DGB criticises European Commission's recommendations on pay policy

In February 1999, Germany's DGB trade union confederation published an analysis of the European Commission's 1999 Annual Economic Report which, in particular, criticises the Commission's recommendations for a continuation of wage restraint.

On 24 February 1999 the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) published a paper entitled Alliance for jobs and European employment pact: macroeconomic framework conditions in Germany and Europe (Bündnis für Arbeit und Europäischer Beschäftigungspakt: die makroökonomischen Rahmenbedingungen in Deutschland und Europa, in Informationen zur Wirtschafts- und Strukturpolitik 1/1999, 24 February 1999) which includes an analysis of the 1999 Annual Economic Report from the European Commission. In the document, DGB sharply rejects the Commission's recommendations for further wage restraint.

The European Commission's 1999 Annual Economic Report, which was published in January 1999, provides four guiding principles on wage developments under the conditions of the Economic and Monetary Union (EMU):

The DGB paper criticises, in particular, the second guideline, where the Commission demands wage developments which support a higher profitability of investments. As has been expressed more explicitly in other Commission documents, the implementation of this recommendation would mean that real wages have to grow at a rate below the increase in productivity, resulting in a further decrease of real unit labour costs and a further redistribution from wage earners' income to profit incomes. According to DGB, such a pay policy is able neither to overcome the weak demand on Europe's internal markets nor to provide stable framework conditions for international economic relations in the "euro-zone". On the contrary, there is still a danger of a downward competition on wages and other labour costs.

Therefore, DGB demands wage developments which are equivalent to the sum total of the evolution of prices and the increase in labour productivity. The DGB's idea follows the principle of a "competition-neutral wage policy" which was also agreed as a joint bargaining guideline by trade unions from Germany, Belgium, the Netherlands and Luxembourg in their September 1998 "Doorn declaration" (DE9810278F). Furthermore, DGB argues that such a "productivity-oriented wage policy" creates the best precondition for a closer European macroeconomic coordination of monetary, fiscal and income policy which, according to the unions, has to be a major pillar of the EU's proposed future "European employment pact" (EU9902156N).