Luxembourg’s wage indexation system, introduced on 27 May 1975, came at a time when the country was facing major economic challenges, particularly in its steel sector.
Between 1975 and 1985, Luxembourg was hit hard by the global economic crisis, while its steel industry struggled with overproduction and falling demand. In response, the government implemented a nationwide wage indexation system to protect workers’ purchasing power.
The mechanism automatically adjusts salaries when prices increase by 2.5%, linking wages to inflation.
Although indexation had existed since 1921, it had previously applied only to civil servants and railway workers. Extending it to all employees in 1975 was a key measure to shield households from the economic downturn.
To further manage the crisis and prevent widespread social unrest amid thousands of layoffs, the government created the Tripartite Coordination Committee – a dialogue platform bringing together employers, unions, and the state. Known simply as the Tripartite among Luxembourgers, this model led to a landmark agreement in 1979 that enabled the restructuring and modernisation of the steel industry.
Despite drastic measures – including large-scale cuts to production – employment in the steel sector halved by 1985, dropping to 13,400 jobs compared to nearly 27,000 in 1974.
Today, tripartite meetings remain central to Luxembourg’s social model, promoting cooperation and compromise in addressing the country’s socioeconomic challenges.
