A tripartite meeting has been convened by the government to address the issue of price increases. Wage increases should be on the table, as a double indexation should take place in 2022. (Photo: Romain Gamba/Maison Moderne/Archives)

A tripartite meeting has been convened by the government to address the issue of price increases. Wage increases should be on the table, as a double indexation should take place in 2022. (Photo: Romain Gamba/Maison Moderne/Archives)

Against the backdrop of the post-pandemic era and the war in Ukraine, inflation is skyrocketing, suggesting that wages will be indexed in April or May, and then again before the end of the year. 

This will put pressure on companies. However, shifting indexation, a mechanism used in the past, does not seem to be on the table.

With inflation, and in particular energy prices, soaring, the next round of wage indexation could be triggered even earlier than expected. In its latest news item on the subject published on 16 February 2022, Statec forecast in its central scenario a first indexation in the second quarter of 2022, then a second at the beginning of 2023. In its so-called "high scenario", it even forecast . With the Russian invasion of Ukraine and an even more significant rise in energy prices, the latter projection is becoming increasingly likely.

International competition

Faced with such a surge in energy prices, the government decided on Thursday to convene a tripartite meeting on the subject. In view of the pressure that a potential double indexation in the same year represents for companies, the question of wages should be on the table. "The challenge for companies is great," said the business union UEL’s director Jean-Paul Olinger. "We must not forget that companies are in international competition and that other countries do not necessarily adjust wages as regularly.”

Without making any proposals, the director of the Union des entreprises luxembourgeoises believes that it is "up to the government to take the lead".

But what can the government propose to avoid the shock of indexation for companies? A 1963 law allows for the triggering of the next indexation bracket in the event of cumulative inflation of more than 2.5% since the last indexation bracket. This then results in the automatic indexation of salaries from the following month.

Indexation shifted several times

In the past, the government has repeatedly postponed the increase in salaries after the index bracket has been passed. This was the case in 2012: the threshold was exceeded in February 2012 and did not lead to an adjustment in March, but in October. The same was true for 2013, when the threshold was exceeded in February but payment was delayed until October.

In addition, between 2006 and 2008, several shifts in the adjustment were decided due to the sharp rise in oil prices. In the early 1980s, following the high inflation caused by the two oil shocks, the number of instalments triggered per year was limited several times by the state in 1981, 1982, 1983 and 1984.

However, in order to shift the indexation of wages, a law must be passed. The agreement of the tripartite must be obtained beforehand. However, during the debate in the Chamber on Thursday afternoon on the subject, no parliamentary group ventured to pronounce itself in favour of such an option.

A sensitive subject for the unions

For OGBL president Nora Back, postponing wage indexation is a "no go". For LCGB president Patrick Dury, "the price increase is not due to the index, but to the post-Covid recovery and the war in Ukraine. These effects must be addressed first. If we mitigate inflation, we won't have an index bracket."

Even Jean-Paul Olinger refrains from calling for the implementation of such a mechanism, simply recalling that it "existed in the past".

If it has indeed existed in the past, it now seems unlikely that such a hypothesis will be put on the table during the next tripartite, when legislative elections are due in 2023.

This story was first published in French on . It has been translated and edited for Delano.