Inflation and indexation: dangers for the recovery and competitiveness of companies

Press release

The Statec Index Commission confirmed on 6 October that the half-yearly average of the national consumer price index linked to the 1.1.1948 base exceeded the threshold of 895.78 points in September. This triggered a new indexation.

UEL notes positively that this indexation will increase the purchasing power of our employees in these difficult times. On the other hand, given the importance of personnel costs in the cost factors of companies, this indexation will have an impact on the competitiveness of our companies (increase of the global annual wage cost of 800 million EUR), and in particular for the labour-intensive sectors, which is of concern to us.

All Luxembourg companies, whether they export goods and services or whether their market is limited to the national territory, are in a permanent competitive position with companies from neighbouring countries, which are not subject to the same constraints, such as the indexation of wages or the adaptation of the minimum wage. Moreover, in addition to private sector wages, the cost to the community of (para)public employment salaries and many public expenditures will increase (including family benefits).

In a context characterised by the rise in the price of many intermediate goods and energy products, the next few months are likely to be marked by significant inflation; this will impact on the profitability of companies already strongly affected by the crisis. The objective of UEL is not to affect the purchasing power of our employees, quite the contrary, but to limit the negative effects of uncontrolled and automatic inflation. To do this, it is necessary to tackle the problem at its source by de-indexing the economy completely.

Alternatively, limiting indexation to a certain level of remuneration would have the advantage of protecting the poorest while containing the overall cost of indexation. We do not find it logical that indexation increases the salary of a person at the minimum wage by EUR 550 per year, while a person at the contribution ceiling (EUR 11,000) will see his or her salary increase by EUR 3,300. As a result, this indexation system increases social inequalities.

Finally, the simultaneous announcement of the overrun of the deadline and the immediate payment of the instalment is to be deplored, as it puts companies in a delicate position, while they are still suffering the effects of the crisis. At the very least, companies would have appreciated it if the index had been triggered in the month following the month in which the overrun of the due date was noted.

Maintaining business activity and employment in the context of the end of the crisis is the objective that unites us all: the State, employees and companies.

Luxembourg, 11 October 2021

About UEL

UEL, the Union of Luxembourg Employers’ Associations, represents the Luxembourg private-sector businesses except for the primary sector and includes the Grand Duchy’s professional chambers and employer federations. As its members provide 80% of the jobs and produce 85% of the GDP, UEL wants to place business and its issues at the heart of Luxembourg society. UEL strives for a sustainable and prosperous economy for the country, its inhabitants and those who work there. It is committed to an attractive economy for investors and talents. For more information visit www.uel.lu

Press contact: 26 00 91 or press@uel.lu