Dutch Central Bank leader calls on employers to raise wages by 5-7 percent

Klaas Knot, president of De Nederlandsche Bank (DNB) said he believes that employers in the Netherlands can raise wages higher. This can help stem the loss of purchasing power due to high energy prices, he said on the news program Nieuwsuur.

Knot said he made some calculations that showed wages could increase by 5 to 7 percent. He stressed, however, that this is an average. It is not the case that companies in all sectors are doing equally well and have the same room to maneuver everywhere. In fact, some sectors are actually suffering greatly from high energy prices. "But there are also sectors that are showing record profitability, such as trade and manufacturing.”

DNB already published new economic estimates earlier this week. These showed that the labor market will remain extremely tight for the time being, with unemployment rising only slightly. This means that the need for personnel will continue in many sectors. DNB Chief Economist Olaf Sleijpen also believed that there is still room for additional wage increases in many sectors.

That is not to say, however, that employers should fully compensate for inflation with the wages they pay. DNB has been warning for some time that automatic wage indexation - something that unions, for example, would like to see - is not a good idea, because that could actually boost inflation even higher.

In that case there would be a so-called wage-price spiral, in which people would spend considerably more and thus encourage companies to raise their prices further. For now, DNB does not yet have the impression that such a scenario is imminent.