Berlin IG Metall is demanding eight percent more money in the metal and electrical industry, 10.5 percent are demanded by Verdi and the civil service association for the public sector. Negotiations on new collectively agreed wages are now also beginning in the chemical industry.
However, the industrial union IG Bergbau, Chemie, Energie (IG BCE) does not want to get into the bidding competition in the collective bargaining round for the chemical-pharmaceutical industry. Instead of high demands, it is the result that counts, says IG-BCE negotiator Ralf Sikorski. On Sunday, the union and the employers’ association BAVC resume the chemical wage round that was suspended in April.
At that time, both sides had agreed on a “bridging payment” of 1,400 euros, now negotiations are taking place on how to compensate for inflation for employees without suffocating the companies. Because the business expectations in the chemical industry fell in September to the worst value since 1991, as the Ifo Institute announced on Friday. Both sides are called upon to deal with the crisis mixture “responsibly”, says Sikorski.
This also applies to the other sectors. But in the metal and electrical industry with its 3.9 million employees, the second round of negotiations did not bring any rapprochement.
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IG Metall boss Jörg Hofmann points out that meeting the eight percent requirement would cost companies 16 billion euros, while companies alone would have paid out 27 billion euros in dividends. There is “a lot of thermals” among members and the union is preparing for a labor dispute, Hofmann said.
>> Read the interview with the overall metal President Stefan Wolf here: “Order backlogs are melting like ice in the sun”
Verdi and the civil servants’ association have made the highest demand to date with 10.5 percent for the 2.5 million civil servants at the federal and local governments. Negotiations begin in January. A decision will therefore be made promptly on the wages of a total of around seven million employees. Does this set the dreaded wage-price spiral in motion?
“So far, the collective wage development is still moderate,” says Hagen Lesch, collective bargaining expert at the employer-related Institute of German Economics (IW). With the new degrees, however, the momentum will pick up noticeably. The wage trend that is emerging indicates “that the underlying inflation will continue to intensify in the coming year,” writes Ralph Solveen, Deputy Head of Economic Research at Commerzbank.
Collective bargaining could drive up prices
In fact, a clear increase in collectively agreed wages can already be observed. If you take into account the wage agreements reached in the first half of the year and the increases already agreed in previous years for 2022, the wages will increase nominally by 2.9 percent this year, according to the Economic and Social Science Institute (WSI) of the Hans Böckler Foundation, which is close to the trade union calculated.
If one only takes into account the deals made in the first half of the year, which were already impacted by the war in Ukraine and sharply rising prices, the plus is even 4.5 percent. Solveen writes that this is significantly more than the average wage increases over the past 20 years. In the past year, negotiated wages rose by only 1.7 percent.
However, in view of the high inflation, the economy as a whole is likely to see real wage losses for the second year in a row. Last year, inflation-adjusted negotiated wages fell by 1.4 percent, according to the WSI.
When it comes to inflation, there will probably be a seven in front of the decimal point in the coming year
For the current year, the economists at Deutsche Bank expect wages to increase by three percent and for the coming year by at least 4.5 percent. Taking into account possible special payments, which the federal government wants to make tax and duty-free up to an amount of 3,000 euros, there are actually even six percent possible.
>> Read here: “Biggest Destroyer of Prosperity” – Bundesbank raises inflation forecast for 2023
But even this plus would probably be eaten up by inflation. In September, the inflation rate rose to ten percent. And with a view to the expected inflation for 2023, he thinks it is “probable that there will be a seven before the decimal point at the end of the year,” said Bundesbank President Joachim Nagel on Thursday at the sidelines of the autumn conference of the International Monetary Fund (IMF) in Washington.
Nevertheless, economists warn that wage developments could push up prices further. Solveen expects that industries with a strong focus on the domestic market in particular have a good chance of passing on the higher wage costs to their customers. Significant increases in tariffs in the public sector would also push up inflation, as it is expected that many public bodies will increase their fees in view of the rising costs. If Verdi and the civil service association were to be able to push through their demands for the public service one-to-one, this would mean additional costs of at least almost 17 billion euros a year for the federal and local governments.
“At least in our industries, I don’t see the issue of wage-price spirals at all.”
(Photo: dpa)
With their demand for the public service, the unions sent a “fatal signal” to other industries, says IW expert Lesch. The impending recession is less noticeable in the public sector because you can simply increase debt or raise fees. The job risk is also lower than in the private sector. But that doesn’t mean that savings shouldn’t also be made in the civil service. “Ultimately, everyone has to bear the loss of prosperity, so the public service cannot simply opt out,” emphasizes Lesch.
>> Read here: Lifeline short-time work? Why the hopes of companies are deceptive
Lesch also sees good opportunities for high degrees in other sectors. The looming recession could slow down the employee representatives’ offensive. However, if the downturn is cushioned by short-time work in terms of labor market policy, the trade unions would have to pay little heed to the economy.
IG-BCE negotiator Sikorski sees no signs of a wage-price spiral, at least in his sectors. Due to the rise in energy prices, the proportion of personnel costs in the chemical industry has fallen to 12.3 percent.
The union is sticking to its demand for a “sustainable increase in purchasing power”, even if the inflation rate in February, when the demand was made, was “only” 5.2 percent. However, according to the union’s ideas, the preservation of real wages is to be achieved through a clever mix, which can include, for example, a percentage increase, fixed amounts and state-sponsored special payments, so that the permanent burden on the company remains within limits.
And it should reach the most with those employees who need relief the most. If both sides deal with the situation responsibly, a conclusion could already be reached by the end of the negotiations scheduled for Tuesday.
More: The Chief Economist: Social Security is the big winner from inflation