Workers represented by IG Metall attend a 2008 rally for higher pay. Sean Gallup, Getty Images

German Metal Workers Reach Landmark Labor Deal to Lift Wages

The agreement between powerful labor union IG Metall and employers was hammered out after weeks of intense negotiations and stretches over 27 months.

Germany’s most powerful labor union IG Metall and employers reached a deal in the key state of Baden-Wuerttemberg that will grant workers a 4.3% pay increase, averting more disruption at industrial giants from Robert Bosch GmbH to Daimler AG.

The agreement, which stretches over 27 months and was hammered out after weeks of intense negotiations and bruising 24-hour walkouts, includes additional one-time payments as well as options to temporarily reduce working hours, IG Metall’s regional unit and the employer organization Suedwestmetall said at a joint press briefing on Tuesday. The drawn-out struggle in recent weeks had stoked concerns about the broader economic fallout from stagnating wages in Europe’s largest economy.

“We’re glad that we could reach a compromise after negotiating some 13 hours today that we can describe as bearable, but that also includes painful elements,” ElringKlinger AG Chief Executive Officer and Suedwestmetall’s top negotiator Stefan Wolf said at a press briefing in Stuttgart.

Monetary policy makers at the European Central Bank and economists have been watching the collective bargaining talks closely amid concerns about the longer-term impact of wage stagnation. If Germany, the euro region’s most prosperous country and largest economy, can’t significantly lift wages, it would complicate efforts to boost inflation and eventually unwind stimulus measures.

IG Metall, representing 3.9 million workers in the metals and electrical engineering sectors, had demanded a 6% pay increase over 12 months, encouraged by robust economic growth and surging corporate profits. The union also pushed for subsidized wages for employees who cut their hours to care for family members. This complicated negotiations since many German companies suffer from a shortage of skilled workers in some areas.

Employers had offered a higher raise of 6.8% over 27 months and claimed subsidized wages would discriminate against those already on flexible contracts who receive no subsidies. Negotiations resumed Monday after a week of one-day walkouts that disrupted production across the nation including at BMW AG and industrial gases company Linde AG.

Rainer Dulger, president of employer organization Gesamtmetall, welcomed the agreement and said the pact for Baden-Wuerttemberg will be proposed to be adapted for other German regions.

By Christoph Rauwald and Carolynn Look

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