AFP, published on Friday, November 18, 2022 at 4:21 p.m.
Nearly 4 million German employees in key industrial sectors, such as the automotive industry, won an 8.5% wage increase over two years on Friday.
The agreement sealed with employers eliminates the risk of hard strikes in a context of record inflation.
“Employees will soon have significantly more money in their pockets – and this in a sustainable way”, welcomed Jörg Hofmann, president of the powerful union IG Metall following a negotiating session ended at the end of the night.
IG Metall carried the demands of the 3.9 million employees of electrometallurgy, a strategic sector which includes thousands of automotive, electronics and machine tool companies, the pillar of the German industrial model.
The pilot agreement, concluded in Baden-Württemberg (south) and which should be valid in the other German regions, provides that this increase will take place in two stages in 2023 then in 2024. A tax-exempt “inflation bonus” of 3,000 euros has also been obtained.
The stalemate of the first weeks of negotiations, then walkouts organized in hundreds of companies in the country, threatened to turn into a major social conflict. And to further deteriorate the climate in a first European economy on the verge of recession.
However, the pill is difficult for employers to swallow: the agreement is “absolutely at the limit” of what is bearable for companies, said employer negotiator Harald Marquardt.
“Our businesses are under extreme pressure, weighed down by the pandemic, supply chain issues, this terrible war in Ukraine and energy prices which are an extremely stressful topic,” said Stefan Wolf, President of the employers’ organization Gesamtmetall.
The union was initially demanding an 8% wage increase over 12 months, its strongest demand since 2008.
– Signal –
The employees had increased the pressure in Germany: first by demonstrations for several weeks, then, since October 29 by “warning strikes”, work stoppages of limited duration which often accompany wage negotiations in this country .
If employers and unions had not reached an agreement, harder strikes of 24 hours threatened the country.
Employers’ representatives, who initially considered the level of salary increase unrealistic, considered that the risk was too great.
“24-hour strikes cost money and in the current situation, especially if we face a recession next year, it would have been irresponsible and pointless to waste money,” explained Stephan Wolf.
A first salary increase of 5.2% will take place in June 2023, followed by a rise of 3.3% on May 1, 2024.
This agreement might send a signal to other branches that are negotiating or will begin negotiations on salaries, such as the civil service sector. For some 2.5 million employees in this sector, the Verdi union is asking for a 10.5% increase.
This tussle took place when inflation exceeded 10% in October in Germany, unheard of since the beginning of the 1950s, due to the high cost of energy caused by the Russian war in Ukraine.
– Spiral ?-
The issue of wage increases is sensitive in the country as among its neighbors in the EU: the risk of a “price-wage loop” making inflation uncontrollable is often mentioned by employers.
The agreement reached on Friday is far from the definition of such a spiral, estimated Frédéric Ducrozet, chief economist at Pictet Wealth Management: taking inflation into account, real wage growth will be well below 8.5% and will not save German employees “a massive loss of purchasing power”.
Germany expects difficult months ahead: Berlin expects gross domestic product (GDP) to fall by 0.4% and inflation by 7% in 2023, according to the latest government forecasts.
Olaf Scholz’s team has released a colossal envelope of more than 200 billion euros to relieve households and businesses. This plan includes several components, including aid payments targeting the most vulnerable, and the introduction at the beginning of next year of subsidies capping energy prices until the spring of 2024.
