Collectively agreed pay increases have not exhausted the margin of distribution

According to recent research, inflation and productivity have grown much faster than collectively agreed wages and salaries between 1994 and 1997.

Traditionally, the results of German collective bargaining have always been very close to the "margin of distribution" (Verteilungsspielraum) - that is, the increase in inflation plus the increase in productivity. The idea of "margin of distribution" was developed from the concept of the "social market economy" (soziale Marktwirtschaft), which should lead to an equal participation in the development of economic wealth among employers and employees. However, according to a recent study by the Institute for Economics and Social Science (Wirtschafts- und Sozialwissenschaftliches Institut, WSI), inflation and productivity have grown much faster than collectively agreed wages and salaries in recent years.

Between 1994 and 1997, collectively agreed wages and salaries increased by about 9.6% while the combined amount of inflation and productivity increased about 19.5%. With the exception of 1995, the level of wage increases stands even below the increase of productivity. The table below gives further details. Considering these figures, the WSI calls for a "U-turn" in German collective bargaining.

Increase in inflation, productivity and collectively agreed wages and salaries in western Germany, 1994-1997
. 1994 1995 1996 1997*
Inflation 102.8 104.5 105.9 107.6
Productivity 103.4 105.7 108.2 111.9
Collectively agreed wages and salaries 102.0 105.7 108.1 109.6

Index: 1993 = 100.

* Second half of 1997 estimated.

Source: WSI Collective Agreement Archive 1997.

The WSI's position is supported by the Berlin-based German Institute for Economics (Deutsches Institut für Wirtschaftsforschung, DIW) which in a recent study underlines the weak position of demand in Germany's internal market arising from the fact that there was a significant redistribution of incomes at the cost of employees in recent years.

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