German Metal Workers Reach Deal Favoring Free Time Over Wages

Updated on
  • Pact for state of Baden-Wuerttemberg includes 4.3% pay raise
  • Deal stretching over 27 months might be adopted across Germany

Germany’s most powerful labor union IG Metall and employers reached a deal in the key state of Baden-Wuerttemberg that will grant workers a 4.3 percent pay increase, averting more disruption at industrial giants from Robert Bosch GmbH to Daimler AG.

The agreement, which stretches over 27 months and was hammered out after weeks of intense negotiations and bruising 24-hour walkouts, is marked by workers’ demands for better work-life balance. The regional unit of IG Metall turned down an offer for a 6.8 percent raise, settling instead on a deal that includes additional one-time payments and options to temporarily reduce working hours.

“The deal isn’t extremely good for unions, but it isn’t too bad either -- overall they managed to push through more of their demands than expected,” said Andreas Scheuerle, economist at Dekabank in Frankfurt. “If you add the one-off payments and narrow it down to wage growth over one year, that leaves you at about 3.8 percent.”

Monetary policy makers at the European Central Bank and economists have been watching the collective bargaining talks closely amid concerns about the longer-term impact of wage stagnation. If Germany, the euro region’s most prosperous country and largest economy, can’t significantly lift wages, that complicates efforts to boost inflation and eventually unwind stimulus measures.

For employers, the challenge was to meet demand for more free time while already suffering from a shortage of skilled workers in some areas. IG Metall, representing 3.9 million workers in the metal and electrical engineering sectors, had originally demanded a 6 percent pay increase over 12 months, as well as subsidized wages for employees who cut their hours to care for family members.

The agreement -- reached after a week of one-day walkouts that disrupted production across the nation -- can be described as “bearable” but also includes “painful elements,” Stefan Wolf, top negotiator for employer group Suedwestmetall, said at the joint briefing in Stuttgart. Rainer Dulger, president of employer organization Gesamtmetall, said the pact for Baden-Wuerttemberg will be proposed to be adapted for other German regions.

“In the broader European context, the fact that this wage settlement was agreed for a period of 27 months underlines that it is not the start of an upward wage-price spiral in Germany,” said Carsten Brzeski, chief economist at ING-Diba in Frankfurt. “In fact, spreading a 4.3 percent nominal increase over more than two years would actually create less not more upward pressure on wages compared with recent years.”

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