The Great Wage Divergence: Who is Really Winning in Europe?
For many workers across the European Union, the numbers on their paychecks have been climbing. Between 2020 and 2025, hourly gross wages and salaries in the EU rose from €21.5 to €26.2, marking a growth of 21.9%.
However, a closer gaze reveals a more complex reality. Even as nominal wages increased, consumer prices for goods and services surged by 25.6% over the same period. This gap means that cumulative real wages actually declined by 3%, eroding the overall purchasing power of households.
The ‘Catch-Up’ Effect in Eastern Europe
One of the most significant trends is the “catch-up” effect, where countries with historically lower wages find it easier to achieve rapid growth. For example, Bulgaria saw wages rise from €5.7 in 2020 to €10.5 in 2025.
This trend is mirrored in other non-euro area countries. Serbia (25.4%), Croatia (21.1%), and Lithuania (21.1%) all recorded real wage increases of over 20%. Other nations like Romania (19.7%), Hungary (18.8%), and Poland (17.8%) also saw real growth between 15% and 20%.
While these gains are substantial, the gap remains wide. As of 2025, Luxembourg maintains the highest hourly wage at €49.7, compared to Bulgaria’s €10.5.
The Struggle of the ‘Big Four’ Economies
In stark contrast to the growth in the East, the EU’s top four economies all experienced real wage declines. Italy suffered the most significant drop at 9.2%, making it the highest decline across Europe.
Spain followed with a 5.9% decrease, while Germany (-3.2%) and France (-3.3%) fell slightly below the EU average. In Italy, the struggle was particularly evident in nominal growth, which was the lowest in the region at just 9.5%.
Inflation vs. Nominal Growth: The Hidden Battle
To understand the real-world impact on workers, one must compare nominal wage growth against inflation. Some countries saw staggering nominal increases—Bulgaria (84.2%), Hungary (82.7%), and Romania (73.1%)—but these were offset by very high inflation rates of 34.1%, 53.7%, and 44.6%, respectively.
Conversely, in countries like France and Malta, inflation remained below the EU average, yet wage growth still failed to keep pace, leading to a decline in real terms.
Bridging the Gap: Equality and Inclusive Growth
Addressing these disparities requires more than just nominal raises. The EU Gender Equality Strategy 2020-2025 emphasizes the need for equal participation and opportunities in the labour market, including equal pay, to ensure a “Union of Equality.”
This aligns with broader goals for inclusive growth, similar to the framework established by the Europe 2020 Strategy, which sought to promote smart and sustainable growth across all member states.
By combining targeted measures with gender mainstreaming and intersectionality, the EU aims to remove structural inequalities that prevent women and men from pursuing their chosen paths regardless of their diversity.
Frequently Asked Questions
What is the “catch-up” effect in wages?
The catch-up effect occurs when countries with lower initial wage levels experience faster growth than wealthier nations because it is economically easier to increase wages from a low base (e.g., €5.7 to €10.5) than from a high base.
Why did real wages decline if gross wages increased?
Real wages decline when the rate of inflation (the increase in consumer prices) exceeds the rate of nominal wage growth. In the EU, while gross wages grew by 21.9%, prices rose by 25.6% between 2020, and 2025.
Which European country had the highest real wage growth?
Bulgaria had the highest real wage growth, with a cumulative increase of 37.4% between 2020 and 2025.
Join the Conversation
How has inflation affected your purchasing power over the last few years? Do you think the “catch-up” effect will eventually close the gap between Eastern and Western Europe?
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