Little Direct Total Wage Growth Impact Of Train Drivers' Negotiations

Contract negotiations between German train drivers' union GDL and national rail provider "Deutsche Bahn" failed for now, which lead GDL head Weselsky to call for a 35h national strike starting on Wednesday with potential follow-ups. While the negotiations will likely only have a limited direct impact on overall wage dynamics in the country, negotiations are incoming for over 1.8mln of workers in March alone, and a significant bump in the hourly wage of train drivers, enforced through the incoming strikes, could yield some momentum for other unions' demands in their respective fields.

• The strikes were called for after GDL stopped the recent round of negotiations, which was ongoing for four weeks, likely following the national rail provider's refusal of accepting the key union demand of a reduction of weekly train drivers hours from 40 to 35, which would equal an hourly wage increase of over 14%.
• Deutsche Bahn employs 19,400 train drivers currently, which is a relatively minor figure compared to total German employment, sitting at around 46mln as of January, so the negotiation's total contribution to German Q1 2024 wage growth would be muted.
• However, in March alone, contracts on negotiated wages impacting over 1.8mln of workers will expire (incl. about 731k in the construction industry and about 700k in the subcontracted labour sector, according to union-affiliated institute WSI), which amounts to almost 4% of total employment, so wide-spread renegotiations are due to follow. A success of the train drivers union could yield some momentum for the other unions in their negotiations going forward.
• Apart from the wage dynamics, strikes in the rail sector can incur significant damages to the German economy - one day of national rail yields an economic loss of an estimated E100mln, according to research institute WSI, which amounts to approximately 0.9% of daily GDP in Germany. Strikes longer than a single day can have an exponential effect, according to the institute.