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Sunday, September 19, 2021

Pay rises for employees – the impact of inflation and higher prices. Economists’ comments

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We are getting closer to employees asking for pay rises due to high inflation – said Piotr Soroczyński from the Polish Chamber of Commerce. According to Ernest Pytlarczyk from Bank Pekao, wage growth will be possible, but thanks to the demand for employees in prospering sectors.

Possible increases due to high inflation

– Many workers report that prices have increased significantly since they were hired: a year, two or eight years ago. It may therefore turn out that the time is approaching for wage indexation. The pressure from the workers is quite strong. On the other hand, the labor market is relatively absorbent. As there is no response from the current employer, employees go where they get better wages, noted Piotr Soroczyński, chief economist of the KIG.

In his opinion, we are getting closer and closer to the real, effective demand of employees for pay raises: either some plants will decide to index wages or employees will decide to move to competition. Soroczyński added that when we start introducing indexation mechanisms, not only for wages, it will mean that inflation will persist at an elevated level.


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It will not be inflation, but the demand for employees that will influence the increases

Chief economist of Pekao, Ernest Pytlarczyk, assessed that inflation would not be the key factor behind wage increases. However, it will be a demand for an employee resulting from the good condition of a number of sectors, including the recovering service sector (HoReCa) and the industrial sector attracting new investments and enjoying a continuous increase in export orders. Pekao estimates that next year the wage dynamics will be in the range of 6-7 percent. yyyyy

Pytlarczyk noted that inflation in Poland is a combination of global and local factors as well as supply and demand factors. – The significance of these supply and global economies is proved by the fact of increased inflation in many European (3.9 percent in Germany) and American (5.4 percent) economies. Postovid opening of many sectors and delayed demand are factors that temporarily boost inflation. The so-called bottlenecks in world trade and high freight costs and the unavailability of many components may also have the same nature, emphasized the economist at Pekao.

Inflation in Poland in 2021

He pointed out that this was overlapped by local factors: the increase in energy prices resulting from CO2 emission allowances and the energy transformation, as well as the business cycle and rising wages. – In fact, we returned to the path of economic growth very quickly, and let us remember that the cycle had already left its mark on the price increase even before COVID (inflation was outside the range of acceptable deviations from the target at the beginning of 2020) – noted Pytlarczyk.

– Inflation has evidently escaped us – said Soroczyński. Among the higher costs of producing goods and services, which are conducive to high inflation, he also mentioned raising the minimum wage and the related pressure to increase wages close to the minimum wage; in addition, costs related to pandemic adaptation and sanitation.

The economist of the Polish Chamber of Commerce pointed to the high increase in industrial PPI inflation, up to 8%. y / y, which translates into consumer prices. He also noted that demand pressure began to emerge from May this year.

– In May, the deposits of the population dropped significantly, by almost PLN 6 billion. There was no rebound in the data for June and July, which may mean that due to high inflation and very low interest rates, we are starting to wonder if we can allow this money to depreciate and whether we should not convert some of it into commodity. In conjunction with the increase in wages, there was additional pressure on inflation from the demand – said Soroczyński.

He added that the weak zloty exchange rate does not help in fighting inflation, which instead of curbing inflation, it stimulates it.

According to the flash estimate of the Central Statistical Office, the prices of consumer goods and services increased in August by 5.4 percent. y / y and 0.2 percent. mdm. Inflation was last higher 20 years ago – in June 2001, when it was 6.2 percent. In July 2001, the price increase in Poland was 5.2 percent.

Inflation in Poland – August 2021PAP

Main photo source: Shutterstock

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