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German Manufacturers Seek to Defuse Labor Spat as Strikes Loom

Jan. 24, 2018
Labor representatives have threatened 24-hour stoppages after rallying more than 700,000 people for protests in recent weeks.

Daimler AG, Siemens AG and other German manufacturers are under pressure to make concessions to employees as more disruptive walkouts loom in a contract dispute over wages and work hours.

At talks on Wednesday, the IG Metall union is pushing employers to raise pay 6% and subsidize wages for workers reducing hours to care for kids or older family members. Emboldened by robust growth and record-low unemployment, labor representatives have threatened 24-hour stoppages after rallying more than 700,000 people for protests in recent weeks.

“The clock is ticking on further escalation,” Olivier Hoebel, IG Metall’s negotiator for Berlin, Brandenburg and Saxony, said after the two sides failed to make progress on Friday.

Wednesday’s talks in the state of Baden-Wuerttemberg, which kick off the fourth round of negotiations for 3.9 million workers, mark a critical stage in the dispute. IG Metall is planning to meet on Thursday to discuss the state of negotiations and map out its next moves, which could lead to costly production stoppages.

Opposing Positions

Worker Demands: 6% pay increase; 28-hour work weeks to care for family; 200 euros/month or 750 euros/year to offset lost wages; right to return to full-time hours

Employer Stance: 2% pay increase; rejects subsidies for shorter hours as illegal; more flexibility to extend hours

Policy makers from governments to central banks are watching closely. Aside from the short-term disruption from potential shutdowns, economists are concerned about the longer-term impact of wage stagnation. If the region’s most prosperous country can’t increase pay, others may face an even greater hurdle. That would complicate the European Central Bank’s efforts to boost inflation and eventually unwind stimulus measures.

Workers and employers in Germany’s influential manufacturing sector are locked in a power struggle. Labor leaders want a sizable pay raise as well as more work-life balance for staff, while employers worry about keeping production lines running amid an increasingly tight market for skilled workers.

IG Metall, which typically has the potential to set higher demands than other unions given the importance of Germany’s industrial sector, has been in talks with employers since it laid out its request in October for more pay and an option to receive subsidies for reduced working hours to take care of family.

For companies, the problem is that an already tight labor market makes it difficult to agree to workers’ requests for more free time. IG Metall has requested that workers be allowed to reduce their hours to 28 per week from 35 for two years and have the right to return to full time. Employers want to end limits on the number of employees that can work longer.

By Christoph Rauwald and Carolynn Look

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