The federal government, local authorities and Verdi have been wrestling for a long time, now the collective agreement is here. And that’s not bad – for both sides.
More is always more, this is especially true when it comes to money. But is the “more” in wages enough to at least compensate for the “more” in the cost of living, at best to surpass it?
In view of this question, not only the approximately 2.5 million employees in the public sector have been watching the sometimes tough collective bargaining between the Verdi union and the representatives of the federal and local governments. Because even those who work somewhere else know that what comes out of it will soon rub off on the degrees in other sectors.
Now the result is there. And it’s something to be proud of.
Federal and local employees will receive 1,250 euros tax and duty-free this July. As a result, everyone receives a gross amount of EUR 220 more per month. From March 2024, wages will then rise for everyone by a gross amount of 200 euros per month, plus a further increase of 5.5 percent, which will be increased in the case of low earners. (Here you can read more about it.)
220 euros more is a lot of money for many people
Only 5.5 percent? At first glance, this is far from what Verdi had demanded for employees in the public sector. The union initially went into the collective bargaining war with the desire for a 10.5 percent increase in wages, with a term of just twelve months, mind you.
But that’s the way it is: In the end, as always, there is a compromise – which in this case elegantly proves how the instrument of the inflation premium can be used so that everyone has more in the end. And without the wage costs exploding permanently and disproportionately, which can ultimately lead to further increases in inflation rates.
Due to the split payment of the tax and license fee 3,000 euros, everyone who works for the federal government or in the municipalities has 220 euros per month in their pockets. That’s a lot of money, especially for those people who earn little in the public sector, such as cleaners or educators.
Wage increase between 8 and almost 17 percent
For them, this lump sum is particularly fair, as it benefits them more in percentage terms than those in higher-level jobs: anyone who currently earns around 2,242 euros a month as a cleaner has a monthly wage increase of around 10 percent. On the other hand, anyone who holds a managerial position in a federal agency will receive significantly less by next year, but still 3.2 percent more.
Sure, the last value alone does not completely offset the inflation rate of 6.9 percent from the past year. But in the coming year there will be more money again: A permanent increase of 200 euros (gross) per person and 5.5 percent more for everyone, with low earners being topped up again, so that at least 340 euros more will come around.
According to calculations by the economist Reinhard Bispinck, who used to work for the union-affiliated Hans Böckler Foundation, this results in a permanent wage increase of between 8.16 percent (in the highest wage group 15Ü, level 5) and an impressive 16.87, depending on the pay group percent (group E1, level 2). On an unweighted average across all salary groups, this corresponds to an increase of around 11.6 percent.
The inflation premium works
That, in turn, is not so bad and sometimes even far more than the former Verdi requirement. And: In all salary groups, such wage growth rates are likely to be far above the inflation rate to be expected as early as next year.
Most experts are assuming that the inflation rate will fall significantly in the current year. In 2024, the European Central Bank also expects the inflation rate to approach the desired value of around 2 percent per year.
Premium serves its purpose
And here is the crux of the matter, the reason why the collective bargaining agreement that has now been found is so reasonable: the inflation premium, used as it is in the case of the public service, serves its purpose exactly. It helps in the short term and especially helps those who really need it to alleviate the problems of inflation from last year and this year.
Later, when inflation has shrunk back to normal levels, the usual wage mechanism takes effect again. The increase of 5.5 percent will still put a heavy strain on the public coffers, but overall it will probably be manageable.
Above all, however, such moderate growth rates do not ensure that inflation takes on a life of its own as a result of constantly rising personnel costs and the resulting higher prices. The Verdi members would therefore be well advised to accept the collective bargaining agreement.
