Salary purchasing power climbing out of the pit dug by rapid inflation
The purchasing power of salaries in Finland, or salary growth after taxes proportional to the price level increase, has remained very modest since 2010. Between 2010 and 2020, the purchasing power of the average salary only grew by 4.5 percent.
english translation marko saajanaho
All of this growth from the previous decade was lost as a result of the rapid inflation in 2022 and 2023. During this time, purchasing power decreased by more than six percent, meaning a drop below its 2010 level. For 2024, provisional data indicates a growth of slightly over two percent from the previous year.
According to monitoring based on AkavaWorks’ proprietary income register data, the salary developments of highly educated workers have been a very close match for general salary developments. In our estimate, the real income of highly educated people in July to September 2024 grew two percent from the previous year but remain about 4.5 percent below their pre-inflation wave level. Purchasing power has also developed at the same rate as real income because no significant changes have been made to earned income taxation in the last few years.
The income register does not provide entirely comparable data for the salary developments of university research and teaching staff. According to my experimental calculations, the real income of this group has grown by nearly four percent annually in July to September 2024 but still remain 5.5 percent below their early 2021 levels. All in all, it appears the salary developments of university research and teaching staff have not outmatched the general trends.
The growth of purchasing power of salaries in 2025 depends on pay raises in the new collective agreements. In any case, the conditions for some sort of purchasing power growth are ideal as the increase of consumer prices is expected to slow down further, with salary taxation also not significantly increasing. Slow inflation also forecasts the European Central Bank’s decisions on lowering interest rates, which would quickly be reflected by mortgage interest, leaving more spending money in the wallets of those with housing loans.
In the longer term, the growth of work productivity at the entire economy level decides the growth rate of salary purchasing power that does not risk the profitability of businesses and consequently enables their continued operation. The poor development of work productivity is ultimately the reason why salary purchasing power in Finland has spent over a decade treading water.
