The right mix

28 May 2013 By Olaf Storbeck

The days of excessive German wage restraint are over, as the latest deal at Volkswagen shows. Wages are set to outpace inflation but not productivity. That’s enough to help consumer spending without harming employment. Germany’s European trading partners should cheer.

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Volkswagen, Europe’s largest carmaker, and the German metal workers’ union IG Metall agreed on a new pay deal during overnight talks on May 27-28. Salaries will rise by 3.4 percent this year and 2.2 percent in July 2014. In mid-May, the IG Metall reached a similar deal for the country’s 3.7 million workers in the metal and electronics industry. Initially, the union had asked for a pay rise of 5.5 percent in 2013. In addition to the pay deal, Volkswagen will make a one-off payment of 300 euros per employee to the company’s pension scheme.
In total, the wages of 12.5 million workers in Germany are due to be renegotiated this year.

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