The real wage in the country grew less than in 2021, the depreciation from high inflation

All sectors of the economy under pressure from a shortage of workers and high living costs grew gross wages last year at double-digit rates.

But the unprecedented change in prices with an average of 6.7 percent made the real wage increase lower than in 2021.

According to INSTAT data, the average monthly gross salary reached 66,015 ALL at the end of 2022 with a 10.8 percent increase compared to 2021. But the real salary that takes into account indexation with inflation increased by only 4.1 percent, a pace this lower than in 2021 when the real wage in the economy increased by 6.4%.

As can be seen from the chart below, nominal wages and real money have grown at similar rates throughout the decade, but in 2022, it can be seen that nominal wages have grown strongly by 10.4%, but real wages have increased by only 4.1 percent as result of high inflation.

Wage growth has been undermined by strong price appreciation, a phenomenon that is also operating this year.

From 2014 to 2022, the average salary in the country has increased by 45%, reaching about 66 thousand ALL. The Prime Minister, Edi Rama announced earlier in the week that the average salary in the country in two years will reach 900 euros (102 thousand ALL) or 54% more than the end of last year.

Economic experts and businesses claim that raising wages without improving productivity and reorienting the economy to a model that produces higher-value goods is likely to backfire.

For example, the initiative of the country's prime minister to increase the average salary by 54% in just two years, results that have not been produced even in a decade, without relying on the structural improvements of the economy, risks creating a spiral of inflation, wages.

The Bank of Albania announced that the salary increase last year exerted pressure on prices.

"In particular, the average salary in the private sector expanded by about 14% in annual terms during the last quarter of last year. This growth has supported the expansion of the disposable income of Albanian families, has fueled the expansion of family consumption and has helped the sustainability of economic growth. However, on the other hand, it has increased the costs of business production and facilitated the transfer of price increases from foreign markets to the domestic economy," said Bank of Albania Governor Genti Sejko at the media conference, after the decision to increase the interest rate. interest on March 23.

Wage growth was anemic in the last decade, in fact from the crisis of 2008 until 2020. Low wages continue to be the basis of the Albanian economic model, so their increase without leading the production cycle to a higher value risks producing inflation and not profits for employees./Monitor/