Income Increases in the EU are Imperative

Due to the difficulties faced by households in coping with rising energy costs, EU member-countries’ governments have entered the process of supporting household electricity bills through a subsidy policy. Sure, such a policy – covering subsidized electricity increases – is a humanitarian benefit, but it is not enough, as it only covers part of the cost of a household’s electricity.

It does not cover the increase in household expenditure caused by the revaluation of all products and services, resulting from the increase in energy costs and raw material prices respectively.

The diffusion of economic growth

What is being seen in the current period is an acceleration of growth in the economies of the Eurozone and the European Union in general, which growth is reflected in fiscal figures, but workers and especially the low-income classes of EU societies do not feel this growth in their pocket.

Of course, those who feel this growth are the big companies, in the form of their rapid increase in profitability and perhaps professions such as the self-employed, and mainly the professions that are active around the construction of houses, whose industry presents a satisfactory pace of development.

Income growth policies

It is a given that first the inflation in the economy must be measured and then economic-income policy measures must be taken. You can not formulate economic policy first and then measure inflation, because it can cause problems with inflation expectations.

However, the decline in incomes is a given throughout 2020 and Q32021, and this decline in incomes must gradually begin to recover, as member countries have emerged from the recession and are entering rapid growth.

1. Increase in minimum wages in economies. Such an increase combined with the increased supply of jobs will begin to drag the whole range of wages upwards.

2. An increase in the salaries of civil servants with a simultaneous reduction of public sector staff will cause an increase in the salaries of the private sector.

3. Wage increases are a major incentive for work. Low wages are often the main reason why many companies are looking for employees in all specialties, but can not find them.

4. Wage increases will gradually smooth out labor market imbalances, as in many economies, the occasional job done by many young people pays more in less working hours than a stable employee earns at work within 8 hours.

The energy crisis is an opportunity for EU governments to gradually increase wage increases within the capabilities of their economies, which will restore work as a commodity. If these policies are not implemented, it is very likely that the energy crisis will worsen the economic situation of households, which will then turn into a serious political cost for governments.

So, a more generous income policy combined with tax cuts would help both economies and households, but also governments in general, while accelerating the growth of economies and restoring the incentive to work.

Fiscal easing in EU member-countries allows for wage increases. Spain has already announced a small 2% increase in wages due to the energy crisis. We hope that the other member-countries will follow the example of Spain.

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