Explaining Double-Digit Wage Claims // ZEW Economist Friedhelm Pfeiffer on Ongoing Wage Bargaining in Germany

ZEW Economist Friedhelm Pfeiffer on Ongoing Wage Bargaining in Germany

Wage bargaining in Germany this year has been conducted with greater intensity than usual. Trade unions demand double-digit wage increases this year - an order of magnitude unthinkable in the recent past. PD Dr. Friedhelm Pfeiffer, deputy head of the "Labour Markets and Social Insurance" Unit at ZEW Mannheim, deliberates the economic reasoning underpinning these demands as well as their likelihood of success on the basis of recent ZEW survey data, inflation expectations, and information from Germany's Federal Statistical Office.

Friedhelm Pfeiffer comments on his analysis: "It should be noted that all of the economic predictions made and calculated for 2023 are projected values. We will only be able to see the actual figures at the beginning of 2024. The present analysis makes clear, though, that the double-digit wage claims made to date have not been conjured out of thin air. Still, it remains unlikely that these demands will be realised in practice."

Real gross income for workers in 2022 sunk by 3.1 per cent in comparison to 2021 despite an increase of 3.5 per cent in nominal terms according to recent data from the Federal Statistical Office. Moreover, workers spent a total of 54,162 million hours on the job in 2022, a 1.9 per cent increase from 2021, whereas the number of employed people increased by a mere 1.5 per cent from around 41 million to 41.6 million workers. "Real wages have thus not sunk due to fewer hours worked. Instead, a rise in inflation caused by the war in Ukraine has been the primary driver of this decrease. If workers' main goal is to counteract this wage decrease in real terms, they should pursue a wage increase of at least 3.1 per cent," Pfeiffer explains.