Germany's Top Union Wants 8% Wage Hike

Union says companies are posting solid profit, but wages are low

IG Metall, Germany's top trade union, said on Sept. 23 it wants an 8% pay hike for 3.6 million workers in the key metal and electronics industries, the biggest increase it has sought in 16 year.

Coming as the country slows, IG Metall's wage demand sets up bruising talks with employers that will likely set the tone for other pay settlements across Europe's largest, export driven economy. Current pay accords in the auto, IT and household goods industries expire on October 31 so the outcome will be closely watched by all sides.

The European Central Bank too will be concerned, anxious that salaries should not rise too fast and stoke inflation which has just begun to come off record highs, slipping to 3.8% in August from 4% in July.

The 15-nation eurozone contracted 0.2% in the second quarter of 2008 and is forecast to stagnate in the third, in which case it would just barely avoid a recession -- defined as two quarters of negative growth.

IG Metall for its part has based its 8% demand on the rising cost of living and solid profits posted by many German companies last year. "Profits have soared ... but (companies) have never spent less in wages," union president Berthold Huber was quoted as saying.

Martin Kannegiesser, head of the Gesamtmetall federation of metallurgy employers, promptly replied by saying: "IG Metall has lost its marbles."

German wages are negotiated sector by sector and unions have become much more militant following several years of pay moderation that allowed the economy to grow more than in neighboring countries. There have been several strikes this year, disrupting activity in the transport, postal and dairy sectors before higher pay was agreed to.

According to the Hans Boeckler foundation, an economic research group close to the unions, Germany is the only EU member where inflation-adjusted salaries fell between 2000 and 2008, by 0.8%. That has raised eyebrows in neighboring countries because it made the German economy more competitive, producing more goods at lower wage cost. A European Commission calculation cited by the German daily Die Zeit found that German wages would need to increase by 6% per year for several years to reach the level of other eurozone countries.

Copyright Agence France-Presse, 2008

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