The biggest bargaining round of the year begins with a bang. The board of directors of IG Metall recommended on Monday to demand seven to eight percent more wages. The targeted increase relates to 2022 and 2023, which is why the union denies that it will increase inflation. Employers, on the other hand, reject high wage agreements because of economic uncertainty.
The wage round for four million employees in the metal and electrical industry is eagerly awaited. Some economists fear that this could fuel inflation, which is currently just under eight percent. In the 1970s, there were wage-price spirals, in which price increases and wage increases spurred each other up.
Arndt Kirchhoff, vice-president of the Gesamtmetall employers’ association, called for a sense of proportion on Sunday: “I can only warn against fueling inflation even further through excessive wage agreements in the industry that is most important for the German economy.”
IG Metall boss Jörg Hofmann rejects this: “We are not triggering a wage-price spiral,” he said in an SZ interview. In it he explained the composition of the wage claim that is to cover 2022 and 2023. Hofmann estimates the annual increase in productivity at 1.1 percent. This expresses, for example, how many more cars a worker produces thanks to better organization and technology than in the previous year. Hofmann adds a redistribution component to this, because the companies in the industry earned well. And the two percent price increase that the European Central Bank is targeting, but which is well below the current inflation rate. Calculated over two years, this amounts to at least seven percent.
“We have the welfare of the whole country in mind,” says Hofmann. “You can see that from the fact that we take the two percent ECB target inflation as a benchmark and not the current inflation of almost eight percent. Because then our demand would be in double digits.” However, it cannot be the case that workers should bear the brunt of inflation on their own.
Since consumer prices have skyrocketed, most employees in Germany have made a loss after deducting inflation. In 2021, negotiated wages rose by an average of 1.7 percent, but consumer prices by 3.1 percent. This year, the minus could be more drastic with annual inflation of seven percent. Above-average inflation is also expected for 2023.
Employers, on the other hand, point to the economic uncertainty. “The Russia-Ukraine war and China’s zero-Covid policy are putting a heavy strain on the economic environment,” explains Bertram Brossardt, Managing Director of the Association of the Bavarian Metal and Electrical Industry. A wage increase of up to eight percent threatens numerous jobs. “To talk about the situation in the metal and electrical industry is irresponsible,” said Gesamtmetall President Stefan Wolf after the Metaller request. “Companies are producing 15 percent less today than in 2018.”
According to a survey by the association, every second company has to reduce or postpone investments. According to this, every fifth company sees itself economically endangered. Above all, the price increases, which only one percent of the companies could fully pass on to the customers, put pressure on them.
However, the detailed figures paint a more optimistic picture. 25 percent of the companies state that they pass on the price increases sufficiently, a good 50 percent to a small extent – and 12 percent don’t know it yet. This is not all that different from a survey conducted by IG Metall among works councils.
No more classic wage increases since 2018
The union points out that the industry has more orders than ever before. The companies also made good profits. The metal companies in the Dax index would have had a net return on sales of 6.5 percent in 2021 – twice as much as in the pre-Corona year 2019. If the economy collapses unexpectedly, for example due to a gas delivery stop, you can take the collective bargaining round into account. Otherwise, however, “a strong wage increase” is needed, according to Jörg Hofmann.
IG Metall has not negotiated a classic wage increase since 2018. Partly she held back because of the Corona crisis. In part, she concentrated on individual payments that are intended to finance wage compensation for shorter working hours, for example. According to the companies, this has meant almost ten percent more money for employees since 2018.
Employer Kirchhoff insists on a differentiated collective bargaining result. This must do justice to the many companies that are in a deep crisis. But also to those companies that are still coping well with the difficult times, but are facing serious structural upheavals. The industry has been dealing with the transformation to decarbonization and digitization for some time.
Relief package should help
But employers and trade unions also agree on something: that the federal government will simplify its round of collective bargaining if it helps citizens with another relief package for the high prices. “We can’t solve everything through collective bargaining,” says union boss Hofmann. “The government must do more than it has done to combat inflation.” The IG Metall demands, among other things, an electricity price limit and a gas price cap. In addition, there should be another energy subsidy. Kirchhoff says: “It’s good that IG Metall recognizes that collective bargaining policy cannot compensate for exogenous price shocks like the ones we’re experiencing right now.” He expects the federal government to respond to inflation with significant relief.
What’s next? The districts are now discussing the proposal of the IG Metall board. The final wage demand comes in July. Union boss Hofmann is determined: “IG Metall is ready for a strike.”