Employers Warn Union Pay Accord Will Cost Jobs

The accord, which was reached on Saturday morning after 10 weeks of negotiations and a final marathon session lasting 18 hours, has kept 3.4 million workers from walking off the job. However, some employers have said the agreement will hurt Germany's competitiveness.

Speaking at the Hanover Trade Fair on Monday, Dieter Brucklacher, president of the German Engineering Federation (VDMA), called the agreement a "Pyrrhic victory" for the IG Metall industrial union that in the long term will hurt employers by preventing job creation.

"We are anything but happy," he said.

The agreement initially concerns metal workers in North Rhine-Westphalia, Germany's most populous state, which alone has around 700,000 employed in the sector. As is customary in wage bargaining in Germany, the pilot agreement will likely be extended to the other regions. Unions in several other states have called their own wage commissions together on Monday for consultations.

Bonuses

The deal, which is valid until the end of March 2007 and has been welcomed by Chancellor Angela Merkel, contains a 3 percent pay increase over a 10-month period which starts on June 1.

Gesamtmetall, the employers' association for the metal and electrical industry, initially offered a 1.2 percent annual hike over two years.

Every worker will also get a bonus of 310 euros ($382) for the months of March, April and May, according to the head of IG Metall, Jürgen Peters, and the head of Gesamtmetall, Martin Kannegiesser.

The bonuses will vary from business to business, however. An employer will be able to pay less than the 310 euro bonus by agreement with workers' councils if the company's results are bad or an increased bonus of up to 620 euros if results are good. It's the first time the union has agreed to make added compensation conditional on a firm's performance.

Kannegiesser stressed that in agreeing the rise, the employers had gone as far as they possibly could.

"It's an appropriate result for both parties," Peters said.

Difficult burden

But the head of Germany's employers' association, Dieter Hundt, said the agreement created a "burden" that many employers would find "difficult to bear" because the pay rises were much higher than was necessary to keep employees happy.

He nonetheless welcomed as "significant progress" a provision allowing flexibility in organizing employers' work.

Bernd Gottschalk, president of the Automobile Industry Federation (VDA), said the agreement would not improve competition or strengthen Germany's economy.

The engineering and metalworking sectors, spanning industries from cars to semi-conductors, are among the most important in Germany and any deal there acts as a benchmark for other sectors.

The 5,000 businesses in the sector include big names such as the ThyssenKrupp steel company, electronics group Siemens and car makers DaimlerChrysler and Volkswagen.

Tens of thousands of metal workers took part in a series of warning strikes across the country and the union had threatened to start an indefinite general strike this week.