One might think that these times were made for trade unionists. Food and energy prices have been rising for months, and with Putin’s attack on Ukraine, inflation has climbed higher than it has in a long time. The employee representatives could now make a name for themselves as advocates for low and middle earners, who push through higher wages in collective bargaining rounds – and thus protect their people from the turmoil of war and inflation. Unfortunately, it’s not that simple.
The Ukraine war not only caught politicians cold, but also trade unionists. The wage negotiations for the approximately 680,000 employees in the chemical and pharmaceutical industry, which have just been adjourned without result, show this: the responsible trade union IG BCE had been preparing for months, and their demand for more wages sounded self-confident. In view of the inflation, “the percentage increase will reach a dimension that we have not experienced in recent years,” her negotiator said on February 22.
The war began two days later and everything has changed since then: Now there is only talk of a “bridge solution” that the union and employer want to agree on together. Employers seem unwilling to make any concessions so far, and they have arguments that should be taken seriously – if only because they will be heard more frequently in the coming months. The two largest rounds of collective bargaining are due in autumn. In the metal and electrical industry and in the federal and municipal public services, it is then about the salaries of a good seven million employees.
The core economic argument against strong wage increases, which could at least approximately compensate for inflation, is that of a threatening “wage-price spiral”, which is known from the 1970s, for example: as a result of the oil crisis, the trade unions, which were still very strong at the time, started with their concentrated bargaining power, in some cases double-digit wage agreements. This raised costs in the factories, which raised their prices further, which in turn caused the unions to demand higher wages, and so on. Inflation continued to be fueled, ultimately harming both companies and employees: Purchasing power fell and unemployment rose.
But are such situations really threatening again? That cannot be answered with absolute certainty, and yet a wage-price spiral is quite unlikely, for three reasons. First, unions have not only lost strength since the 1970s, they have also learned. The current demands are not in the double digits, but are based on inflation compensation, which would already be achieved at five to seven percent. Secondly, labor costs are by no means the largest item for companies; they are 13 percent in the chemical industry and 16 percent in industry as a whole. The pressure to return moderately higher wages to consumers in the form of price increases is therefore not quite as great.
Third, and most importantly, individual wage demands at a given point in time do not result in a spiral. It builds up over three, four, five years, leading economists are currently referring to this. The decisive factor is not whether the unions now push through a high degree. But that this will not become the rule and that the employee representatives will again accept lower qualifications in the next few years.
There are always good reasons for a little more money these days. Wages have risen only slightly in recent years, which is one of the reasons why inflation is now tearing such large holes in the wallet. Despite the crisis and uncertainty, many companies are still doing very well, especially in chemistry. Also: Employers like to emphasize the functioning “social partnership” in Germany – meaning the ability to ensure good working conditions together with the unions and without state interference. Now they can prove that this also applies in times of war and crisis – by not passing on the relief for their employees to politicians alone.