Wages and pensions are set to rise in Luxembourg by 2.5% from 1 August, the economy minister has announced in a tweet.
Tweeting at 8.07 on Tuesday morning, Etienne Schneider wrote “Indexation déclenchée: il est confirmé qu’au 1er août 2018, les salaires, traitements et pensions augmentent de +2.5%.” (Indexation triggered : it is confirmed that from 1 August 2018, wages, salaries and pensions increase by +2.5%).
Indexation is a sliding wage mechanism whereby the Luxembourg government connects earnings to inflation to preserve the purchasing power of workers. Employers are obliged under law to apply the increase to the earnings of staff. The last indexation was applied in January 2017.
Luxembourg statistics body Statec had in early May forecast an indexation of earnings some time between July and September 2018. It said the rise was a result of new increases in fuel prices.
The mechanism, while popular with earners, is strongly opposed by Luxembourg’s company union, the UEL, because of the financial strain it places on employers.
The sliding wage scale was first introduced in Luxembourg in 1921, based on a basket of 19 consumption articles, which rose to 36 products in 1948. Today it covers around 8,000 goods and services. The grand duchy is the only country within the European Union, besides Belgium, to peg earnings to inflation in this way.