Germany’s largest industrial union, IG Metall, has reaffirmed its demand for a 7% pay rise for its 3.9 million workers. This demand was previously recommended by the union’s leadership for this year’s collective bargaining round, which is a key indicator of wage growth in the euro area.
The union stated that while inflation rates may be declining, prices at the checkout remain high for people, justifying the 7% wage increase demand. The sector’s employers’ association, which includes companies like Thyssenkrupp, Siemens Healthineers, and Bosch, have rejected the union’s demand as excessive.
The European Central Bank has said it will closely watch wage growth to inform its monetary policy after cutting interest rates for the first time since 2019. German consumer price inflation was 2.5% in June, down from 2.8% in May, but still high.
The collective bargaining round for the metalworking and electrical engineering industries is set to begin in mid-September. The union’s demand for a 7% pay rise reflects the continued pressure on workers’ purchasing power due to high inflation, despite the recent moderation in the inflation rate.
The outcome of these wage negotiations will be closely watched as an indicator of the broader wage growth trends in the German and eurozone economies. The ECB is particularly focused on wage developments as it seeks to bring inflation back to its 2% target.