Blog Post

German wage negotiations

In the beginning of January I wrote about the impact of persistently low inflation on collectively bargained wages in Germany. Concluded negotiations in the banking, construction, printing, and federal state and municipalities sectors at the time pointed to lower wage increases in 2015 than in 2014, as did suggestions from employers’ associations that stagnating productivity and a low inflation environment would factor into the negotiation process. 

By: Date: March 17, 2015 Topic: European Macroeconomics & Governance

In the beginning of January I wrote about the impact of persistently low inflation on collectively bargained wages in Germany. Concluded negotiations in the banking, construction, printing, and federal state and municipalities sectors at the time pointed to lower wage increases in 2015 than in 2014, as did suggestions from employers’ associations that stagnating productivity and a low inflation environment would factor into the negotiation process.

On 24 February 2015, however, IG Metall, the largest union in Germany that often paves the way for wage agreements in the other sectors, concluded their 2015 bargaining round in Baden-Württemberg with a 3.4% wage increase starting in April and a one-off payment of €150 in March for 800,000 workers. The agreement will last for 12 months, and comes after the union first requested a 5.5% increase. IG Metall then reached a subsequent and similar agreement for 115,000 Volkswagen employees, and secured the Baden-Württemberg agreement for the metal and electrical industry across all regions. As seen in the updated table below, the wage hike represents a sizeable increase over the wage agreement from the previous year, which was 2.2% for a period of 8 months.

In the chemical industry, however, wage negotiations are at a standstill after a third round of bargaining came to a close on 12 March with no agreement reached. IG BCE, the union that represents 550,000 chemical workers, is asking for a 4.8% increase over a contract of 12 months. In the latest round of negotiations, the employers’ association countered with a 1.6% increase to last 15 months. Another round of negotiations is set to commence on 26 March, and it will be interesting to see if the chemical industry can follow the metal industry’s lead in securing a sizable wage hike.

The civil service union is also in the midst of bargaining for a 5.5% wage increase with a third round of negotiations that began yesterday, 16 March.  Meanwhile, the Insurance sector, demanding a 5.5% increase as well, begins negotiations on 20 March.

If German collective bargaining agreements can resist the influences of the current low inflation environment (0.1% in February) it would be a boon for a deflation-wary Euro area.  Indeed, last July even the Bundesbank backed the idea of wage developments that would support price stability in the Eurozone, noting that Germany has “close to full employment in a number of sectors and regions, and [is] seeing more and more reports of labour shortages. It is therefore only natural, and also to be welcomed that wages and salaries are rising more strongly than in the days when the German economy was in much poorer shape.”

While higher wages may be a hindrance for Germany’s export-oriented sectors, higher wages in Germany could compliment the ECB’s new efforts to increase inflation. It is also important that German wages grow more strongly to address the imbalances plaguing the Euro area and to support ongoing adjustment in Southern Europe.


Republishing and referencing

Bruegel considers itself a public good and takes no institutional standpoint. Anyone is free to republish and/or quote this post without prior consent. Please provide a full reference, clearly stating Bruegel and the relevant author as the source, and include a prominent hyperlink to the original post.


Warning: Invalid argument supplied for foreach() in /home/bruegelo/public_html/wp-content/themes/bruegel/content.php on line 449
View comments
Read article More on this topic More by this author

Opinion

France’s institutional system favours rebellion against its leader

The 'yellow vest' movement proves that France's political and budgetary centralism, as the source of citizens' feelings of abandonment and revolt, must be reformed.

By: André Sapir Topic: European Macroeconomics & Governance Date: February 19, 2019
Read article Download PDF More by this author

Working Paper

Greening monetary policy

The author proposes a tilting approach to steer the allocation of the Eurosystem’s assets and collateral towards low-carbon sectors, which would reduce the cost of capital for these sectors relative to high-carbon sectors. Central banks have already started to look at climate-related risks in the context of financial stability. Should they also take the carbon intensity of assets into account in the context of monetary policy?

By: Dirk Schoenmaker Topic: Energy & Climate, European Macroeconomics & Governance Date: February 19, 2019
Read about event More on this topic

Upcoming Event

Feb
21
13:30

Reforming decision-making for EU taxation policy

How should the EU taxation policy be reformed?

Speakers: Johannes Becker, Pierre Moscovici, Paola Profeta and Guntram B. Wolff Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

Universal basic income and the Finnish experiment

The preliminary results on the Universal Basic Income (UBI) experiment in Finland, and what they mean for the long-standing questions over the potential impact of UBI in developed countries.

By: Catarina Midoes Topic: European Macroeconomics & Governance Date: February 18, 2019
Read about event More on this topic

Upcoming Event

Feb
27
12:30

Diverging narratives: European policies and national perceptions

A look at the politicians' view of the EU.

Speakers: Pierre Boyer, Giuseppe Porcaro and Laura Shields Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article

Opinion

What can the EU do to keep its firms globally relevant?

There is a fear that EU companies will find it increasingly difficult to be on top of global value chains. Many argue that EU-based firms simply lack the critical scale to compete and, in order to address this problem, that Europe’s merger control should become less strict. But the real question is where the EU can strengthen itself beyond the realm of competition policy.

By: Georgios Petropoulos and Guntram B. Wolff Topic: European Macroeconomics & Governance, Innovation & Competition Policy Date: February 15, 2019
Read about event More on this topic

Upcoming Event

Mar
5
12:30

Saving the right to asylum

How can we improve the European asylum policy?

Speakers: Rainer Münz, Elina Ribakova, Marc-Olivier Padis and Jean-Paul Tran Thiet Topic: European Macroeconomics & Governance Location: Bruegel, Rue de la Charité 33, 1210 Brussels
Read article More on this topic More by this author

Blog Post

On Modern Monetary Theory

An old debate is back with a kick. The discussion around modern monetary theory first gained traction in the economic blogosphere around 2012. Recent interventions in the US and UK political arenas rekindled the interest in the heterodox theory that is now seeping into mainstream debates.

By: Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: February 11, 2019
Read article More on this topic

Blog Post

Whose (fiscal) debt is it anyway?

The authors map how much fiscal debt is in the hands of domestic and foreign holders in the euro area. While the market for debt was much more international prior to the crisis, this trend has since been reversed. At the same time, central banks have become important holders of fiscal debt.

By: Maria Demertzis and David Pichler Topic: European Macroeconomics & Governance Date: February 6, 2019
Read article More on this topic

Blog Post

The higher yield on Italian government securities is becoming a burden for the real economy

Francesco Papadia and Inês Gonçalves Raposo have recently written on Italian fiscal policy and the increase in the spread between Italian (BTP) and German (Bund) government. Since then, two developments have taken place: one good, and one bad. This blog post reviews them.

By: Francesco Papadia and Inês Goncalves Raposo Topic: European Macroeconomics & Governance Date: February 5, 2019
Read article More on this topic More by this author

Opinion

The EU needs a Brexit endgame

Britain and the EU must try to preserve the longstanding economic, political, and security links and, despite the last 31 months spent arguing over Brexit, they should try to follow a new path toward convergence.

By: Jean Pisani-Ferry Topic: European Macroeconomics & Governance Date: January 31, 2019
Read article More on this topic More by this author

Blog Post

After the ESM programme: Options for Greek bank restructuring

With the end of the Greece support programme, authorities now have scope to focus on the legacy of NPLs and excess private-sector debt. Two wide-ranging schemes are under discussion. They should be assessed in terms of required state support, likely investor appetite for problematic bank assets, and institutional capacity to manage a complex new organisation tasked with debt restructuring.

By: Alexander Lehmann Topic: European Macroeconomics & Governance Date: January 29, 2019
Load more posts