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Inflation delivers wage earners 1,000-euro hit

Salaries don't stretch as far as they used to.

Rising costs generally hit low-income households more than other groups. Image: Henrietta Hassinen / Yle

Inflation is reducing consumers' spending power in Finland at an alarming rate, as salaries are not keeping up with prices, experts told Yle.

Finland has not witnessed a similar erosion on real wages since the 1970s. This year average wages will lose buying power equivalent to 1,000 euros.

8% inflation

Wages are not keeping pace with inflation, which has been around eight percent over the past few months. This week Statistics Finland reported that real income dropped by nearly five percent during the second quarter compared to the same period last year.

"Real wages haven't dropped this much since 1977," said Jukka Tapio of Statistics Finland. "Wage earners' purchasing power is decreasing at an alarming rate."

Between April and June real wages grew by just two percent.

"It's a dramatic change," said Mikael Kirkko-Jaakkola of the Taxpayers Association of Finland (TAF).

The association estimates that real take-home income for average earners will see an overall drop of three percent this year compared to 2021.

"Average earners will have some 1,000 euros less to spend on goods and services than last year," Kirkko-Jaakkola explained.

Inflation is moreover expected to accelerate towards the end of the year, as it stood at 7.8 percent in July.

Paying more for power

As in the rest of Europe, electricity bills are soaring in Finland. People living in electrically-heated houses are expecting a tough winter as energy prices continue to rise. This month many households have received notices from their utility companies informing them of significant price increases.

"It's very probable that purchasing power will drop even more than we're now expecting it to. A lot hinges on how energy prices develop," Kirkko-Jaakkola added.

He noted that climbing inflation is particularly hitting households who use a lot of electricity and rely on their cars to get around.

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