ABN Amro says it is time to end high wage increases

ABN Amro has stated that it is time to end the higher salary increases for employees as compensation for inflation. According to a report by the bank, the wage increase has almost caught inflation. The loss of purchasing power due to inflation has been largely compensated in many collective labor agreements, the bank said.

ABN Amro is responding to demands set by the trade unions to have wages increase again in 2025. FNV has set a wage increase demand of seven percent for next year.

Higher wages result in companies increasing the prices of their products to compensate for these increased costs. This causes a price-increasing effect known as the wage-price spiral.

Inflation will stay at a high level if higher wage demands are continuously agreed upon. This higher inflation causes risks for the Netherlands’ competitive position and economic growth, said the bank. This growth is important for important issues like the energy transition and the aging population.

“It is understandable that after an inflation shock, the wages need to close on the prices, but the wage demands need to drop after this has been compensated. After this, the wage increase needs to be connected to an increase in labor productivity,” ABN Amro stated.

Recently, a Dutch chairman of the International Monetary Fund (IMF) also said that caution is required when it comes to strong wage increases. This is because if the wage increases are too high, then a new string of price increases makes life more expensive for everybody. Nobody would be aided by this, said IMF chairman Paul Hilbers.