price, europeThe consumer price index of Germany is lower than those of Italy and Greece (check here), and the average salaries of Germany are about double with respect to those in Italy and Grece (check here). These data seem to be in contradiction with the law of demand and supply: the higher the salaries the higher the demand, the higher should be the prices. Indeed this is what happen with the other northern european countries: high salaries apperar to be associated with high prices yet Germany seems to be an anomaly. How can it be explained?
My guess is that goods are relatively easy to enter Germany (high supply), but skilled people (who speak german and can work in Germany) are in low supply. There might be legal reasons too.
Not sure how reliable that website is, but the salaries are importantly after tax.
Germany’s health care system has compulsory insurance which acts as a tax but probably doesn’t get factored in to the sites statistics when looking at post tax income (as it’s not actually a tax), there are many things such as this that can make it hard to compare post tax income between countries. Or it might be that one country favours having more indirect taxation and another more direct taxation.
I think the sensitivity of the CPI to wages is actually even larger than what you suggest, and for different reasons too.
the law of demand and supply: the higher the salaries the higher the demand, the higher should be the prices
This seems like somewhat of a naive view for the purposes of macroeconomics. If you consider that a large part of prices are due to local inputs, then the consumer is the same people as the producer to a large extent. If wages are uniformly higher, then a retail location has to pay their staff more.
Thus, I think one of the few useful mechanisms to explain lower prices in Germany is efficiency, which is the result of a myriad of factors. A single laborer in retail would need to make a larger number of transactions in Germany in order for the prior arguments to be consistent.
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