German Strikers' Class Action

While workers will probably achieve only slight concessions from current and looming disputes, the real gain may be a sense of renewed solidarity

When the garbage trucks rolled to a stop in southern Germany on Feb. 6, they signaled a noisy spring to come. The ver.di union, which represents public-service workers, struck in the southwestern state of Baden-Württemberg to protest a planned increase in the workweek, from 38.5 hours to 40. Some 10,000 employees walked out -- from child-care workers to building officials -- and their comrades in other regions are expected to join them soon.

The strike signaled that German unions are becoming more aggressive after years of flat wages and increased hours. The IG Metall union, which represents 3.4 million auto and steel workers, including those at DaimlerChrysler (DCX ), is demanding a 5% wage hike in negotiations that begin at the regional level on Feb. 8.

The union bosses argue that their workers have done their part to make Germany competitive again. Corporate profits have been setting records, rising 9.2% in 2005, according to Dresdner Bank. Growth is likely to double from 0.9% in 2005, and it's time the working man got his cut, say the bosses.

"WAGE RESTRAINT CONTINUES." In fact, workers likely will be successful in wresting some concessions from companies. But, say economists, unions are still in a weak bargaining position because of 12.1% unemployment and continued competition from workers in Central Europe and Asia. Any wage increases will be modest -- probably from 2% to 3%. Barely enough to cover inflation, it won't be a big problem for German companies to bear.

More important, it won't endanger what looks like an increasingly robust recovery. "Unions are asking for more, but we are still a long way from excessive demands. The wage restraint continues," says Dirk Schumacher, senior economist at Goldman Sachs (GS ) in Frankfurt.

Even bank economists are not alarmed at the idea of workers getting a modest share of corporate prosperity. One of Germany's biggest macroeconomic problems is its weak consumer spending. Retail sales unexpectedly fell 1.4% in December from November. German consumers could use a boost, within reason. "I have penciled in a bit of pickup in private consumption because of wage increases," says Schumacher.

Unions will claim victory if they get increases of 3% or so, but most workers won't actually see that in their paychecks. In Germany, agreements are negotiated between unions and industry groups at the regional level. That means, theoretically, that an auto-parts maker in Ulm pays the same wages as one in Augsburg. In practice, this wage cartel has seriously eroded in recent years.

"EFFECTIVE EARNINGS." At the company level, workers often accept concessions in pay or working hours to preserve their jobs, and the union looks the other way. Plus, many workers in service industries and other occupations aren't covered by union agreements.

All told, wages nationwide will probably increase only about 1.5% to 2%. "There is a big difference between the tariff agreement and effective earnings," says Rolf Schneider, head of economic research at Dresdner Bank.

Nor will the public-service workers' demands have a big effect on Germany's efforts to corral its government budget deficit, which has been in violation of European Union treaty limits for four years.

SHRINKING MEMBERSHIP. The ver.di union's central demand is based more on principle than substance. Employers are asking workers to put in less than 20 extra minutes per day. The extra time would help Germany's financially strapped local governments, in particular, maintain services. But the working hours won't be decisive to the national budget, which explains why Chancellor Angela Merkel seems little troubled by the labor militancy.

So why all the noise? Here's one theory: All German unions have suffered drastic declines in membership in the last decade. There's nothing like a spirited job action to inspire class solidarity. What unions may be after isn't so much money or free time, but dues-paying members.

READER COMMENTS

Ewing is BusinessWeek's Frankfurt bureau chief

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