Thursday, May 30

German union wins right to 28-hour working week and 4.3% pay rise



German workers won a key victory in their fight for a better work-life balance when a big employers’ group agreed to demands from the country’s largest trade union for the introduction of a 28-hour working week.

The agreement between IG Metall, which represents a wide swath of industrial workers, and the Südwestmetall employers’ federation, shows how unions in Germany, that for years have been a model of wage restraint, are flexing their muscles in ways more typical of organised labour in France, home of the 35-hour working week.

It also comes with Germany in the midst of its longest postwar stretch without a government and Angela Merkel struggling through her fifth month of coalition negotiations, raising questions about whether a country that once lectured Europe on economic and political stability is suddenly losing its way.

The labour agreement is a product of Germany’s economic boom, which has given unions an unusually strong hand in collective bargaining talks this year. Last year, the economy grew at its fastest rate since 2011 and unemployment is at its lowest since reunification in 1990.

The wage settlement was reached in the early hours of Tuesday after six rounds of often bruising talks and a series of 24-hour strikes.

The two-year deal covers 900,000 workers in the metals and electrical industries in Baden-Württemberg, home to several of Germany’s most high-profile industrial groups, including Daimler, the carmaker, and Bosch.

But IG Metall’s agreements tend to be seen as benchmarks for the whole of German industry, and it is now expected to be rolled out in other sectors.

The parties agreed on a 4.3 per cent wage raise from April, and other payments spread over 27 months. Workers will be allowed to reduce their working week from the standard 35 hours to 28, while preserving the right to return to full-time work.

Employers successfully resisted IG Metall’s demand that workers receive the same, or similar, pay for fewer hours worked a week.

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Experts said the deal reflected a new mindset among younger workers. “More and more people have periods in their lives when they want to work less, for example to look after elderly relatives, or to take a sabbatical or unpaid leave,” said Hanna Schwander, professor of public policy at the Hertie School of Governance in Berlin.

The days when employees joined a company at an early age, worked full time most of their lives and retired early were “long gone” and it was becoming “increasingly important for people to reconcile their personal and professional lives”, she said.

In an editorial, the business daily Handelsblatt said the deal reflected “the credo of the new age: that time is more valuable than money”.

“The wage settlement is a milestone on the path to a modern, self-determined world of work,” said Jörg Hofmann, IG Metall’s chairman.

Germany’s collective bargaining talks have been watched closely by the European Central Bank, which would be better able to hit its inflation target if wages in the eurozone’s largest economy rose. Mario Draghi, the ECB chief, has said wages need to grow before the bank can unwind its crisis-era stimulus measures.

Mr Hofmann said the deal would have a “positive effect” across the economy, with the “significant increase in incomes strengthening domestic demand”.

IG Metall had pushed for a 6 per cent annual rise and held the 24-hour strikes to press its demands. It also threatened to ballot its members on extended industrial action if employers failed to budge.

While acknowledging the award would be a burden, Stefan Wolf, Südwestmetall’s negotiator, said the agreement’s long duration would allow companies to better plan ahead. The deal would work out at below 4 per cent per year to employers, he said.

Workers will receive a one-off payment of €100 for the first quarter of 2018, and, from 2019, a sum equivalent to 27.5 per cent of their monthly salary as well as an additional fixed annual amount of €400, though this can be postponed, reduced or cancelled if economic conditions deteriorate.

Workers who need more time to look after children or elderly relatives can take eight additional days off work in lieu of the extra payment, two of which would be paid for by their employer.

In return, companies will be able to offer more 40-hour a week contracts, at times when there is a shortage of skilled workers.

“Employees have more opportunities to reduce their hours of work, while companies get more options to increase the volume of working hours,” Mr Wolf added.