The clamour is growing for higher pay across Europe as some big hitters throw their weight behind the ETUC’s arguments for #OurPayRise, including the European Central Bank, the International Monetary Fund and even the King of the Netherlands!
The head of the ECB, Mario Draghi, is reported to be discreetly backing German trade union IG Metall’s demand for a 6% pay hike. The reason? Low inflation in the eurozone is undermining recovery, and pay rises in countries like Germany would give the economy a boost. Quoted in the Financial Times, Mr Draghi says wages are the “primary driver of inflation”. In the European Parliament, he warned MEPs that wage growth “has been more subdued at this stage in the business cycle than it has been in the past”. Unemployment in Germany is at a record low, but while demand for labour is outstripping supply in some sectors, wages have failed to recover.
One reason is that much of the recovery in employment has come from low-quality, temporary work that denies staff the bargaining power to press for higher wages, believes the ECB. Mr Draghi has even implied that unions need to be more ambitious in their wage claims. With employer confidence now reported to be growing, there is no justification – economic or social – for maintaining poverty pay. Now is the time for stronger collective bargaining!
“Why isn’t a higher demand for workers driving up pay?” ask IMF economists in a blog post highlighting “the disconnect between unemployment and wages”. Jobless rates are apparently down to their pre-crisis levels in many countries, but wage growth remains sluggish (see graphs), because headline unemployment figures may not tell the whole story. Involuntary part-time and temporary contracts are a growing phenomenon, while global competition and the threat of plant relocations undermine workers’ confidence and therefore economic recovery. The IMF blog suggests part-timers should be covered by minimum wages and pro-rata rights to paid leave and skills training.
Finally, welcoming the Netherlands’ economic recovery at the opening the Dutch Parliamentary session last week, King Willem-Alexander admitted: “Not everybody is feeling economic growth in their daily life. It is important that more people benefit from this prosperity. There are still people who struggle to pay the rent every month, or worry about their job security.”
At the same time, in a TV interview, Dutch Finance Minister Jeroen Dijsselbloem called for wage rises and stronger trade union representation while Prime Minister Mark Rutte also urged employers to share the benefits of growth more widely. National unions FNV and CVN are demanding 3.5% and 2.6% pay rises, with more for low earners, but are also concerned about the rise in precarious work. In a survey of public opinion in the Netherlands, 80% of respondents agreed with the FNV that flexible contracts are too widespread. This distorts labour market and employment figures. “First create permanent jobs!” said one.