OECD report shows real wages will diverge across Europe's top 5 economies

According to the OECD's 2026 Employment Outlook report, real wage balances across Europe's five leading economies are diverging and reversing from country to country. Geopolitical uncertainties and energy costs are impacting the markets.

OECD 2026 Employment Report

The outlook for real wages varies from country to country among Europe's leading economies. According to the OECD's 2026 Employment Outlook report, real wages are expected to decline in Italy, Spain, France, and the UK while increasing in Germany between the first quarter of 2026 and the first quarter of 2027. The report stated that geopolitical uncertainties and rising energy costs could weaken labor markets.

Expected Sharp Decline in Italy

Among the five major economies, Italy is expected to experience the sharpest drop in real wages. Real wages are projected to remain 1.9 percent lower in the third quarter of 2026 compared to the first quarter of the year. Due to Italy's high dependence on imported oil and natural gas, the increase in energy costs is expected to erase gains.

The Outlook for Spain and France

In Spain, the decline in real wages is expected to be more limited compared to Italy, but of longer duration. By the end of 2027, Spain will be the country experiencing the highest loss. In France, the contraction is expected to remain more limited, bottoming out with a 0.5 percent decline in the second quarter of 2026.

Expectation of Growth in Germany

Germany stands out as the only country among the five major economies where real wages are expected to rise throughout the period. Real wages are projected to increase by 0.1 percent in the second quarter of 2026 and by 0.5 percent by the end of the year. This outlook is supported by a tight labor market and a shortage of skilled workers.