The pandemic caused between the first and second quarters of last year the largest drop in wages ever recorded in the last 20 years, including the years of the great recession that began in 2008.
Salaries among the countries of the Old Continent suffered an environmental cut at 5%, although recently published Eurostat data already show a strong recovery, mainly between the end of 2020 and the first quarter of this year. Thus, between January and March 2021, the zero year-on-year increase in remuneration was reflected in a 1.9% increase in wages.
“With the onset of the crisis, wage growth plummeted in the second quarter of 2020 to a similar degree in market services, industry (excluding construction) and construction.
In the third quarter there was a recovery. the general wage growth continuing in early 2021 in industry and construction, while in the services market, growth was affected for the second time though somewhat less , in the fourth quarter of 2020, as the situation of the pandemic made it necessary to impose a new period of confinement that mainly affected employment in services, “the experts from the European Central Bank (ECB) point out about the trend.
Within this sector, non-market services differed during the pandemic in the sense that wage growth remained close to the pre-crisis level until the summer of 2020, and even increased substantially in the second half of 2020 (to 3.7% in the fourth quarter) , before moderating to 2.2% in the first quarter of 2021.
Furthermore, the rebound experienced in recent months has its response in the preponderance of the construction sector, with an upturn of almost 4% , double that of the rest of the activity branches -Market services, Non-market services and Industry-, all of them in the environment of 2% of salary increase between the months of January and March of this 2021.
In this way, they point out from the ECB, that the divergences in the sectorial evolution of the growth of remunerations reflect differences in the magnitude of the impact of the pandemic in the sectors and in the measures adopted to contain it, in particular, the use of programs maintenance of employment . In contrast to previous crises, market services were the hardest hit by the pandemic, as much of their activity was particularly affected by restrictions on mobility and containment measures.
And they warn from the institution that it is foreseeable that these upward base effects will be more pronounced in the sectors that have been most seriously affected during the pandemic.
Part of the savings will go to consumption
From the ECB, they point out that the Covid-19 disturbance has led to a sharp increase in household savings, “but its determinants do not suggest that it will provide a strong additional boost to the expected rebound in consumption,” the experts say.
The Covid pandemic has caused private household consumption to plummet. While various factors suggest that excess accumulated savings could be easily reabsorbed for consumption purposes, others indicate that it may not be so straightforward. But the likelihood of an immediate reabsorption of this excess accumulated savings going to consumption in the future is limited.