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As labor markets continue to tighten, wages are accelerating in some of the world’s tightest markets. In Germany, public sector workers will see a cumulative wage boost of 7.5 over the next 30 months, an increase secured by the latest in a series of labor agreements. In the US, the Employment Cost Index for the first quarter of 2018 shows a continuation of wage acceleration—led by blue-collar occupations, where labor shortages are leading to wage growth that is well above pre-recession rates.
While raising wages is far from the first solution employers would choose to deal with recruiting and retention difficulties, it is becoming more widespread in tight labor markets. By 2019, labor market tightness could reach levels not seen for decades, especially in the US, Japan, UK, and several countries in Central and Eastern Europe. (Access our 2018 data for specific regions below.)