Although citizens’ salaries have increased in monetary value, their purchasing power is falling rapidly. In the last quarter of 2025, the gap between real and nominal wages was -17% and has widened over the past year. At the beginning of 2023, this difference was lower, at only 12%. Since the basis of comparison is 2020, each quarter reflects accumulated inflation, further increasing the gap between real and nominal wages.
These data show that living standards are coming under pressure as higher wages have failed to offset rising costs of living, leaving consumers with significantly weaker purchasing power than at the beginning of the decade. Price increases are moving at a much faster pace than income growth. Another factor is the lag in the labor market. While employers are raising nominal wages to retain staff, these increases often fail to fully offset the rising costs of living that have occurred in previous months.
Fiscal policies also play a negative role through the phenomenon where nominal wage increases move individuals into a higher tax bracket, causing a good portion of the increase to go to taxes, while real purchasing power continues to shrink. Successive shocks to supply chains and currency instability have caused the real appreciation of money to decline. The difference between real and nominal wages is also deepening because their growth did not come from productivity in the economy, but from labor force pressures. The increase in wages by decisions further stimulated price increases, actually reducing the real value of wages. (Monitor.al)