The European Central Bank’s (ECB) latest wage tracker showed easing negotiated wage growth across the euro area in 2026, while recent data from Cyprus pointed to continued salary increases alongside persistent income disparities across the labour market.

The latest figures from the European Central Bank and Cyprus Statistical Service (Cystat) highlighted how wage growth, inflation pressures, labour market dynamics, income inequality, collective bargaining agreements and broader economic conditions continue to shape the outlook in Cyprus and across Europe.

According to the ECB’s headline wage tracker, negotiated wage growth with smoothed one-off payments is expected to reach 3.2 per cent in 2025 before slowing to 2.3 per cent in 2026.

The ECB said these calculations are based on coverage representing 51.3 per cent of employees in participating countries for 2025 and 41.9 per cent for 2026.

Compared with the March 2026 data release, the ECB said the 2026 figures remained unrevised.

The ECB’s tracker using unsmoothed one-off payments indicated negotiated wage growth of 3.0 per cent in 2025 and 2.6 per cent in 2026.

Meanwhile, the tracker excluding one-off payments showed a decline in negotiated wage growth from 3.8 per cent in 2025 to 2.6 per cent in 2026.

The central bank explained that the headline wage tracker is more suitable for understanding monthly and quarterly wage dynamics because it smooths bonuses, inflation compensation payments and other temporary elements over time.

By contrast, the ECB said the unsmoothed indicator provides a clearer picture of annual wage developments.

For 2026, the headline tracker averages 1.8 per cent in the first quarter, 2.1 per cent in the second quarter and 2.6 per cent in both the third and fourth quarters.

According to the ECB, the gradual increase during the year reflects the fading mechanical impact of large one-off payments made in 2024 but not repeated in 2025.

The ECB said this downward mechanical effect is expected to “virtually disappear” over the course of 2026.

At the same time, the institution warned that the “deeply uncertain economic situation” could still increase the role of one-off payments in future wage agreements, although this has not yet appeared in newly signed collective bargaining deals.

The ECB’s unsmoothed wage tracker pointed to a more stable outlook for negotiated wage growth in 2026, averaging 2.9 per cent in the first quarter, 2.6 per cent in the second quarter and 2.5 per cent in the remaining quarters.

The tracker excluding one-off payments is expected to remain broadly stable at around 2.6 per cent throughout the year.

According to the ECB, this signals more moderate dynamics in base wages compared with recent years.

Employee coverage within the ECB tracker stood at 45.6 per cent in the first quarter of 2026, 43.5 per cent in the second quarter, 39.5 per cent in the third quarter and 38.8 per cent in the fourth quarter.

The ECB also announced that wage tracker data for Austria have been expanded and now begin from January 2013.

The forward-looking horizon of the tracker remains unchanged until December 2026.

However, the ECB confirmed that the horizon will be extended to the first quarter of 2027 in the July 2026 release as additional agreements are signed and contract coverage increases.

The central bank stressed that the wage tracker should not be interpreted as a formal forecast because it only reflects currently active collective bargaining agreements.

It also cautioned that the data may be revised over time and may not perfectly mirror the ECB’s negotiated wage growth indicator.

For a broader picture, the ECB referred to its March 2026 staff macroeconomic projections, which estimate yearly growth in compensation per employee across the euro area at 3.4 per cent in 2026.

The ECB further explained that its four indicators capture different dimensions of negotiated wages and employee coverage.

The headline tracker incorporates collectively agreed one-off payments such as inflation compensation, bonuses and backdated pay, smoothing these over a 12-month period.

The indicator excluding one-off payments is designed to measure more structural and permanent negotiated wage increases.

Meanwhile, the unsmoothed indicator follows a methodology conceptually similar to the ECB’s official negotiated wage growth measure, although not identical.

The employee coverage indicator measures the share of workers directly covered by wage tracker data across participating countries and serves as a gauge of representativeness.

Against this broader euro area backdrop, new figures from Cystat showed that average monthly earnings in Cyprus rose to €2,605 in 2025.

However, the median salary stood significantly lower at €1,968, underlining persistent disparities in income distribution.

The distinction is considered important because average salaries can be distorted by high earners, whereas the median reflects the earnings level of a typical employee.

Cystat’s data for the fourth quarter of 2025 showed that average gross monthly earnings increased to €2,932, compared with €2,810 during the corresponding quarter of 2024.

This represented a year-on-year increase of 4.4 per cent, the statistical service added.

On a seasonally adjusted basis, earnings increased by 1.1 per cent quarter-on-quarter compared with the third quarter of 2025.

The figures suggest that wage growth in Cyprus remains stronger than the broader euro area negotiated wage indicators monitored by the ECB.

For the full year, average earnings in Cyprus rose by 4.9 per cent in 2025 after increasing by 5.1 per cent in 2024.

The data also revealed continuing differences in earnings between men and women.

Male employees recorded average earnings of €3,102, while female employees earned €2,718.

Compared with the fourth quarter of 2024, earnings increased by 4.2 per cent for men and 4.5 per cent for women.

The slightly faster growth among women partly reflects ongoing efforts to narrow the gender pay gap, although women continue to start from a lower earnings base.

As a result, the increase in female wages points more towards gradual convergence than immediate equalisation.

Cystat’s report also highlighted significant differences in earnings distribution among Cypriot and non-Cypriot workers.

Among Cypriot employees, 42.8 per cent were concentrated in the €1,500 to €2,999 income bracket.

By comparison, 47.7 per cent of non-Cypriot employees fell within the lowest earnings category below €1,500.

Differences were also visible across genders. Among women, 38.8 per cent were concentrated in the lowest earnings bracket. For men, 40.5 per cent were concentrated in the €1,500 to €2,999 category.

At the same time, non-Cypriot workers also recorded a larger presence in the highest earnings category above €6,000.

According to Cystat, 7.8 per cent of non-Cypriot employees were in this highest bracket, compared with 5.2 per cent of Cypriot employees.

Cypriot workers displayed a more balanced distribution across middle and higher income categories.

The figures published by the statistical service include basic salaries, the cost of living allowance (CoLA), overtime pay, holiday fund contributions and bonuses, including 13th and 14th salaries.

The latest data therefore suggest that while wage growth in Cyprus remains relatively robust compared with broader euro area trends, significant inequalities continue to shape the country’s labour market.

The contrast between headline salary growth and median earnings also underlines how broader wage increases do not necessarily translate evenly across the workforce.