(Bloomberg) -- German states agreed to a new labor contract with public-sector employees including teachers, police and nursing-home staff that increases wages by about 8 percent over the next couple of years as they seek to boost recruitment.
While Germany is seeking to improve services such as daycare for working mothers, it has struggled to fill positions because pay is low and there are plenty of other job openings with unemployment in the country at a record low.
Under the new contract, which affects about 1 million employees, German states will retroactively raise wages by 3.2 percent from January 2019, the Ver.di union said in a statement Saturday. A second 3.2 percent hike will follow in January 2020, with a 1.4 percent increase in January 2021. Pay structures were also adjusted to boost earnings for entry-level staff.
“This is the best result in many years and a good day for civil-service employees,” Frank Bsirske, chairman of Ver.di, said in the statement after the deal was reached late on Saturday in the city of Potsdam. “We’ve sustainably improved the attractiveness of public service for career starters and skilled workers. That’s a win for both unions and employers."
The wage increase could provide some support for European Central Bank policy makers as they grapple with weak underlying price pressures in the euro area. ECB officials meet on March 7 to gauge whether the bloc’s economic slowdown is serious enough to require a fresh monetary boost.
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