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Pay lagging behind economic growth as unions demands ignored

AFP/The Local · 12 Sep 2010, 10:37

Published: 12 Sep 2010 10:37 GMT+02:00

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In 2010, pay should increase by an average of 1.5 percent according to UniCredit economist Alexander Koch, while the economy is expected to expand by at least twice that.

A study last week showed German pay rose by less than in any other European Union country in the past 10 years, boosting the biggest EU economy's competitive position by two spots to fifth in rankings compiled by the World Economic Forum.

Neighbouring countries like France take a dim view of such moderation, and want German workers to earn more so they will buy more imported products and so that German products are less competitively priced than their own.

Even German Chancellor Angela Merkel said last week that "workers who demonstrated good faith during the crisis must not be disappointed during the recovery."

But such kind words could fall on deaf ears because German bosses have warned that excessive pay raises could choke off what they say is still an uncertain recovery.

Talks now taking place in the steel sector could serve as a test. The IG Metall union is calling for a wage hike of six percent for 85,000 steel workers.

The majority of the 3.4 million workers on whose behalf IG Metall negotiates, in the auto, construction and machine tool sectors for example, will not hold new talks before their latest agreements expire in 2012.

Chemical workers must wait until the first half of 2011 to sit down at the bargaining table.

In addition, "for 2011, wage hikes in several important sectors have already been fixed," UniCredit's Koch noted.

The German economy, which posted impressive growth early this year after suffering its worst recession in the postwar period in 2009, may now begin to slow down, and wage demands might come too late.

Another obstacle is a trend towards offering one-off bonuses in place of permanent pay increases.

The Hans-Böckler Institute, a research group close to trade unions, says such a development has increased and warned, "If one-off bonuses come at the expense of raised wages, worker revenues will fall in the end."

And even if unions manage to obtain salary hikes for the industrial sector, a large part of the population, those who work in restaurants or part-time for example, will not benefit.

"In Germany, the percentage of low salaries has increased from 14 percent to 22 percent in a dozen years," said Arnaud Lechevalier, a researcher at the Marc-Bloch centre.

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Low salaries are defined as less than two-thirds the median pay for a given population.

Lechevalier said the government could do more to influence wages, even though officials note that German pay questions are settled directly between workers and bosses.

"The state could do much more if it wanted to, by fixing a universal minimum wage for example," he said.

AFP/The Local (news@thelocal.de)

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Your comments about this article

14:09 September 14, 2010 by William Thirteen
'If one-off bonuses come at the expense of raised wages, worker revenues will fall in the end'

tell that to my boss...
01:50 September 18, 2010 by rebelcowboy77
Tell me about it. I work for Boeing and out of the last three contracts that I've had to strike for. We have gotten a lump sum bonus, small annual raises, and negative colas(cost of living adjustments). The colas have been negative or zero for the past two years. The company has told us everytime the cola has been announced that even though the cola is negative, they have decided to not adjust our pay down to reflect the cola. Sie sind sehr gütig und gnädig. Wir, die bescheidenen Mäuse, für chesse Krümel warten. This next contract will be a fight over who has to pay more in health care. In the past contract negotiations, they have tried to take away health care for the retirees and remove the pension option for new hires. I wonder how long the strike will be next time.
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