In 2022, inflation in the OECD, as measured by the consumer price index (CPI), reached levels not recorded since the 1980s, putting households’ budgets under pressure. While prices started to pick up already towards the end of pandemic, fuelled by supply bottlenecks, as well as rising demand coupled with public stimulus measures, the war in Ukraine exacerbated inflationary pressures. Since end of 2022, headline inflation has been declining in most countries, driven by restrictive monetary policy, lower energy prices and continued easing of supply chain pressures.
Inflation and cost of living
Inflation has reached levels not seen in the last four decades in most OECD countries, leading to a rapid increase in the cost of living and particularly affecting low-income individuals. When prices of essentials like energy and food rise rapidly, effective policy responses are crucial to safeguard living standards. They are also needed to share the burden from high inflation between households, employers and governments.
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Key messages
After a decline in the past two years, average annual real wages are now growing in several countries but in Q3 2023 remained below 2019 levels in most. On the other hand, real minimum wages are above their 2019 level in virtually all OECD countries, with an average increase of 14% across OECD countries (Dec 2019-Jan 2024). Learn how wages are adjusting in the cost-of-living crisis with OECD's new wage bulletin.
For most families their home is the most important and most widely owned asset, as well as the main source of debt. However, there are significant differences in house price developments across countries, but also within countries, across regions and cities.
Context
OECD headline inflation broadly stable at 5.7% in April 2024
Year-on-year inflation in the OECD as measured by the Consumer Price Index (CPI) remained broadly stable at 5.7% in April 2024, after 5.8% in March and 5.7% in January and February. Headline inflation declined in 24 of 38 OECD countries, with the largest falls of 0.5 percentage point (p.p.) or more, recorded in Estonia, the United Kingdom, Iceland, Luxembourg, Austria, and Slovenia. The remaining third of OECD countries recorded increases. Headline inflation was below 2.0% in seven OECD countries, the same number as in March.
Minimum wages
The most direct way to help workers in a time of high inflation is by increasing their wages. Minimum wages and other wage-setting measurements can help mitigate losses in purchasing power and ensure a fair distribution of the cost of inflation between firms and workers.
Minimum wages are struggling to keep up with rising inflation. Currently, 30 out of 38 OECD countries have a statutory minimum wage in place and minimum wages also exist in most non-OECD emerging economies. In the 8 OECD countries without a statutory minimum (Austria, Denmark, Finland, Iceland, Italy, Norway, Sweden and Switzerland), sector or occupation-level collective agreements include de-facto wage floors for large parts of the workforce.
Related publications
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Seasonal adjustment of CPIs during the COVID-19 pandemic and beyondLearn more
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Inflation has reached levels not seen in the last four decades in most OECD countries, hitting disproportionally the most vulnerable, low-income households. This policy brief discusses the functioning of minimum wages across OECD countries, and their role in the current high inflation context. The role of working-age benefits is the focus of another policy brief (OECD, 2022[1]) while a third one focuses on the challenges for the pension systems (OECD, 2022[2]).Learn more
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Inflation has reached levels not seen in the last four decades in most OECD countries, hitting disproportionally the most vulnerable, low-income households. This policy brief discusses how high levels of price inflation challenge pensions. The role of minimum wages and of working-age benefits in the current inflation context are the focus of two other OECD policy briefs (OECD, 2022[1]; OECD, 2022[2])Learn more
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The cost of living is climbing at an exceptionally fast pace across the OECD, with inflation in several countries reaching levels not seen in 40 years or longer. As steep increases in the prices of energy and food cause hardship for low-income people in particular, labour market and social policies have a crucial role in protecting living standards. They are also needed to share the burdens from high inflation between households, employers and governments. This policy brief discusses the resulting challenges of providing timely and targeted supporting for working-age individuals and their families.Learn more
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After a decline in the past two years, real wages are now growing on an annual basis in several countries but remain below 2019 levels in most. In Q3 2023, yearly real wage growth was positive in 25 of the 35 countries with available data at 1.4%. However, real wages were still below their Q4 2019 level in 20 countries, even as, on average across all 35 countries, they had recovered.Learn more
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These FAQs address common queries and concerns from purchasing power parities users.Learn more