UNRIC, 9 October 2023:

Belgian lawyer and professor of international law Olivier De Schutter has been UN Special Rapporteur on extreme poverty and human rights since 2020. He is mandated by the United Nations Human Rights Council as an independent expert on these issues.

On 20 October, he will present to the United Nations General Assembly a new report on “The working poor: a human rights-based approach to wages”, based on the observation that more than one in five workers in the world lives in poverty.

Olivier De Schutter here shares his analysis on the issues of inflation, poverty and purchasing power within the European Union.

A major American publication headlined in July that “Europeans are becoming poorer”, partly because of inflation. Have Europeans lost a lot of purchasing power?

The whole question is whether social protection and wages keep up with inflation. Salaries in 2022 increased by 4.2% in the EU area, which means a real drop of more than 4% in purchasing power, since inflation reached 8.4% in the same year. The situation is more serious in some countries. In Italy, real wages fell by 12% between 2008 and 2022, a very worrying situation.

Three EU states, Belgium, Luxembourg and Cyprus, have a system of automatic wage indexation to inflation. However, in these countries we do not see the wage-inflation spiral feared by economists. IMF [International Monetary Fund] studies show that when inflation is due to external factors, wage indexation does not lead to this spiral. In 2022, inflation was due to increased energy prices, linked to the conflict in Ukraine, but also to speculation on energy markets, as well as rising food prices, again linked to speculation on agricultural markets. To protect Europeans from the risk of impoverishment linked to the return of inflation, the system of indexing wages to inflation is good, and it works.

The International Covenant on Economic, Social and Cultural Rights includes an obligation for States to ensure the indexation of income, including social benefits, to the cost of living.

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