Real wages expected to fall in the main European economies, Germany is the exception

Real wages, that is, incomes adjusted for inflation, are expected to fall in Italy, Spain, France and the United Kingdom from the first quarter of 2026 to the same period of 2027. Germany is the only exception, according to the OECD’s “Employment Outlook 2026” report.

According to the forecasts, geopolitical uncertainty and rising energy costs could weaken labour markets, while inflationary pressures are expected to negatively affect the purchasing power of wages.

In the eurozone, real wages are expected to fall by around 0.4% during mid-2026 and to return to the level of the start of the year only in the first quarter of 2027. By the end of 2027, an increase of 0.7% is expected.

Italy is forecast to suffer the strongest blow. Real wages are expected to fall by 1.9% in the third quarter of 2026. Even at the end of 2027, they are expected to remain 0.6% below the level of the start of 2026.

According to the OECD, high energy costs and Italy’s dependence on oil and gas imports are among the main factors influencing this decline.

In Spain, the decline is smaller, but longer-lasting. Real wages are expected to be 0.7% lower at the end of 2026 and to stay at this level throughout 2027.

The United Kingdom is expected to register a decline of up to 1.6% by the end of 2026, before a recovery during the following year. At the end of 2027, real wages are forecast to be around 1% higher than at the start of 2026.

France is expected to have a more limited decline. Real wages are forecast to fall by 0.5% during the second quarter of 2026 and to recover gradually, ending 2027 around 0.1% above the initial level.

Germany is the only one of the five economies analysed where real wages are expected to rise throughout the period. The increase is forecast to reach 0.5% by the end of 2026 and 1.7% by the end of 2027.

According to experts cited in the report, the relatively strong labour market, the shortage of qualified workers and the increase in the minimum wage are supporting wage growth in Germany.

The OECD stresses that the forecasts rest on the assumption that the disruptions caused by the conflict in the Middle East will be considerable, but relatively limited in time.