German construction workers seal wage deal with 2.6% pay hike

BERLIN, Sept 3 (Reuters) - German labour unions and employers said on Thursday they agreed a wage deal through arbitration that includes a 2.6% pay hike for some 850,000 construction workers.

Construction workers in the former Communist eastern Germany, where wages are still lagging behind the west even 30 years after reunification, will get a slightly higher increase of 2.7%, the labour unions said.

The agreement shows that German labour unions are able to seal solid real wage increases despite the COVID-19 pandemic that plunged Europe’s largest economy into its deepest recession on record in the first half of the year.

The German government expects national inflation to slow to 0.6% this year due to the pandemic. This means that construction workers will benefit from a real wage increase of roughly 2%.

In Germany’s public sector, labour unions are currently pushing for a 4.8% wage increase for more than 2.3 million workers in federal government and municipalities for a period of 12 months.

The European Central Bank is keeping a close eye on German wage negotiations for any sign that wage growth - and with it price pressure - could be losing steam as this could further complicate its already difficult-to-achieve inflation targets. (Reporting by Michael Nienaber, editing by Emma Thomasson)