Spending power dropped significantly in 2011

Small bump in wages cannot keep pace with prices

Last year’s modest one percent increase in wages could not offset a three percent jump in the costs of food, clothing and other consumer goods. The wage/price difference left Danish households with 4,300 kroner less to spend.

“This means that our income actually fell by 1.7 percent – about 4,300 kroner – when measured against 2011 prices," Danske Bank economist Lars Olsen told Politiken newspaper. “So even though we earned more, wages did not keep pace with prices, so we are actually poorer.”

Olsen said that public employees were particularly hard hit last year.

The numbers were actually worse then they appear on paper. The figures from Statistics Denmark’s show only pre-tax income. Taxes increased last year while the number of deductions fell, which reduced overall purchasing power by even more than indicated.

Olsen said the one bright spot in last year’s number was a reduction in interest rates.

He also said this year's outlook is just as bleak.

“Inflation is at the same level as it was in 2011, and wages are certainly not going to increase more than they did last year," Olsen said.

Those who decided to opt out of their early retirement plans (efterløn) will see a few extra kroner this year when they get back the money that they paid in to the system over the years. Some private employees are due a raise from agreements negotiated earlier this year, but those increases don't kick in until 2014.