WSI researcher Bispinck has now calculated how the bonuses work for a fictitious wage agreement that runs from January 2023 to December 2024. In variant 1, 3,000 euros are paid in the first year as tax and duty-free inflation money, followed by a tariff increase of four percent at the beginning of the second year.
Inflation premium pays off in the first year
In variant 2 there is no inflation allowance, but in the first and second year there is an increase in the collective wage agreement by four percent each. For the next three years after the end of the collective agreement from 2025 to 2027, both variants assume a collective wage increase of four percent.
Bispinck has calculated example cases for four different employees: an employee without children in tax bracket 1 with 36,000 euros and 48,000 euros gross annual income, an employee with a child in tax bracket 3 with 60,000 euros income and an employee with two children in tax bracket 4 and 72,000 euros annual income.
It turns out that in the first year, employees in all four scenarios would benefit more, both gross and net, from the 3,000 euros of inflation money than from a wage increase of four percent. The female employee with an annual income of 48,000 euros would have 1,982 euros more in her pocket than in variant 2. From the second year onwards, however, those employees who received the four percent wage increase in the first year instead of the inflation allowance do better.
Read more about the inflation compensation premium here:
The example of the employee with an annual income of 48,000 euros shows why this is the case. In the first year, she gets 3,000 euros in the first variant, so she earned 51,000 euros at the end of the year. In the second variant, four percent would be added to your initial earnings, so that you end up with 49,920 euros. The gross difference is 1080 euros.
From the second year, however, in Variant 1 with the omission of the inflation allowance, all percentage tariff increases were based on the annual gross of 48,000 euros, in Variant 2 on the other hand on the higher gross of 49,920 euros. Due to the compound interest effect, the gap between the two variants grows from year to year.
>> Read here: Concern about core inflation – Price pressures in the euro area are affecting more and more areas of the economy
Variant 2 performs significantly better over the period 2023 to 2027 in both gross and net terms. With inflation money in the first year, the childless employee in tax class 1 with 48,000 euros at the end of 2027 has a total of 2371 euros net less in her wallet than the colleague who benefited from the percentage increase from the start. For the two employees with children and higher annual incomes, the difference is even more than 5000 euros.
For employees, state-subsidized inflation money is “at first sight without a doubt highly attractive,” writes Bispinck. In the long run, however, the premium could turn out to be a “sweet poison”.
More: Chancellery ends “concerted action” against rising prices