The average real wage increase for European workers fell from 2.7% in 2006 to 2.3% in 2007, according to new data published by Eurofound’s European Industrial Relations Observatory (EIRO).

The annual update on pay developments in Europe recorded big differences between EU Member States, both in terms of pay trends and the level of pay increases. It also found a continued moderation in wage increases in the former EU15 countries; among the new EU Member States, however, a distinctive upward trend was evident, with average wage increases almost four times higher than in the former EU15 countries.

Collective bargaining plays a relatively significant role in pay setting across Europe. The new report, which covers the current 27 EU Member States (EU27) and Norway, found that average collectively-agreed nominal wage increases across the EU rose from 5.6% in 2006 to 7% in 2007. In the former EU15, the average increase in 2006 stood at only 2.9%, rising to 3.1% in 2007. In the ten new EU Member States (NMS10), the average increase was 8.5% in 2006, rising to 10.5% in 2007. When the newest members Romania and Bulgaria are added, the respective figures for the larger NMS12 are 9% and 11.9%.

However, when inflation is taken into account, the rate of real increase across the EU27 fell from 2.7% in 2006 to 2.3% in 2007. In the EU15, the average real pay increase stood at only 0.8% in 2006, and fell to 0.2% in 2007. In the NMS12, the average real pay increase also fell, from 5.2% in 2006 to 5% in 2007. In the NMS10, the average real pay increase fell from 5% to 4.1%. During the period under review, differences in pay trends and the level of pay increases varied substantially between individual Member States. Pay rises in Greece and Ireland, for example, ran far ahead of the EU15 averages in both 2006 and 2007. Among the NMS, countries such as Cyprus, Malta and Slovenia saw low increases in pay. The overall average for this group of countries was pushed up significantly by the double-digit increases in the Baltic States, Bulgaria and Romania in both years.

In terms of trends, the rate of increase rose between 2006 and 2007 in 18 of the countries reviewed, remained unchanged in one country and fell in nine. The rate increased in the NMS, most sharply in Latvia, Bulgaria and Romania), with the exceptions of Cyprus, Malta and Slovenia, where it fell. In the EU15, the overall tendency was for a slight rise (with the highest increases in Sweden and Finland); however, the rate of increase was unchanged in the Netherlands and fell in Austria, Belgium, France, Greece, Italy and Spain.

The report also looks at collectively-agreed pay increases in three selected sectors (chemicals, retail and the civil service), current wage rates and minimum wage increases, increases in average earnings, and the extent of the gender pay gap across all countries.