Economic stagnation: Experts warn of wage increases in Austria

Economic stagnation: Experts warn of wage increases in Austria

The current economic situation in Austria, Germany and Europe is characterized by stagnating development. Clemens Fuest, the President of the IFO Institute, emphasizes in his recent statements that wage increases in such an economic situation do not make sense. He therefore recommends wage retention in the ongoing collective agreement negotiations. Fuest argues that in a stagnating economy in which the forecasts for a third shrinking year are unable to increase for the Austrian economy, wages cannot increase sustainably. He warns that the opposite, an increase in wages without sufficient sales, can lead to a breakdown of workplaces. This view contradicts the arguments of the unions who demand that wages have to rise in times of crisis to secure purchasing power.

In the neighboring countries, a similar picture is shown. An investigation in Germany, which refers to the period from 2000 to 2007, proves that wage restraint did not lead to the creation of new jobs during this time. Instead, high corporate profits were created without this being made in investments or growth in employment. Professor Thomas von der Vring has analyzed that wage costs in industry were reduced by more than 16 percent, while the profits of the companies are increasing by 99 billion euros. Nevertheless, the number of employees in industry remained a lot.

economic stagnation and its effects

The stagnating economy has profound effects on society and political stability. The purchasing power of the wage recipients is now below the values ​​of 2020, a development that undermines trust in state institutions. An analysis has shown that these economic circumstances contribute to the polarization of society, which is evident in the change in voters. In East Germany, many voters have supported parties that are considered unable to government, such as the AfD or the left.

High inflation rates are interpreted as a sign of a lack of offer, which further tightens the situation. Inadequate demand is primarily identified as the cause of economic stagnation, which endangers the social cooperation and the stability of democracy. In response to these economic challenges, the Mecklenburg-Western Pomerania Bürgschaftsbank has already taken over 45 million euros to support companies in 2024.

political measures to strengthen growth

Fuest also emphasized that improvement in the infrastructure and state administration are necessary to promote economic growth. Tax increases could slow down growth, and it is proposed to reduce less important expenses - possibly also pensions. However, political resistance to such reforms can be expected. The current economic challenges are not only a threat to prosperity, but also for democratic stability in the same regions.