Workers in Europe are still struggling to regain the purchasing power lost during the post-pandemic inflation surge, according to new analysis from the Indeed Wage Tracker. While some countries are close to recovery, others, particularly Italy and Spain, continue to face a significant gap.
Inflation across Europe surged in 2022 to levels not seen in four decades, peaking above 11% in the EU. Energy prices rose sharply following Russia’s invasion of Ukraine, pushing consumer prices higher than wages and eroding real income.
The Indeed Wage Tracker uses advertised wages on its platform to construct a cumulative real wage index, rebased to 100 in January 2021. Values above 100 indicate wage growth has outpaced inflation, while values below 100 show that purchasing power remains lower.
As of January 2026, seven major European economies still have real wages below pre-pandemic levels. The euro area index stands at 96.2. The Netherlands shows the strongest recovery at 99.7, followed closely by the UK at 99.5. Ireland and Germany both reach 99.1, while France is at 98.1. Spain aligns with the euro area average at 96.2, and Italy records the lowest level at 89.9. In practical terms, a worker earning €1,000 in January 2021 would see their real income drop to €899 in Italy after adjusting for inflation and nominal wage growth.
Pawel Adrjan, Director of Economic Research at Indeed, said the combination of rapid inflation and slow wage-setting cycles explains the persistent gap. “Wage increases in Europe are often locked in by multi-year collective bargaining agreements, which meant pay could not keep pace with the sudden spike in prices,” he told Euronews Business. Central bank interventions, including interest rate hikes by the European Central Bank, also cooled labour markets and weakened workers’ bargaining power, slowing wage recovery.
Responses differ across Europe. The US and UK largely closed the gap due to tight labour markets, high demand for workers, and significant minimum wage increases. Germany and the Netherlands caught up more gradually through delayed but robust collective bargaining, while France and Spain have seen recent wage growth begin to exceed inflation. Italy remains an outlier, with stagnant posted wages despite strong hiring demand, leaving many workers’ purchasing power well below pre-pandemic levels.
Adrjan also highlighted that lower-paid workers are most exposed to these delays, as their wages adjust less frequently and are closely tied to minimum wage floors. He warned that ongoing global crises, such as the conflict in Iran, could threaten recovery in countries that had nearly regained real wages. High energy prices from the latest disruptions may act as a second inflationary shock, potentially pushing full recovery to 2027 or 2028 in affected regions.
The analysis underscores the uneven pace of wage recovery across Europe and the continued vulnerability of workers to inflation shocks, highlighting challenges for policymakers seeking to restore household purchasing power.
