The ongoing collective bargaining dispute involving Verdi, the federal government, and municipal employers continues to be unresolved following four days of negotiations. As neither party shows any inclination to compromise, it seems that arbitration is poised to become the inevitable course of action to resolve the impasse.

Since Friday, representatives from unions and employers at both municipal and federal levels have been engaged in discussions, striving to reach a compromise. Verdi, alongside the Civil Service Union, has put forth a call for an eight percent salary increase or a minimum of €350 per month for more than three million public sector workers, encompassing civil servants and pensioners alike. Moreover, there is a concerted effort to advocate for increased bonuses for shift workers, alongside the proposal of up to four additional vacation days—one of which would be reserved solely for union members.

Nevertheless, employers have resolutely dismissed these demands, pointing to the financial limitations encountered by local authorities. The suggested rise in wages would amount to around €10 billion for 2.5 million employees within local government. The total cost, when accounting for the extra leave days, is projected to approach €15 billion, as reported by the Association of Local Employers’ Associations (VKA). Karin Welge, representing the SPD and serving as the lead negotiator for VKA, characterized the proposal as ‘unmanageable and out of step with the times.’

Arbitration Appears Inevitable as Talks Reach a Standstill

Should an agreement not be achieved, either party may officially announce the negotiations as unsuccessful, thereby initiating an arbitration process. Two seasoned politicians—Roland Koch from the CDU, who previously served as Minister-President of Hesse, and Hans-Henning Lühr from the SPD, a former State Councillor in Bremen—have been appointed as mediators.

This situation is not without precedent. Two years prior, Verdi sought arbitration following a comparable stalemate, yet the union is hesitant to pursue that route once more, particularly given that Koch would possess the pivotal vote should a deadlock arise.

Staff Shortages Heighten Strain

Aside from the financial issues at hand, a significant staffing crisis within the public sector is driving unions to call for improved wages and working conditions. At present, there are 550,000 vacancies within the public sector, with 115,000 in geriatric and nursing care, 100,000 each in educational institutions and daycare facilities, and 110,000 in local government roles.

Verdi contends that enhancing wages and benefits is essential for drawing in skilled workers and bolstering the competitiveness of the public sector. Interior Minister Nancy Faeser, from the SPD, has recognized the staffing crisis facing the government, yet she stands resolute regarding the financial limitations in place.

Significant Wage Hikes, Yet Inequalities Persist

Although wages in the public sector have seen a more rapid increase compared to their private sector counterparts in recent years, they remain behind the overall growth in economic wages. Frank Werneke, the chairman of Verdi, has noted that collective agreements at both federal and municipal levels have experienced a 72 percent rise since the year 2000, in contrast to a 76.7 percent increase across the broader economy.

The collective agreement for 2023–2024 stands out as one of the most consequential in recent decades, providing employees with inflation compensation and a guaranteed minimum pay rise of €340 per month, effective from March 2024. An analogous accord was established for 850,000 state employees towards the close of 2023, with additional discussions anticipated with state governments come autumn.

What Lies Ahead?

As the situation remains unresolved, the prospect of arbitration appears to be growing more probable. It remains to be seen whether Verdi will make the call or if the employers will take the initiative themselves. Should arbitration be invoked, both parties will find themselves in a position of awaiting a binding resolution, which could result in a postponement of wage increases for those employed in the public sector.

As the impasse persists, countless workers are left in limbo regarding their financial prospects, whilst public services grapple with persistent difficulties stemming from staffing shortages and fiscal limitations.