The pandemic, Russia-Ukraine conflict, elevated energy expenses, historic price surges, and further pressures have strained earnings throughout Europe. Higher living costs have weighed heavily on countless households.

Inflation-adjusted pay, which factors in rising prices, dropped in one-third of the European nations reviewed over the five-year span ending in early 2026.

So which countries experienced the sharpest drops in real earnings between the opening quarters of 2021 and 2026? Where did inflation-adjusted wages climb the fastest? What explains why certain nations bucked the overall euro-area trend of decline?

The OECD Employment Outlook 2026, covering 27 European countries though not every EU member, shows cumulative real-wage reductions in nine nations from the first quarter of 2021 to the first quarter of 2026.

Effects of the 2022-2023 cost-of-living shock

"Inflation-adjusted earnings remained influenced by the 2022-2023 cost-of-living shock even into Q1 2026," Andrea Bassanini, editor of the OECD Employment Outlook, told Euronews Business.

"Because sectoral collective agreements are renewed on staggered multi-year cycles, negotiated pay took considerable time to rebound and has not fully recovered."

He added that statutory minimum wages have largely tracked price increases.

Real wages dropped more than 6 percent in Italy

Italy recorded the steepest fall, with real wages down 6.1 percent. Ronald Janssen, former chief economist at the European Trade Union Confederation and the Trade Union Advisory Committee, noted that employers repeatedly postponing fresh deals and the reduced leverage of unions helped drive the decline.

Michele Bavaro, an economist at Italy's Scuola Normale Superiore, highlighted that Italy's traditionally lengthy contract-renewal delays slowed the rebound in nominal pay after inflation rose.

Richard Grieveson and Meryem Gökten of the Vienna Institute for International Economic Studies also cited weak productivity, modest economic expansion, and relatively sluggish nominal-wage responses in Italy.

Czechia and Sweden posted declines of 5.8 percent and 4.8 percent. Real wages fell 2.1 percent in Denmark and 2 percent in Spain. Across the eurozone the drop averaged 1.8 percent.

Slovakia, Finland, Ireland, and Switzerland registered modest reductions between 0.7 percent and 1.4 percent.

Rising inflation and employment-stability worries

Ronald Janssen cited the rapid inflation spike of 2021-2022 across the eurozone.

"Although later bargaining rounds sought to restore lost purchasing power, workers and unions faced weaker negotiating positions amid prolonged economic stagnation, concerns over industrial decline linked to Chinese competition, and tariff barriers limiting access to a key export market," he told Euronews Business.

In Belgium real wages stayed flat, while France and Estonia posted tiny gains of 0.1 percent.

Turkey emerges as a clear outlier

Turkey appears as the clearest outlier, posting the largest real-wage gain at 78.6 percent even as inflation reached 32 percent in mid-2026.

"Turkey's 79 percent real-wage rise is mathematically accurate yet exaggerates the improvement in living standards," Grieveson and Gökten told Euronews Business.

"Real wages began from a depressed base in 2021 after the 2018 currency crisis, so part of the increase simply reflected recovery."

They added that the main driver during 2022-2023 was two large minimum-wage increases tied to electoral timing.

"Following the 2023 elections, adjustments reverted to once a year and have since lagged behind inflation," they noted.

They also raised questions about the accuracy of official Turkish inflation statistics, referencing opposition claims of manipulation.

Hungary records the strongest EU growth

Hungary ranks second with 29.8 percent growth and stands out inside the EU. Poland saw a 16.5 percent rise. The top three performers all lie outside the euro area.

"Hungary's robust real-wage growth over five years stems from structural labour shortages, state wage policies, and a post-inflation recovery phase," Péter Virovácz, chief economist at ING, said.

He explained that the strong performance reflects labour-market tightness, an assertive minimum-wage approach, ongoing wage convergence, and workers restoring purchasing power after the inflation shock rather than an unusual productivity boom.

Inside the eurozone, Lithuania posted the largest gain at 14.8 percent. No other country reached double digits. Real wages rose 7.4 percent in Latvia, 6.6 percent in Slovenia, 5.6 percent in Portugal, 4.7 percent in Greece, and 4.1 percent in Luxembourg.

Largest economies: UK tops real-wage gains

Among Europe's five biggest economies the UK led with a 3.6 percent increase. Real wages advanced less than 1 percent in Germany and France, at 0.9 percent and 0.1 percent. Italy suffered the largest drop among all nations examined, while Spain recorded a 2 percent decline.

"One key element is the trajectory of statutory minimum wages, which outpaced inflation by government choice in Germany and the UK and roughly matched inflation in France and Spain," Bassanini said.

Grieveson and Gökten observed that the UK's relatively flexible wage-setting framework and ongoing hiring difficulties enabled nominal pay to adjust faster to inflation than in several eurozone peers.

The report notes that its first-quarter 2026 figures predate the latest energy-price jump that followed joint US-Israeli strikes on Iran and Tehran's reply.