Indexation of income can mitigate inflation
October 22 2025, 21:30
Consumer goods in Armenia have recently become more expensive again. One mechanism to mitigate the effects of these price increases is the indexation of population income. Indexation refers to the growth of income driven by inflation. It is a mechanism that creates a link between public income and consumer prices. The goal is to prevent inflation from reducing people’s purchasing power.
Income indexation can be automatic, selective, or conditional, and contractual. Automatic indexation involves regular and continuous review of income at set intervals. Selective or conditional indexation applies to the income of specific population groups. Contractual indexation refers to the revision of wages stipulated in employment contracts in response to inflation.
Indexation is widely practiced around the world. For example, in several European countries—such as Belgium, Denmark, Iceland, Italy, and others—universal indexation is applied, where the income of the entire population is reviewed. In countries like Canada, Switzerland, France, and the United States, indexation is applied to specific social groups.
In Armenia, occasional revisions of minimum wages and pensions can be considered a form of indexation. However, there is no institutionalized mechanism in place.
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