Inflation looming over Germany’s 2022 chem wage bargaining

Stefan Baumgarten

29-Nov-2021

LONDON (ICIS)–Surging inflation is set to dominate the upcoming 2022 collective pay bargaining for Germany’s 580,000 chemical-pharmaceutical employees.

In October, the country’s consumer price inflation rate ran at 4.5% – the highest since 1993, and inflation, along with the spike in coronavirus infections, is weighing on consumer confidence.

Chemical trade union IG BCE has pledged it will push for a “sustainable” improvement in workers’ purchasing power.

“We will not stand by idly as inflation bites into our hard-earned money,” Ralf Sikorski, who will lead the talks for the union, said in a webcast online event last week.

“There is no question about it, any increase in pay must be above the rate of inflation,” he said.

In addition to inflation, the industry’s strong profits and sales justify a marked pay increase, he said.

The vast majority of chemical producers in Germany were doing very well – despite the challenges from the coronavirus and strained supply chains, Sikorski said.

He pointed to rising chemical production, producer prices and sales.

Q3 2021 CHEM-PHARMA INDUSTRY PERFORMANCE

+/- from Q2 +/- from Q3 2020
Production 0.8% 8.2%
Producer prices 2.9% 11.7%
Sales 6.3% 26.1%

(source: chemical producers’ trade group VCI)

In an IG BCE survey of 2,200 chemical industry workers, 78% stated that their company was “doing well or brilliantly,” he noted.

At the same times, workers were suffering from rising inflation, with 42% of respondents saying they had to cut back household budgets, and 15% stating they had no money left at the end of the month.

Workers are particularly worried about higher gasoline and fuel prices, the survey found.

Fuel and energy, along with food, are excluded from economists’ concept of “core inflation”. Excluding fuel and energy, Germany’s inflation rate was 3.1% in October.

CHEM EMPLOYERS BAULK
Chemical employers’ trade group BAVC was quick to respond, saying that the current price trends could not justify demands for higher wages and salaries.

The price increases were largely due to three factors, the group said:
– a higher sales tax, following the expiry of temporary reductions that were part of coronavirus relief measures in 2020
– supply chain bottlenecks
– deliberate government policies to make fossil fuels more expensive

It is not the job of collective bargaining to absorb those increases – especially as the increases affect chemical companies, as well, BAVC argues.

Furthermore, past trends showed that there was no need for a “catch-up” in chemical industry pay.

Since 2010, prices have risen by 16%, while wages and salaries in the chemical industry rose by nearly 30%, according to the group.

On average, a full-time chemical industry employee makes about €64,000/year, noted BAVC director general Klaus-Peter Stiller.

The group also disputes the union’s claims about the industry’s health, saying that, while production increased in past months, it was still only at its 2018 level.

Furthermore, producers took “a massive hit” from the supply chain issues and the “dramatic” raw material price increases, Stiller said.

While economic data points in the industry seemed, at first glance, “decent”, this did not translate into improved profits for all chemical companies, he noted.

In the chemical production chain, the increases in prices and sales some companies have registered reflected higher costs for intermediate products for others, he said.

As such, a part of the industry sees sales and profits declining, he said.

INDUSTRY NEEDS TO INVEST
Importantly, IG BCE’s demands come as the industry faces the challenge of transforming production processes towards emission-neutrality.

These structural changes can only succeed with big investments, and not with demands for big pay increases, Stiller said.

“Investing, instead of redistributing, that must be the motto for the 2022 collective bargaining round,” he said.

With its demands, IG BCE was “throwing sand into the gears of structural change,” he said.

IG BCE has yet to determine the precise percentage increase in wages and salaries it will demand.

However, the union has a clear demand for better pay for shift work. It calls for the supplement payments night shift workers receive to be raised to 25%.

Furthermore, the union wants a deal with a duration of not more than 12 months.

The existing 29-month collective deal agreed in 2019 will expire on 31 March 2022.

It provided for a 1.5% increase in wages and salaries, effective 1 July 2020, and an additional 1.3% increase, effective 1 July 2021. It also included one-off payments and improved health benefits.

The 2022 collective bargaining for the 580,000 people employed at about 1,900 chemical and pharmaceutical companies is due to begin on a regional level on 2 March 2022, before moving to the federal level on 21 March.

Thumbnail photo: Ralf Sikorski, member IG BCE’s executive committee, and member of LANXESS’ supervisory board

Focus article by Stefan Baumgarten

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