Central bankers love talking about austerity for ordinary people. Wage austerity is also a favourite topic of our Finnish central bank boss, Mr. Rehn, a former active Center Party politician turned public sector hawk. (A useful definition of “hawk” is a person who wants to limit and/or privatise basic public services, and reduce taxation.)
The main tasks of central banks in Europe is to keep inflation low at around 2% and make sure that currencies and banks are stable and safe.
Inflation in Europe is now at over 8% – it was already increasing before the Russian invasion of Ukraine, and now Finland is seeing more than 5% increase in consumer prices.
Fuel costs for filling a car tank has increased by more than €50 each time you visit the gas station and the cost of electricity has more than doubled!
… and big banks in Europe are as shaky as they were twelve years ago, with many stronger Nordic banks beginning to look a little risky because they are heavily exposed to real estate.
Given that monthly pensions and wages for the majority of Finns are around €1500 and €3500, then a 2% increase does not leave much on the table after taxes! Higher interest rates are also another cost being faced by ordinary folks who must borrow to buy their homes.
Naturally Central Bankers get another type of salary – around €300 000 and more each year depending on the country, and they too receive inflation increases each year. That high salary comes from our taxes one way or another. Do we really need to pay them that much, or are we just fooling ourselves that such people need to be highly paid? That will be dealt with in the next article to be published in the coming days…
Mr. Rehn received 2,3% increase in 2021 according to the central bank’s annual report – a little more than €6000 a year – or more than enough to cover his energy and fuel costs comfortably.
It is nice to be at the receiving end of a huge salary when working for the public sector, but remember that this cost is ultimately borne by ordinary folk who receive around one-tenth each year!
Furthermore, it is rather surprising that few people complain that the highly paid in the public sector also receive the same percentage salary increases when they are already really immune to inflation.