VW Strike Over Wage Gap Highlights Salary Strain in East Europe

(Bloomberg) -- Audi workers in Hungary began a week-long strike Thursday to protest what they consider an unfair wage gap with colleagues working for Volkswagen AG’s other factories in eastern Europe. Their Czech colleagues also threatened to take action over pay.

The strike shut down engine and car production in the western Hungarian city of Gyor, the location of one of the flagship European factories of Volkswagen’s premium brand, according to Audi Hungary labor union Vice President Gyorgy Csalogany. Workers are demanding an 18 percent wage hike for this year while Audi is offering 10 percent in 2019 and the same for 2020, Audi spokeswoman Judit Mithay-Marko said.

The strike at Audi highlights intensifying wage pressures across the eastern wing of the European Union, once a magnet for foreign investment because of its cheap labor. A dire worker shortage fueled by an aging population, emigration and anti-immigration policies have triggered a wage explosion, potentially straining the bottom line of companies like Volkswagen. Audi provides the largest share of Volkswagen’s profit.

“We’re not thinking about wages in Hungary, where we’re close to the top of the salary scale, but in regional terms,” Csalogany said in a phone interview, citing company data that he said showed Volkswagen pay to be lowest in Hungary. “If that means that we’ll push wages higher across Hungary then we’re fine with that.”

Labor Crunch

Hungarian Prime Minister Viktor Orban has faced more than a month of protests since the passage of a controversial law on overtime in December that would allow companies to ask employees to work the equivalent of six days a week on average. The legislation, dubbed the “slave law” by critics, was widely seen as an attempt to deal with the labor shortage.

The labor crunch in Hungary has caused wages to rise by more than a third in the past three years, to an average net monthly salary in the private sector of 245,000 forint ($872) in November, the latest available period. That hasn’t alleviated the labor shortage as the number of unfilled jobs has doubled since 2015.

While Audi workers in Hungary are also taking home more than before, they trail Volkswagen peers in the region. Employees are earning on average 25 percent more in the Czech Republic, 28 percent more in Slovakia, 39 percent more in Poland and 3.6 times more in Belgium than in Hungary, Csalogany said.

Audi declined to comment on the data stated by labor unions.

The trade union at Volkswagen’s highly profitable unit Skoda Auto AS said on Thursday it was ready to go on strike if collective bargaining scheduled to begin later this month doesn’t meet its requirements. The flagship of the Czech economy and a benchmark of wage trends across the country last April agreed to increase salaries, including bonuses and overtime, by more than 20 percent.

©2019 Bloomberg L.P.