain groups of workers, who may be disproportionately affected by these trends.

Moreover, productivity, competitiveness and wage developments are closely interlinked, with important implications for the sustainability, adequacy and distribution of wages. Productivity growth is a key ingredient for sustainable increases in real wages. But higher wages can also boost productivity, under some circumstances. The extent to which competitiveness relies on cost and wage pressures, or rather product quality and innovation, can also affect wages and productivity. Moreover, enhancing productivity and competitiveness can sometimes go along with raising disparities in the wage distribution, for instance through job polarisation. Thus, understanding how productivity, competitiveness and wage developments interact is key for achieving sustainable and adequate wage growth.

Against this background, this chapter looks at wage developments, wage adequacy and the interplay between wages and competitiveness. Section 2.2 assesses recent wage developments and their prospects. Section 2.3 delves into wage adequacy. Section 2.4 investigates the interactions between wages, productivity and competitiveness. Finally, Section 2.5 aims at informing policies to promote both adequate and sustainable wage growth based on a competitive economy.

Section 2.2 assesses recent wage developments and their prospects.
Section 2.3 delves into wage adequacy.
Section 2.4 investigates the interactions between wages, productivity and competitiveness.
Finally, Section 2.5 aims at informing policies to promote both adequate and sustainable wage growth based on a competitive economy.