Chamber of Commerce director general Carlo Thelen pictured during a press conference in 2020 Library photo: Matic Zorman / Maison Moderne

Chamber of Commerce director general Carlo Thelen pictured during a press conference in 2020 Library photo: Matic Zorman / Maison Moderne

The automatic adjustment of wages to inflation should be abolished, the Luxembourg Chamber of Commerce said on Thursday, calling for more targeted measures to support low-income households.

The so-called indexation of salaries--a 2.5% increase in wages when a specific inflation index is reached--has long been a thorn in the side of businesses in Luxembourg as it leads to rising costs.

Wages were last adjusted in October but with high inflation another payment could already be triggered in 2022.

“The Chamber of Commerce calls for a complete deindexation of the economy and an abolition of automatic mechanisms that undermine the competitiveness of exporting companies,” the interest group said on Thursday.

Alternatively, the chamber said indexation should apply only to some income brackets or, for example, exclude fossil fuels from the basket of goods in support of a green transition.

Finance minister Pierre Gramegna (DP) also on Thursday of wages in parliament, however, and the government stood by the measure in tripartite talks with employee and employer groups on Monday.

Rising energy prices are already affecting company costs, the chamber said, with the threat of indexation creating a double burden. In addition, the cost of raw materials has increased connected to the global supply chain crisis and high demand from competing markets.

The price of industrial metals, for example, has risen 17% since January, the chamber said.

High salary costs could further jeopardise competitivity, the chamber said, also citing real estate costs and traffic as hampering growth. The Luxembourg Institute of Science and Technology estimates that traffic jams cost the economy €1.4bn a year, or 3.3% of GDP.

“The risk over time is to see Luxembourg's attractiveness decline both for companies wishing to set up there and for the workforce wishing to work there,” the Chamber of Commerce said in a .

The chamber said the government must work to uphold attractivity, for example through a competitive tax regime, as well as boosting digitalisation and the upskilling and reskilling of the workforce.

“Efforts to attract and retain talent from abroad must be continued, bearing in mind that the flow of cross-border workers will no longer be sufficient to meet growing demand,” the chamber said.

On Monday, the government had announced plans to make it easier for accompanying spouses of third-country nationals to get a when they move to the grand duchy.

Like the UEL business union, the chamber also said while the pandemic lasts. The government has pledged to continue paying partial unemployment and business grants until February 2022, but the UEL demanded a longer-term strategy on payments.