The leadership of IG Metall, Germany’s largest industrial union, has advised its members to demand a seven percent wage increase in the upcoming collective bargaining round.
This proposed raise significantly exceeds the current inflation rate.
In a statement released Monday, IG Metall announced that regional panels would finalize the union’s official wage demands for 12 months.
These negotiations are expected to set the tone for wage growth across the euro area.
“While inflation rates may have declined, prices at the checkout remain high,” said the union, representing workers in the mechanical engineering and electronics sectors.
The bargaining round, set to begin in mid-September, involves 3.9 million workers and aims to secure substantially higher pay due to companies having a large backlog of orders.
The sector’s employers’ association, which includes major companies like Thyssenkrupp, Siemens Healthineers, and Bosch GmbH, has dismissed the union’s demand as excessive.
JP Morgan economist Greg Fuzesi noted historically, wage agreements in this sector tend to settle at about half the level of initial demands.
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Fuzesi said: “The new deal will indicate where pay growth stands as headline inflation returns to more normal levels.”
The European Central Bank (ECB) recently emphasized its intention to monitor wages closely after cutting interest rates for the first time since 2019.
This decision was driven by a significant drop in inflation, from 10 percent in 2022 to just over its 2 percent target recently.
However, ECB policymakers have indicated that strong price pressures and wage growth might keep inflation above target well into next year.
In Germany, consumer price inflation rose to 2.8 percent in May, up from 2.4 percent in April, reflecting ongoing economic challenges.
