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.
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
Driven by falling energy prices, OECD headline inflation slows to 4.4% in September 2024
Year-on-year inflation in the OECD as measured by the Consumer Price Index (CPI) slowed to 4.4% in September 2024 from 4.7% in August. Inflation declined in 27 of 38 OECD countries, rose in 6, and was stable or broadly stable in 5. Headline inflation stood at or below 2% in 17 countries in September, similar to the number in August (16). Inflation in Türkiye remained above 49%.
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.
