Austria's wages are escalating faster than in other countries for various reasons.
Article:
Austria's economic struggles continue as the nation grapples with a slumping GDP and above-average inflation, according to business experts. The situation has intensified, with renowned economists such as Gabriel Felbermayr of WIFO and Holger Bonin of IHS publicly endorsing wage restraint amidst harsh criticism from labor unions.
The latest publication from Agenda Austria, titled "Wage Negotiations: How Austria Became the Sick Man of Europe," takes an assertive approach. Authored by Agenda economist Jan Kluge, the paper advocates for the abolition of the Benya wage formula, considered sacrosanct by unions. Instead, Kluge proposes adopting a German model that allows large corporations like Volkswagen to negotiate wage agreements with their respective works councils.
Critics argue that implementing such change would weaken trade unions' bargaining power, threaten employee rights, and necessitate legal reforms. However, Kluge contends that dissolving the compulsory membership of companies in the Economic Chamber would empower firms to negotiate wages at the company level.
In the paper industry, a recent collective agreement has been reached that takes into account each company’s economic situation, marking a small step forward, according to Kluge.
Criticism doesn't only focus on the Benya formula and the rigid nature of collective agreements; it also targets the state and its civil service wage agreements starting in 2023. Kluge asserts that public sector wages should mirror those in the commercial economy rather than the other way around.
While the Benya formula preserves purchasing power, Austria's above-average inflation has prompted higher wage agreements than other EU countries. Since productivity growth has stalled, Austria's increasing wage costs have eroded its price competitiveness. Customers are finding "Made in Austria" products to be more expensive compared to their "Made in Anywhere Else" counterparts, potentially causing problems for export companies.
Enforcement of the Benya wage formula in combination with civil service wage agreements has contributed to Austria's high wages, which are now nearly eleven percentage points above the eurozone average. Yet, whether Austria should shift towards company-specific agreements to boost competitiveness remains a contentious issue, given potential implications for worker protections and cohesion within the workforce.
Economic and social policy changes, such as the abolition of the Benya wage formula and adopting a German model for wage negotiations, are being proposed to address Austria's economic struggles. These changes, as advocated by economist Jan Kluge in his latest publication, could potentially impact various aspects of business, including finance and the power dynamics between firms and trade unions.
