IDA's salary forecast 2025

The most important parameter for salary development is supply and demand. Historically, statistics on salary development show a clear connection between low salary increases and high unemployment and vice versa.

This picture was clearly confirmed in 2024, when members employed in the private sector received an average increase of more than 4 per cent for the second year in a row.

The past two years, with pay growth of 6.5 percent and 5.5 percent, respectively, among private sector employees, paint a picture of a highly sought-after group.

According to an analysis prepared by IRIS Group and HBS Economics for IDA, in 2030 there will be a shortage of 13,000 educated candidates in the STEM fields.
 
With this in mind, it's safe to assume that the demand for IDA's members' labour is persistently high, even though unemployment  increased slightly for the entire labour market in 2024.

How IDA makes the salary forecast

The salary development for privately employed IDA members has been prepared on the basis of the following factors:

• The average of the past three years' salary development according to IDA's Salary Statistics and Industry Denmark's salary statistics for engineers.
• The Economic Council's (DØR) and the ministry of economic affairs' forecasts for salary development and inflation.
• The unemployment rate for engineers etc.
• Assessments of economic growth and uncertainties therein.mo

Over 80 per cent of the salary adjustments are made in the period from January to August. This means that the statistics largely show the salary increase in the year.

The forecasts regarding salary development and inflation in the table come from DØR's report on the Danish economy. DØR consists of a chairmanship of four independent economists. The members of DØR are representatives of the social partners, the Danish National Bank, the government and interest organisations.

Unemployment

To make the salary forecast, IDA has also looked at unemployment.

In December 2024, the unemployment rate for engineers was 2.5%, while it was 4.7% for MScs. For all IDA members in total, the unemployment rate was 3.1%.

Compared to the previous years, there is an increase in total unemployment of 1% for engineers and 0.5% for MScs. While the unemployment rate has increased, the overall level remains very low.

An analysis from IDA's chief economist

'The Danish economy is doing well and has been for so long that the labour market is repeatedly breaking records in the number of employees. With more than 3 million employees, there is a battle for labour.

We should be happy about that, because it is fortunately reflected in wages. According to the latest figures from the Danish Employers' Association (DA), the third quarter of 2024 ended with a nice wage increase of 4.8 percent compared to the same quarter the year before. In light of the historically high employment, this may not sound like much, but with inflation of just 1.3 percent in the same quarter, this is a pretty good real wage increase. This is also something we can see among our members, where wage growth reached a whopping 5.5 percent in a calculation that, however, cannot be fully compared to DA's.

With the wage increases we have seen in recent years, the big question is whether the trend will continue next year. The short answer is yes.

The clear expectation is that the progress in the Danish economy will continue, even though growth in the labour market is expected to slow down. For the same reason, there is also a prospect of lower wage growth than in the last few years. My expectation is that salaries among our members will increase by between 4.5 and 5 percent next year. With inflation expected to land at around 2 percent, there is still a prospect of a nice increase in real wages.

Despite continued high salary increases, I do not believe there is reason to worry about whether we are jeopardiaing our competitiveness. Foreign wage increases have exceeded ours in recent years, so there is ample room for us to continue to raise wages at home.

However, we cannot avoid the fact that there is considerable uncertainty and that the Danish economy may be affected by external factors. The most obvious threat lies south of the border, where a failing German economy could drag Denmark down. On the other side of the Atlantic, Trump may make reality of his threats of a trade war, which would put pressure on the entire European economy.

If any of these risks materialise, it is important to remember that the Danish economy has a strong starting point. Although several of the labour market indicators today are reminiscent of the period leading up to the financial crisis, the situation is fortunately completely different. At that time, the economy was characterised by unsustainably high consumption and housing prices that were out of step with the underlying conditions. We do not see such imbalances today.

However, this does not mean that everything is going brilliantly. One cause for concern is that productivity growth is driven by far too few companies.

But that doesn't change the fact that with record-high employment, there is more competition for labour, and when the product is scarce, the price rises.'