Germany's largest industrial union seeks 7% raise for millions of workers

Germany's biggest industrial union said Monday it will seek a 7 per cent pay increase for millions of workers in negotiations starting later this year, arguing that companies including automakers and machinery manufacturers are in a position to afford it.

The IG Metall union's leadership said it was recommending a hefty raise demand for 3.9 million workers in view of a persistently high price level. It said that companies have well-filled order books and that, even though prices are no longer accelerating as quickly as they were, one-time payments agreed in the last settlement have been eaten up by inflation.

In the last round of pay talks, IG Metall and employers agreed in late 2022 to raises totalling 8.5 per cent over two years plus one-time payments totalling 3,000 euros (about USD 3,200) each, meant to cushion the effect of sky-high inflation. The government, which wanted to address the impact of rising prices while preventing an inflationary spiral, was keen to promote such tax-free payments.

IG Metall called for a 7 per cent raise and a one-year deal this time. It said it understands that some companies are in a volatile situation, but argued this doesn't detract from the industry's overall solidity and an improving economic outlook.

In Germany, wage deals are typically hammered out in negotiations between employers organisations and unions that cover a whole sector, and an agreement reached in one region is generally applied nationwide. IG Metall's current agreement expires at the end of September.

Germany's annual inflation rate stood at 2.4 per cent in May, down from nearly 9 per cent at the beginning of last year.

The country's economy, Europe's biggest, has been struggling to generate growth. Employers have argued that the economic situation doesn't allow for large wage increases.