Even two minimum wage increases will not compensate for inflation

The government announced that in 2023 the minimum wage will be increased twice. It is already visible today that even these two increases will not compensate for high inflation. From January, minimum wages will increase net by 14,2 percent, while inflation may even exceed 18 percent. The second increase in 2023 will mean a smaller increase in the minimum wage in 2024.

The minimum wage has gone up more than once

The government announced that in 2023 the minimum wage in Poland will increase exceptionally twice: in January and July. And this is to compensate for the effects of rising inflation. Next year is the election year in which parliamentary elections will be held (local elections will most likely be postponed to 2024). Therefore, the government is committed to a significant increase in the minimum wage.

According to the government's proposal, the minimum wage is to increase from PLN 3010 gross (PLN 2363 net) to PLN 3490 gross (PLN 2700 net) from January 2023 and again in July to PLN 3600 gross (PLN 2780 net). Such an increase means that the gross minimum wage will increase by 15,95% in January and by 3,15%. in July. It will be the second highest increase in the minimum wage in the last 20 years - only in 2008 it increased more, by as much as 20,3 percent. annually. However, all the increases in the last 20 years have resulted in a real increase in the minimum wage as inflation has ranged from 0 to 4 percent. y / y was lower than these increases.

Salary increases will not compensate for inflation

In 2023, the increase in the minimum wage will be nominally very high, but there are indications that this increase will not be able to compensate employees with the lowest incomes for the increase in inflation. Inflation in August was 16,1%. y / y and at the end of the year will be at an even higher level. Thus, it beats the planned one by 15,95 percent. a gross salary increase. Net salary (after paying taxes and contributions) will increase in this case by only 14,2 percent.

On the other hand, the July increase is to compensate for the increase in inflation in the first half of 2023. It is highly probable that inflation at the end of June 2023 will not fall below 10%. y / y, which will be the result of a large increase in the cost of living at the beginning of the year. Also, an increase in the lowest salary since July by 3%, only partially compensates for the loss of income of employees with the lowest earnings.

In this case, we compare the increase in the minimum wage to the general level of inflation. However, it should be remembered that people with lower incomes spend much more on food and fixed fees. And both of these items last year were more expensive than the official figure CPI inflation. It is also worth remembering that if in 2023 the minimum wage is exceptionally raised twice, it will result in smaller increases in 2024.

The amount of the minimum wage in Poland in individual years

Source: ZUS, eToro calculations

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.