Workers: Demands for permanently higher wages – economy

View of the pipeline systems of the Nord Stream 1 Baltic Sea pipeline in Lubmin. Photo: Stefan Sauer / dpa

Price spikes cause problems for many consumers, but also for businesses. Chancellor Scholz therefore called for “united action” – what are the expectations?

Before the commencement of “Joint Action” by Chancellor Olaf Scholz, economists and politicians called for permanent wage increases at employers and trade unions. “Only higher wages and social benefits can compensate middle and low income people in the long term,” said Marcel Fratzscher, president of the German Institute for Economic Research (DIW), the German Press Agency in Berlin.

SPD leader Saskia Esken warned against limiting joint activities to one-off payments to employees. “The economy” Veronika Grimm told DPA: “The idea of ​​one-off payments could backfire too.” Business representatives called on the state to ease the burden on companies.

This package of measures

The campaign with the federal government, trade unions and employers will start on Monday at the Chancellery. The reason for this is the sharp increase in consumer prices. A government spokesman said it would not yet be a matter of agreeing on concrete steps. The process should begin. The aim is to prevent or mitigate losses of real income, while at the same time preventing the risk of a “price spiral”. A whole package of measures is under discussion. One-off payments may be a factor, but not the only factor.

A week ago, the Law Firm’s plans for one-off tax-free payments became known. In return, trade unions may forgo some wage increases in collective bargaining rounds so as not to fuel inflation. But then the criticism dropped, also from the trade unions.

Esken: The Wage and Price Spiral “False Myth”

SPD head Esken told the newspapers of the Funke media group: “One-off payments and temporary relief measures help in the short term, but are not a long-term solution.” Prices, especially energy prices, will remain high. “As a welfare state, we must therefore adapt benefits to rising inflation.” In addition, labor market wages, especially in the low-wage sector, would have to “increase significantly and sustainably”.

In principle, working together is good because it enables close coordination between politicians, employers and employees, said Fratzscher. However, it will fail if its primary objective is to urge workers to cut even more wages. The wage and price spiral is a “false myth”. Overall wage development this year is too weak rather than too strong. “The more purchasing power decreases, the greater the harm to the economy.” Lower purchasing power among middle and low income earners leads to a decline in consumption and therefore less sales and jobs for many companies.

“One-off payments are not accurate as many do not use them,” said Fratzscher. One-off payments can only be a temporary, but not lasting, relief to consistently higher energy and food prices. “The best economically and socially effective way to deal with inflation is – in addition to higher wages and incomes – tax breaks and higher social benefits for middle- and low-income people,” said Fratzscher. He also called on employers to strengthen collective agreements. The federal government should decide on the package of future investments. The debt brake should also be suspended in 2023 – the federal government wants to apply it again.

Grimm: Targeted cushioning of difficulty

“Economic wise” Grimm said that if one waives the wage increases for a one-off payment, they will have to be very high. “Of course, that could immediately stimulate demand and thus re-inflation. If you exclude them from taxes, it seems more like a way of pushing the parties to the bargaining agreement in this direction. ” However, this frustrates the goal of using state resources to help lower-income groups in particular.

Giving up tax revenues would be a support for the state, which would benefit the better-earners to a greater extent. “Particularly among those with primary security and among lower and middle income groups, there is a need to mitigate the difficulties arising from the current events in a targeted manner,” said Grimm.

President of the Association of German Chambers of Commerce and Industry, Peter Adrian, told DPA that monetary policy and wage changes are very important aspects in dealing with inflation. “But there are also other important influencers in the current price spiral.” Inflation is driven in particular by rising energy, raw material costs and other bottlenecks in international supply chains.

“So we must first and foremost address the measures that widen these supply-side bottlenecks.” This also involved faster approval procedures and easier transition to new technologies or suppliers, for example. Adrian continued, “With the price explosion, any additional government burdens and unnecessary regulation that can be eliminated are a helpful relief.”

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