European inflation surged in 2022 to levels not seen in 40 years. It peaked above 11% in the EU, mainly driven by a rise in energy prices after Russia’s invasion of Ukraine.
This surge eroded workers’ purchasing power across advanced European economies as consumer prices rose faster than wages.
Have wages recovered? Not yet. They remain below early 2021 levels although many major European economies are close to catching up, according to analysis done by the Indeed Wage Tracker based on advertised wages on their platform.
Indeed has constructed a cumulative real wage index, rebased to 100 in January 2021.
Values above 100 mean that cumulative advertised wage growth has outpaced inflation. Values below 100 indicate that workers’ purchasing power remains lower.
As of January 2026, real wages based on job postings are still below January 2021 levels in seven major European economies. However, most are close to recovering, except for Italy and Spain. In the euro area, the index stands at 96.2.
The Netherlands shows the strongest recovery at 99.7, followed by the UK at 99.5. Ireland and Germany (both at 99.1) are also close to the 100 level. In France, the index is 98.1.
Spain matches the euro area average at 96.2 while Italy has the lowest level at 89.9. This means that if a worker earned €1,000 in January 2021, their real wage in January 2026 would be €899 after accounting for nominal wage growth and inflation.
Why real wages in Europe have not recovered?
Pawel Adrjan, Director of Economic Research at Indeed, emphasised that Russia's invasion of Ukraine was the trigger that drove a surge in energy and food prices, which pushed eurozone inflation above 10% in 2022 and opened up the real wage gap across Europe.
“There are several reasons the gap persisted for a long time and still persists in some countries,” he told Euronews Business.
According to him, there are two main reasons. The first is that wage-setting in Europe adjusts slowly and incrementally, with collective bargaining cycles locking in pay rises for multi-year periods.
Inflation increased rapidly and turned more persistent than originally expected, and wages had to play catch-up over a long period.
Second, central banks like the ECB eventually reacted by increasing interest rates to bring down inflation.
This started to cool the labour market, which is seen in the Indeed Job Postings Index coming down from 2022-23 onwards in major economies like Germany, France and the Netherlands.
But it also weakened the bargaining power of unions and individual workers in subsequent wage negotiations, further delaying the catch-up in real terms.
Inflation vs weak wage growth
Adrjan noted that the inflation shock was a common driver everywhere, but the degree to which wages have responded differs across countries.
In the US and UK, nominal wage growth was strong enough to broadly close the gap, due to tight labour markets driven by high demand for workers, as well as large minimum wage increases and labour supply constraints in the UK.
In Germany and the Netherlands, delayed but robust collective bargaining increases have brought them close to full recovery.
For France and Spain, it's more balanced: wage growth has recently exceeded inflation.
Italy is an outlier
“Italy is the extreme case. The problem there is overwhelmingly on the wage growth side, with posted wages barely growing at all, meaning the gap is actually still wide,” Adrjan cotninued.
The paradox is that Italy's job postings are well above pre-pandemic levels but this strong hiring demand has not translated into pay growth, consistent with the fact that the labour market was still less tight than in other large European economies.
Lower-paid workers hardest hit by wage lags
Indeed data does not show the real wage evolution by occupation. Adrjan stated thatgenerally, lower-paid workers in standardised roles are the most exposed to longer adjustment delays because their wages adjust less frequently and are more tightly anchored to minimum wage floors.
When asked when workers can realistically expect real wages to recover, and about the impact of the Middle East crisis, Pawel Adrjan pointed to possible risks linked to the Iran conflict.
He noted that before the Iran war, most northern European economies were within a percentage point or two of full recovery and the European Commission projected aggregate EU real wages would close the gap this year or next.
“The conflict has raised the risk that this timeline will not be met and that countries where purchasing power has essentially recovered will see real wages decline again. Current high energy prices are essentially a second inflationary shock that is hitting before the first one has been fully absorbed,” he said.
If the conflict is short, recovery may be delayed by only a few months for countries close to the finish line.
“If disruption persists through the summer refill season, we may see a replay of the 2022 dynamic that will push recovery back to 2027-28 for many workers,” he added.
