Pay rise damages job hopes

Talks this week about tackling unemployment could be frosty. As unions, employers and government assemble for a second round of discussions over job creation, there is still a chill in the air after last week’s initial wage deal. There is even a lingering threat of strike action. IG Metall, the engineering union and employers agreed […]

Talks this week about tackling unemployment could be frosty. As unions, employers and government assemble for a second round of discussions over job creation, there is still a chill in the air after last week’s initial wage deal. There is even a lingering threat of strike action.

IG Metall, the engineering union and employers agreed a 3.6% pay rise over 14 months in last-minute talks in the state of Baden-Wurtemburg. But angry employers said that it may not be accepted nationwide, as the union hoped.

Baden-Wurtemburg

Employers’ leader Dieter Hundt said the deal is ‘a great burden’ and ‘very damaging’ to the government’s job-creation initiative, called the ‘alliance for jobs’.

Late last year, Chancellor Gerhard Schroder called employers and unions together under his chairmanship to agree voluntary measures to cut unemployment, which hit a staggering 11.5% last month.

The talks ended with promises for lower business taxes and better early retirement packages, but there was no willingness by unions or government to concede to employers’ demands to include wage policy in the talks.

In the wake of this latest pay deal, employers are stepping up their calls for wage policy to be re-examined. This all adds up to greater pressure on Germany’s consensus-based system, the social contract between workers and employers upon which the post-war economic recovery was based.

The gap between unions and employers is widening as more companies reject nationwide pay deals that fail to take into account the differing fortunes of a wide range of companies.

Ducking out of deals

In the eastern states, a growing number of small and medium-sized firms are ducking out of the national deals negotiated by IG Metall.

The truth is that they simply can’t afford the pay deals that bigger, Western companies award their workers albeit reluctantly.

But the big companies also have reason for concern this time around, hence the employers’ federation’s unease.

Many of the large concerns have recently posted healthy earnings, fuelling the union’s argument for rewards on the shopfloor.

However, results do not yet reflect the impact of economic crises in key export markets like Asia, Russia and Brazil.

According to a recent survey of 7,000 companies by Munich-based research firm IFO, the mood across the business community is gloomier that it has been for months.

Pay deals should be forward looking but, for many firms, the future does not look bright, employers argue.

Stuart Penson