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IG Metall Wins 5.6 Percent Pay Increase in Bavaria

May 15 (Bloomberg) -- IG Metall, Germany’s biggest union, won a pay deal in Bavaria that exceeds the rate of inflation, setting a benchmark for a national accord and raising wages at companies from Siemens AG to Bayerische Motoren Werke AG.

The union and the Gesamtmetall employers group agreed to a 5.6 percent pay increase over 20 months for about 770,000 workers, in talks that ended early today. Prices will rise less than 2 percent in 2013 and 2014, according to forecasts compiled by Bloomberg. IG Metall has demanded a 5.5 percent one-year increase for its 3.7 million members nationwide.

The terms were “far-sighted and fair,” Gesamtmetall President Rainer Dulger said in an e-mailed statement. Negotiators brushed aside “dusty ritual to broker an accord at record speed.”

Higher incomes may help Chancellor Angela Merkel and Bavarian Prime Minister Horst Seehofer in an election year. The state’s voters go to the polls in a regional vote one week before national elections in September.

The union stepped up selective action this week in support of its pay position, including stoppages by 130,000 workers at 600 businesses yesterday. Amid weak economic growth, IG Metall and employers are taking into account regional industry strengths and weaknesses in weighing a national accord.

“Any agreement which avoids a labor conflict is one we welcome,” Michael Friedrich, a Berlin-based spokesman for Siemens, said by telephone. The pay agreement “is relatively high but still acceptable. Wage accords are always a compromise.”

Slow Growth

Germany’s economy grew just 0.1 percent in the first quarter, the Federal Statistics Office said today. The economy of the euro area, Germany’s biggest export destination, is slated to contract for the second consecutive year in 2013. Private consumption may grow by just 0.6 percent this year, the Economy Ministry said on April 25.

IG Metall workers in Bavaria will be paid 3.4 percent more starting July 1 this year and 2.2 percent more from May 1, 2014, the union said. The accord will expire in December next year.

“We welcome the agreement’s length, which gives us far more security in our planning,” Munich-based BMW spokesman Jochen Frey said, a view echoed by Siemens’s Friedrich. “We’re also glad that an accord was reached very quickly. It’s a wage increase in real terms but is manageable for the companies,” Frey said.

Unemployment in Bavaria in April fell to 3.9 percent. Germany reported an average rate of unemployment of 7.1 percent last month.

To contact the reporters on this story: Brian Parkin in Berlin at bparkin@bloomberg.net; Alex Webb in Munich at awebb25@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net

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