Uncovering the reasons for the substantial salary hikes in the United States
Recently, American labor unions have scored significant wage victories for their members. A deeper examination of these wage boosts of 30%, 50%, or even over 60%, alongside Germany's journey, presents a more complex narrative.
staggering figures that would leave German workers in a spin: As per the latest collective bargaining agreement, the wages of dockworkers on the US East Coast are poised to skyrocket by more than 60%. Union workers at Boeing recently turned down a 25% pay hike and are insisting on a 40% increase. Last year, unions managed to secure wage hikes of up to 33% from major US automakers. Global attention was captured by an agreement at the parcel service UPS in 2023's summer, in which drivers' annual salary climbed to as high as $170,000 (approximately €156,000).
Even when considering that gross wage figures in the US sometimes incorporate employer-funded labor expenses viewed as German labor costs, and that living expenses in numerous US areas exceed those in Germany, these earnings levels are practically unreachable for collectively agreed workers in Germany. For instance, a large parcel service driver in Germany can anticipate an average annual income of around €35,000, as per the job portal Stepstone. Wage boosts such as those for US dockworkers or American automakers are scarcely imaginable in Germany. In the current wage talks, IG Metall is advocating for a 7% wage increase, while Verdi is aiming for an 8% increase in the public sector. How can these disparities be explained?
To begin with, the percentage figures mentioned in negotiations or collective bargaining agreements often pose challenges when it comes to comparing them directly. For example, the impressive 60% wage increase for US dockworkers is to be distributed over six years, equating to an annual increase of slightly more than 8%. The UAW union and Ford's agreement, which offers a wage increase exceeding 30%, is valid for a period of four and a half years.
Higher wage level in the USA
Moreover, such substantial agreements do not paint an accurate picture of wage growth in the USA. The unions used their high demands during negotiations as a response to stagnating or decreasing incomes. Albeit most American employees had to endure a decline in their purchasing power in recent years, only a select few reaped the benefits of eye-popping wage increases. As per current US government statistics, wages have risen by an average of 4% over the past year. After subtracting the inflation rate of 2.5%, this leaves a real wage increase of only 1.5%.
In comparison to this real wage development, German workers have actually fared slightly better. According to Destatis, wages saw a 5.4% increase in the second quarter of 2024 (the most recent data available), with an inflation rate of 2.3%. In actual terms, German workers saw their wages increase by 3.1% over the previous year and recorded an average wage increase higher than their American counterparts.
However, the salary level in the USA is considerably higher. According to OECD figures for 2023, the average annual salary in the USA stood at around 80,000 USD (approximately 73,000 EUR), in contrast to just over 48,000 EUR (52,000 USD) in Germany. These figures do not account for the fact that, on average, Americans work more hours per week and enjoy less vacation time than German employees. Additionally, the cost of living in numerous US areas is significantly greater.
The wage boosts in the USA, such as the 60% increase for dockworkers, include other expenses paid by employers, which are viewed as labor costs in Germany. These employer-funded expenses often lead to gross wage figures in the USA being higher than what German workers can practically achieve. Furthermore, when considering materials like metal, German manufacturing industries often face higher costs compared to their counterparts in the USA.
