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Volkswagen Agrees to Wage Increase for Workers

    FRANKFURT — Volkswagen employees agreed to a wage deal Tuesday that ensures them a larger share of soaring profits in the German auto industry, and may signal an end to a decade in which pay barely kept pace with inflation.

    “The time for ultra-low wage increases in Germany is over,” said Jörg Krämer, chief economist at Commerzbank in Frankfurt.

    However, he and other analysts said the agreement with Europe’s largest carmaker will not have much immediate effect on VW rivals or other manufacturers, because their contracts with workers do not expire until next year. That means that, for now, the deal is unlikely to add to the already worrisome inflation rate, or add to pressure on the European Central Bank to raise official interest rates.

    “I don’t think it will have any effect on European monetary policy,” Rolf Schneider, head of macroeconomic research at German insurer Allianz, said of the VW agreement.

    Germany’s economic boom has been driven partly by demand in China and other emerging markets for Volkswagen, Mercedes and BMW cars. Bayerische Motoren Werke said Tuesday that sales of BMW, Mini and Rolls-Royce brand vehicles rose 28 percent in January compared to a year earlier, as sales in the United States and Europe also recovered.

    Audi, a unit of Volkswagen which competes with BMW in the market for premium cars, said its unit sales rose 23 percent last month and amounted to the brand’s best January ever.

    One reason for Germany’s export boom and competitiveness in world markets is that, for a decade, workers have accepted modest wage increases in return for more job security. Now, with German unemployment on a sharp downward trend, and oil prices putting pressure on consumers, economists have been alert for signs that the period of wage restraint was ending.

    After a marathon bargaining session in Hanover that lasted until early morning Tuesday, the IG Metall union and Volkswagen agreed to give employees of the carmaker a 3.2 percent increase in base pay, plus a one-time bonus equal to 1 percent of pay and no less than €500, or $680.

    Unlike Daimler and BMW, Volkswagen negotiates directly with IG Metall. In Germany wage negotiations typically take place at a regional level between industry groups and unions.

    A general increase in wages in the euro-area’s largest economy would put pressure on the E.C.B. to raise rates, even though other countries such as Spain or Ireland are still struggling with slow growth. Economists say that monetary policy is already too loose for Germany, as the E.C.B. focuses on helping the weaker members of the euro area.

    Yet so far, the pressure from German wages has not been alarming. Mr. Krämer said that only a quarter of the unionized workers in Germany would be able to negotiate a new pay raise this year, so that the overall increase in pay for workers covered by collective bargaining will only be an estimated 1.8 percent. “The end of ultra-low wage increases will be fully reflected only next year,” Mr. Krämer said.

    Ralph Wiechers, chief economist of the German Engineering Federation, an industry group, said that many companies still have workers on short shifts and have not fully recovered from the recession of 2009. The need to preserve jobs at these companies will help restrain wage demands next year. “Lots of companies are still a long way from their all-time highs,” Mr. Wiechers said.

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Volkswagen Agrees to Wage Increase for Workers

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