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The German tariff agreement.

It seems like the industrial agreement will end on 4.3% wage increases over the next 2 years. It is not what I predicted in 5-6% range – far from it. The Finance Minister Schäuble had said: “Ok with wage rises; just don’t overdo it!” More emphasis on the “don’t” than the “ok”.

A far more important part of the agreement seems to have been overlooked. The employers can change the weekly number of work hours between 35 and 40 for 30% (a doubling from earlier).


If it is a victory for the employers or the workers is a moot question. It means that the employer can adjust his work force with +/- 5% without resorting to hiring or firing.

In the first place it means for the workers that a steady job situation is more likely and the employer will not be so hesitant with hiring, as he can downscale and remain productive. It has been a problem with the collective agreements that employers could not get rid of surplus workforce without waiting for someone to pensioned off. Firing is not something an employer just does for the fun of it.

–          Firing highly skilled workforce means that it might not be available next month when you might need it.

–          “Temping” is a solution to varying workload, but an expensive one – not so much in wage rate; but more in training and supervision. No to mention the risks involved in trusting your very expensive capital equipment to someone who really couldn’t care less.

In this context few people understand the huge absorption of workforce Germany has managed since WW2. First it was the refugees from the communist German Democratic Republic. The GDR had to shoot people trying to get out.

Then in the 1960’ies and 70’ies there was the influx of southern European and Turkish migrant workers. With the reunification of Germany and more important the expansion of European Union yet another challenge came up.

To understand the repercussions of a seemingly trivial tariff agreement one should realize the extent the German industry is dependent on suppliers all over Europe. Instead of having a ton of employees messing up your shop floor, you might as well keep them in their country and just truck their stuff in.

So when German industry is faring well it will benefit the rest of Europe, as Germany is an open market. We are not only talking raw materials and food; we are much higher in the food chain. To Germany a “kickstart” of European economy is thought not liked. These “jumpstarts” only keep sick systems alive much longer.