The cost of certain services increased “very fast” following the implementation of the last indexation
Luxembourg’s 2.5% indexation on wages and pensions in January had a pronounced impact on the cost of certain services, health and treatments, partially administered by the state, a report has found.
The July Statec “Regards 10”, reporting on the effect of indexation on underlining inflation, found that the cost of certain services increased “very fast” following its implementation. It explained that these increases were shouldered by consumers as early as the first two months after earnings were indexed.
However, it marginally pushed up inflation levels on a very short-term only, equivalent to 0.2 %.
“Because the direct impact is already relatively low, we expect that the effects in the next stage will be even lower. Therefore, the implementation of this last index only contributes marginally to the triggering of future indexations,” the report wrote.
Indexation is a mechanism used in Luxembourg in order to ensure that earnings remain in-line with rising living costs. Equivalent to a compulsory 2.5% increase, it is triggered each time the consumer price index rises beyond a set threshold.