Where Real Wages Rose & Where They Stagnated

In 2022, inflation has taken a serious bite out of (or even totally diminished) any salary increases workers might have received. For people in some countries, this scenario is not new, however, but has been a reality for decades. Stagnant real wages - wages that are not increasing after inflation - have plagued high-income nations like Japan, Italy and Spain for the past three decades. In Mexico, real wages have not only remained stagnant, but continue to be very low.

As seen in OECD real wage statistics that includes member and affiliate countries, Mexico had the lowest average annual full-time wage before tax out of the 36 countries surveyed at just $16,429 in 2021 (calculated at purchasing power parity). This means the average wage increased by only 6 percent since 1990 after adjusting for inflation.

Lower-income and middle-income countries like Mexico - not usually part of the OECD - are actually most at risk of having wage increases wiped out by inflation as runaway price increases more often happen in less developed countries. But even in countries without such a history of rampant inflation prior to 2022, economic stagnation can become severe.

In Japan, for example, average wages after adjustment for inflation and purchasing power are slightly lower today than those in Italy or Lithuania. Japan did have a comparable average wage with Canada, Australia or Germany in 1990, this is not the case anymore 30 years later as the latter countries have seen real wages increase between 34 and 40 percent, while Japan has not. Japan's problems have been chalked up to, among others, years of low economic growth, low inflation and deflation, a business culture that has been called adverse to change and a growing low-wage and short-term contract sector. Experiencing similar problems are some Southern European nations like Italy, Spain or Greece. On the other hand, the biggest success stories in terms of real wage growth can be found in Eastern Europe and the Baltic States, for example in Lithuania, Latvia, Estonia and the Czech Republic. Despite these increases, Eastern European wages remain among the lowest in the OECD.