Germany’s largest industrial union has announced it will seek a pay hike of up to four percent for its manufacturing workers. Although that number is smaller than past union demands, employers say it’s unrealistic.
IG Metall has kicked off what could prove to be noisy wage negotiations.
IG Metall said it will enter the wage negotiation round set to begin at the end of year with a demand for a pay raise of up to four percent for its 3.5 million metal and engineering workers. The union’s head, Jürgen Peters, said the pay hike would help stimulate weak consumer demand and buoy a struggling German economy.
“We believe that, with this, we can help spur a sustainable recovery of the German economy,” Peters (photo) said at the announcement of the demand on Monday in Frankfurt. He said the union’s board would make its final decision on Nov. 27.
IG Metall’s pay demands often serve as a benchmark for wage agreements throughout Germany and are even watched by unions in other European countries.
In Germany, pay negotiations for some sectors, including manufacturing, are made on an industry-wide basis. The announcement by IG Metall is the beginning of a complicated dance between unions and employers that generally involves many offers, counter-offers and late-night bargaining sessions and usually ends with a compromise agreement.
While the four percent figure is considered modest by IG Metall standards—during the last pay round, the union entered talks demanding a hike of 6.5 percent—employers have been swift to criticize the union’s decision, saying it was more than the sluggish economy, beginning to inch toward recovery, could support.
“IG Metall is awakening false expectations among the employees of a sector that is battling major economic difficulties for the third consecutive year and has lost more than 100,000 jobs since the last pay deal,” said Martin Kannegiesser, head of the Gesamtmetall employers’ association.
Employers have said any pay hike should not exceed increases in productivity, which are projected to be around 1.4 percent next year.
“Only if we stay under that will we employ more people in the long run than we do now,” Hans Werner Busch, another Gesamtmetall official, said in an interview with German television.
Chancellor urges restraint
German Chancellor Gerhard Schröder weighed in on the matter, urging metalworkers and employers to consider the economy when negotiating a new agreement. He told bankers at a gathering in Berlin on Tuesday that both sides “have a responsibility to the broader economy.” He warned both sides from having unrealistic expectations.
Schröder, who is pinning his political future on a resuscitation of the German economy and lowering unemployment, currently at ten percent, hopes to prevent a rise in labor costs that would discourage employers from hiring.
Michael Rogowski of the BDI industry group said if wage increases exceed one percent next year, employers will be reluctant to add jobs to their payrolls.
Germany’s non-wage labor costs are the third highest in Europe after Belgium and Hungary.
Despite the criticism by industry groups, IG Metall’s demand is seen as modest by many, who have called it the latest sign that union’s in Germany have fallen on hard times and are having to tone down some of their past militancy.
IG Metall, along with many other unions, has seen sharp membership declines in recent years and it has been under pressure to adapt to tougher economic conditions. Its bargaining position has also been weakened by a failed strike in May in eastern Germany for a shorter work week as well as an ensuing leadership battle that threatened to split the union.
“The union has become more realistic,” Ullrich Heilemann, an analyst with the RWI economics institute, told the Berliner Zeitung newspaper. “We should welcome that.”