Career: Labor dispute is coming soon

Wage talks in the industry will resume this week. The union threatens industrial action. Wages in Austria are already rising significantly faster than the eurozone average.

Vienna will again be dominated by wage negotiations this week. On Monday, wage negotiations resumed in the electrical and electronics sector with 60,000 workers. Employers and unions insist that the environment for negotiations is good. But the union was already unwinding the striking club: “Now it's payday,” it announced before negotiations began on Monday. “If we can't reach an agreement on Monday, the signs point to industrial action,” chief negotiators Reinhold Binder and Karl Durtscher told employers in a broadcast.

It is very possible that Austria is heading for a period of great conflict. Because employers don't want to accept high wage demands. From 2021 to 2022, inflation in Austria rose to an average of 2.8 to 8.6 percent, and in 2023 it was 7.8 percent. Inflation forms the basis for union wage demands. These are correspondingly high and often successful: In the spring pay round of 2023, he requested a 12.9 percent increase, compared to an average of 10.5 percent. The results achieved in the autumn salary round were also impressive.

So wages in Austria are rising significantly more than in the euro area, an analysis of ECB data by the Institute for Economic Research (Wifo) shows: In the euro area, collectively bargained wages rose by 4.5 percent from October to December 2023. In the same quarter of the previous year, and 8 .1 percent in Austria. Wifo economist Joseph Baumgartner expects wage growth in Austria to be higher than in the euro area in 2024 and 2025. In 2023, this mainly drives the inflation differential between Austria and the Eurozone. Labor costs are one of the most important factors in determining prices, especially for labor-intensive services.

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Wages will rise rapidly

The union takes the position that workers deserve higher wage contracts and that wages are not the primary price driver. However, economists warn that the permanently high-wage contracts will have an impact on the competitiveness of Austrian companies. Last year, Wifo pointed out that real wages are pushing unit labor costs higher than they have been in 30 years. Unit labor costs calculate the costs per unit of production and are an indicator of a country's competitiveness.

Wifo economist Benjamin Bittschi notes that wages are growing faster in Austria, especially compared to the “old” EU member states in the West, and lower compared to the East, where inflation is higher than in Austria. When comparing wage growth with other countries, it should be remembered that the collective wage is being compared here, ie the minimum wage according to the collective agreement, says Pitshi. In Austria about 98 percent of employees are covered by a collective agreement, in Germany it is about 40 percent and in southern countries such as Spain and Portugal even less. One-time payments and bonus payments and salary increments agreed at the company level are not included in this table. If you take that into account, the differences are significantly smaller. However, unit labor costs in Austria are significantly higher than in their trading partners. “This suggests that we have a productivity problem in the economy as a whole,” says Bitchy, excluding industry.

Important week

Either way, this week will show where wages are headed. A third round of talks in the electricity sector was scheduled for Monday afternoon, and a third round of talks in the chemical sector, Austria's third-largest industry with 50,000 employees, begins on Tuesday. The current week is considered a decisive one in the spring pay cycle as the new collective agreements take effect on May 1st, next Wednesday.

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In the paper industry, which has about 8,000 employees, wage negotiations will continue in a second round on Thursday. “The combination of sharp increases in labor costs and high energy prices is toxic for the energy-intensive industry,” Christian Helmenstein, chief economist at the Chamber of Commerce, said on Monday. If Ukraine ends the flow of Russian natural gas to Europe by the end of 2024, industrial gas prices are on the horizon to rise.

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