Workers in Western Europe Are Demanding Higher Pay as Inflation Soars

They are demanding but do not receive.

"In Europe, unions are also agitated after numerous companies reported bumper profits and dividends despite the pandemic. Companies listed on France’s CAC 40 stock index saw margins jump by an average of 35 percent in the first quarter of 2021, and half reported profits around 40 percent higher than the same period a year earlier.
 
Workers say that they have not benefited from such gains, and that inflation has made things worse by abruptly slashing their purchasing power. Companies, for their part, are wary of linking salaries to inflation — a policy that also makes the European Central Bank nervous.

Surging energy costs have been “a shock on incomes,” said James Watson, chief economist for Business Europe, the largest business trade association. “But if you try to compensate by raising wages, there’s a risk that it’s unsustainable and that we enter into a wage-price spiral,” he said.
European policymakers are watching carefully for any signs that companies are passing the cost of higher wages on to consumers. If that happens, it could create a dangerous run-up of higher prices that might make inflation chronic.

For now, that seems unlikely, in part because wage negotiations so far haven’t resulted in outsize pay increases, said Holger Schmieding, chief economist at Berenberg Bank in London. Negotiated wage increases have been averaging around 2.5 percent, below inflation’s current pace. “Will wage hikes be inflationary? Not really,” he said. “The eurozone is not at a severe risk.”

But as climbing prices continue to unnerve consumers, labor organizations are unlikely to ease up. Gasoline prices recently hit €2 a liter in parts of Europe — equal to over $8 a gallon. Higher transportation costs and supply chain bottlenecks are also making supermarket basics more expensive."