Germany: ‘Wage formation’
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The German system of wage formation is still dominated by sectoral collective bargaining. There is no state intervention in collective bargaining. Contrary to most European countries Germany has no statutory minimum wage. In the IT industry there is no overall pattern of collective bargaining. Some companies are covered by sectoral collective agreements, some by company level collective agreements and an unknown- albeit not insignificant- number of enterprises is not engaged in collective bargaining at all.
1. Systems of wage formation
a) Please briefly describe the main systems of wage formation in your country (when relevant please distinguish between private-public sector). For example:
- is the system underpinned by legislation or collective bargaining, a mixture of both, or other factors, such as the labour market?
- who are the main actors?
- do state bodies play a role in wage setting?
Collective bargaining is a matter between trade unions and employers. The state does not interfere in collective bargaining. Collective bargaining is governed by the Collective Agreement Act (Tarifvertragsgesetz).
On the employees' side, the Act states that only trade unions have the right to conclude collective agreements (Article 2, Para 1). The Act contains an exclusive provision concerning the promotion of trade unions. Neither other "employees' associations", such as "yellow unions", nor works council s have the right to conclude collective agreements. The Works Constitution Act (Betriebsverfassungsgesetz) of 1952 confirmed that works agreement s which are concluded between the works council and management "shall not deal with remuneration and other conditions of employment that have been fixed, or are normally fixed, by collective agreement" (Article 77, Para 3).
On the employers' side, the Collective Agreement Act provides that collective agreements may be concluded either by employers' associations or by individual employers. In practice, however, during the 1950s Germany saw the development of a comprehensive system of association-level collective bargaining. Although company agreements (Haustarifverträge) gained importance in the 1990s (DE9803152F), more than two-thirds of all German employees are still covered by an association-level agreement (Flächentarifvertrag).
Collective agreement s are directly binding for all members of the bargaining parties concerned (Article 3, Para 1) – i.e. all employees who are members of the trade unions and all companies who are members of the employers' associations. As a result, only the members of the signatory trade unions have a direct legal claim against their employers - for example, in relation to wage increases or working time arrangements provided for in a collective agreement. In practice, however, employers who are bound by a collective agreement usually apply the agreed provisions to all employees, regardless of whether they are trade union members or not. Furthermore collective agreements can also be extended by the Minister of Labour to include employers and employees in the relevant sector which are not bound by the agreement.
Collectively agreed provisions keep their validity as long as no new agreement has been signed, even when the duration of the agreement has run out (Article 4, Para 5). The so-called "after-effect" (Nachwirkung) of collective agreements also applies to employers who have left their employers' association. Furthermore, during the term of an agreement both bargaining parties are bound by the "peace obligation" (Friedenspflicht), which forbids any form of industrial action. The latter provision, however, is not fixed in the Collective Agreements Act but has been introduced through Labour Court decisions of principle (DE9802253N).
b) If collective bargaining is the main determinant, what is the main level at which this takes place (national, sectoral, and/or company level)? Where relevant, please refer to other European Foundation studies that you have written in this context. Where collective bargaining fails, what is the role of labour market institutions (i.e. labour court, labour commission)? Provide an example if relevant.
Sectoral collective bargaining is prevalent. According to data for 2006 provided by the Institute for Labour Market and Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) - the research branch of the Federal Employment Agency (Bundesagentur für Arbeit, BA), 63% of employees were covered by collective agreements, 54% of employees were covered by sectoral collective agreements and 9% by company level collective agreements.
c) Monitoring. What monitoring of collective bargaining is carried out (if any)? Who carries this out? (Joint /Tripartite body at national/sectoral level)? How does it do this? Are there any studies or surveys?
There is no official monitoring carried out. However, the Collective Agreement Archive (Tarifarchiv) of the Institute of Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) within the Hans Böckler Foundation (Hans-Böckler-Stiftung, HBS) regularly monitors the development of range and scope of collective agreements, in particular those concluded by affiliates of the Confederation of German Trade Unions (Deutscher Gewerkschaftsbund, DGB). It regularly publishes monthly and annual reports on the development of collective bargaining.
2. Wage developments
a) Please briefly describe any major overall wage development trends over the past five years (refer to previous EIRO updates where appropriate)
| 2003 | 2004 | 2005 | 2006 | 2007 | |
|---|---|---|---|---|---|
| Average collectively agreed basic pay increase in percentage terms | 2.5 | 2.0 | 1.6 | 1.5% | 2.2% |
| Increase in average earnings in percentage terms | 1.2 | 0.1 | 0.5 | 0.7 | 1.3 |
Source: WSI, Collective Agreement Archive, 2008; Federal Statistical Office ( Statistisches Bundesamt, destatis)
b) What developments have there been regarding equal pay between men and women in your country? Is this an issue for debate?
| Year | Men’s income (in €) | Women’s income (in €) | Gap between women’s and men’s income (in %) |
|---|---|---|---|
| 2001 | 2,888 | 2,281 | 21.0 |
| 2002 | 2,978 | 2,345 | 21.3 |
| 2003 | 3,063 | 2,420 | 21.0 |
| 2004 | 3,127 | 2,483 | 20.6 |
| 2005 | 3,182 | 2,539 | 20.2 |
Source: Federal Statistical Office (Statistisches Bundesamt, destatis)
The statistical data does not give a full picture of the current situation in Germany, as it only focuses on some, albeit important, sections of the workforce as a whole. Major areas of female employment, such as public or health services, have not been included in the study. Figures relating to blue-collar workers employed in the services sector and part-time workers were excluded as well. According to a Eurostat press release (in German, PDF 72Kb) on 6 March 2006, Germany has one of the biggest gender pay gaps in Europe.
According to latest figures issued by Eurostat the gender pay gap for Germany remained in 2006 at 22%.
The gender pay gap has received some attention in the media in recent years. However, special provisions to tackle wage discrimination and to promote equal opportunities were not included in those collective agreements concluded in recent years.
c) Please briefly describe the main recent sectoral agreements and outcomes in terms of pay
In February 2008, the bargaining parties of the northwestern German steel industry agreed on a new package of collective agreements (DE0803029I). The provisions of the new agreements comprise a €200 one-off payment and a general pay increase of 5.2%, with effect from 1 March 2008. Later in the month, the pilot agreement was also adopted for the eastern German steel industry.
In March 2008 the German Metalworkers’ Union (Industriegewerkschaft Metall, IG Metall) signed a new agreement for the western German textile and clothing industry. The agreement provides for a general pay increase of 3.6% and one-off payment of €200.
In March 2008, the United Services Union (Vereinte Dienstleistungsgewerkschaft, ver.di) signed a new package of agreements on pay and working time for the public services sector with representatives of the German government and municipal employers (DE0804029I). The agreements, which cover the period 2008–2009, provide for an average wage increase of about 5% for all federal and municipal employees in public services. In exchange for the pay rise, the trade unions had to accept an increase in standard weekly working hours in western Germany.
In April 2008 the bargaining parties in the chemical industries agreed on a new package of collective agreements. The provisions of the new agreements comprise a general pay increase of 4.4% for 13 months followed by a 3.3% increase for further 12 months. In addition the parties agreed on a flexible one-off payment worth 0.5% of monthly income which can be delayed or cancelled under certain circumstances by way of agreement at company level.
d) Are there any noteworthy trends at company level, such as an increasing individualisation of pay setting?
There are no newly emerged trends regarding the individualisation of pay in particular with regard to performance related pay schemes. According to the 2007 WSI Works Council Survey some form of profit-related pay, that is bonus payments related to the business performance of the company, are in place in about 35% of companies. This is about the same volume found in the previous survey of 2005.
Recent main actions/strikes /protests on wages
| 2003 | 2004 | 2005 | 2006 | 2007 | |
|---|---|---|---|---|---|
| Total number of working days lost through industrial action | 163,879 | 50,673 | 18,633 | 428,739 | n.a. |
| Number of workers involved in industrial action | 57,251 | 101,420 | 17,097 | 166,423 | n.a. |
| Number of disputes | n.a. | n.a. | n.a. | n.a. | n.a. |
| Number of working days lost through industrial action per 1,000 workers | 4.7 | 1.5 | 0.5 | 12.4 | n.a. |
Source: Sources: Federal Employment Agency (Bundesagentur für Arbeit, BA); own calculation
Among the latest strikes concerning pay issues was a dispute in 2007 which involved the German rail company Deutsche Bahn AG (DB) and the German Engine Drivers’ Union (Gewerkschaft Deutscher Lokomotivführer, GDL) resulting in 11 strike days. Since April 2007 there have been virtually thousands of strike actions involving ver.di and employers in retail. Most of these strikes lasted for a day. No new sectoral collective agreement has been reached so far (as of May 2008). Some employers have concluded company level collective agreements with the union. Warning strikes involving some 39,000 steel workers accompanied the 2008 bargaining round in the German steel industry. Some hundred thousands workers went out on warning strikes lasting up to a day in the public sector in the 2008 bargaining round in public services.
f) What are the main social partners’ views on wage developments in your country?
There have been no general comments published by either the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) or the DGB commenting on the overall wage development in the first half of 2008. However, various statements by the bargaining parties in various industries made clear that while trade unions demand and appreciate substantial pay increases, employers’ associations are in general stressing the need for wage restraints in order to maintain overall competitiveness.
3. Minimum wages
In this section, we are aiming to update information from the previous study on the minimum wage (http://www.eurofound.europa.eu/eiro/2005/07/study/index.htm)
a) Does your country have a national minimum wage?
No
b) How is it defined? How is it set and updated? Do you have any data as to its level and coverage rates?
c) Are there minimum wages (sectoral, regional) covering a major part of the workforce?
There are some sectors covered by minimum wages in accordance with the Posted Workers Act. The Posted Workers Act of 1996 provides the workers concerned with the protection of German statutory minimum standards in areas such as working time, paid leave, health and safety, maternity and equal treatment. Furthermore, the law stipulates that posted workers should be covered by the same minimum collectively agreed pay rates and collectively agreed provisions on paid holidays as German workers are. This objective is accomplished by way of the extension of collective agreements. Such an extension applies the terms and conditions of a collective agreement to those workers who are not covered by any agreement because they are either not members of the signatory trade union or their employer is not a member of the employers’ organisation which is party to the agreement.
According to an article published by Bispinck and Schulten, researchers at the WSI, 1.3 million workers in seven sectors are now covered by minimum wages under the provisions of the Posted Workers Act.
Most sectors are related in some way to the construction sector and building trades. The largest sector is the construction industry (Bauhauptgewerbe) where different scales of minimum wages have been agreed: Scale 1 for unskilled workers and Scale 2 for skilled workers. A similar distinction is made in the painting trades (Maler und Lackiererhandwerk) and in the demolition industry (Abbruch und Abwrackgewerbe), while the building cleaning sector (Gebäudereinigerhandwerk) and the roofing trade (Dachdeckerhandwerk) only agreed on minimum wages for the lowest pay grades. Beside these industries there are minimum wages in the mail delivery services (Briefdienstleistungen) and in the electrical trades (Elektrohandwerk). In the latter industry this only covers workers when they are working away from the establishments where they are employed, for example, on construction sites.
d) What are the views of the social partners and the government on the minimum wage(s)?
The DGB, following a controversial debate (DE0409205F), adopted a resolution endorsing the introduction of a statutory minimum wage of €7.50 per hour at its 2006 congress. The decision was opposed by the Mining, Chemicals and Energy Industrial Union (IG Bergbau, Chemie, Energie, IG BCE). The IG BCE is in favour of legal requirements which would ease the extension of collective agreements in order to allow a wider use of this procedure. With regard to the position of other trade unions, IG BCE argues that many low-paid jobs, especially in eastern Germany, would be threatened if a minimum wage at a rate above currently paid wages would be introduced.
The longest-standing supporters of a statutory minimum wage are to be found in the ranks of the Trade Union of Food, Beverages, Tobacco, Hotel and Catering and Allied Trades (Gewerkschaft Nahrung-Genuss-Gaststätten, NGG). This trade union has been campaigning since the late 1990s in favour of a national minimum wage (DE9911221N). In addition to NGG , German's second largest trade union, ver.di is also actively campaigning for a national statutory minimum wage of €7.50.
The employers' side is united in its rejection of any statutory minimum wage. The president of the Confederation of Germany Industries (Bundesvereinigung der Deutschen Industrie, BDI), Michael Rogowski, was quoted in the press saying that he rejects in principle any statutory minimum wage, even at branch level, as this would make an already overregulated labour market even more inflexible. In his view, the level of social assistance already serves as a kind of minimum wage with the effect that a low-pay sector is prevented. A high minimum wage, however, would destroy workplaces for people with low qualifications. For Mr Rogowski, these people are not helped if they are financed by society but are without any prospect of getting into work.
The president of the BDA, Dieter Hundt, said in an interview that a statutory minimum wage would turn the intention of the government's 'Agenda 2010' (DE0311101N) upside down. A statutory minimum wage would make it more difficult to create a low-wage sector to employ the long-term unemployed. Not a minimum wage but wider wage differentials are needed. Those who could not make a living from their work because of low wages should then receive additional payments from the state. Mr. Hundt also rejected the idea of extending collective agreements by ministerial decree. He said that employers should have the right to opt out of a collective agreement if they deemed it necessary for their business. This would be part of their bargaining autonomy.
e) Is the minimum wage a subject for debate in your country?
A lively public debate on minimum wages is currently ongoing in Germany. So far, no agreement has been reached within the coalition government of the conservative Christian Democratic Party (Christlich Demokratische Union, CDU), its Bavarian associate party, the Christian Social Union (Christlich-Soziale Union, CSU), and the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) on whether or not to introduce a statutory national minimum wage in Germany. In the political arena, the introduction of a national minimum wage has emerged as a controversial issue within the coalition government, with the SPD favouring the introduction of a minimum wage, while the conservatives have been reluctant to follow such a line. However, some consensus is evident when it comes to introducing minimum wages in some sectors by way of including those in the Posted Workers Act. There was a major controversy on whether or not to include mail delivery services in the Posted Workers Act. The agreement was finally reached within the coalition on 29 November - made possible by the revision of the collective agreement concluded between ver.di and Deutsche Post (DE0712039I). Both parties agreed on a revision of a collective agreement on minimum wages concluded earlier in 2007, in order to limit its scope to those companies and their subsidiaries whose business is ‘predominantly’ in the mail delivery services sector. This revision limits the number of workers covered by minimum wages. The move aimed to meet the demands raised by the CDU as a precondition to any final compromise within the coalition.
f) Do you have any data on the minimum wage in relation to average wages, how it interacts with the tax system and any effects it is having on employment?
There is no national minimum wage
4. Wage formation within the IT sector
Please describe in detail the wage formation process in the IT sector in your country. According to data issued by BITKOM, a business association in the sector, the market volume of the software industry and IT services was about €44 billion in 2007.
a) Importance of the sector in the economy
There are some 29,000 establishments in the industry of which 23,000 employ between 1 and 9 employees. This is 1.4% of all establishments recorded by the Federal Employment Agency (Bundesagentur für Arbeit, BA).
b) % of the workforce in the sector
According to data from the BA of September 2007 there were 413,431 employees liable to social security contributions (sozialversicherungspflichtigte Beschäftigte) in the sector (NACE 72). This was about 1.5% of total employment liable to social security contributions. 120,241 of those were women.
c) Main pay-related characteristics, such as: low pay, differences in pay between men and women and/or older and young workers, wage drift;
There is no data available on income in the IT sector
- II Describe the main characteristics of the sector pay decision process
a) Is the wage formation process in this sector shaped by institutions? If there is a collective bargaining process, how does it work? Eg:
- at sector level only;
- at sector level, which then provides a framework for company level;
- at company level only
Who are the main actors?
The bargaining landscape in the IT sector (NACE 72) is rather complex. There is no overall sectoral agreement and there is no employers’ association for the whole IT sector. There are a number of trade unions claiming to represent IT workers. There is a major disagreement between the IG Metall and ver.di as to which trade union is authorised to represent this industry. As a result both unions have been trying to establish a presence in the sector. In a few cases IT workers are also represented by the IG BCE - in particular if they work in IT subsidiaries of chemical companies.
In those cases where IT companies are still subsidiaries of major companies in the communication and metal working industries they may still be covered by the respective agreements for these sectors or there may be company level agreements. The latter applies for example to Deutsche Telekom which concluded collective agreements with ver.di. Others like the large SAP Company are not covered by any collective agreement. The same probably holds true for many small enterprises in the sector. The overall number of companies having company level agreements is unknown. There is also no data on bargaining coverage in the sector.
The business interests of the IT and telecommunications sector (ITK-Sektor) which includes not only IT but also telecommunication services and hardware manufacturing is represented by the German Association for Information Technology. Telecommunications and New Media (Bundesverband Informationswirtschaft Telekommunikation und neue Medien, BITKOM) has 900 direct members representing some 1.200 companies.
b) Specific issues : upward pressures on pay such as wage competition between firms, the effects of a tight labour market, and using pay as an attraction and retention tool, the effects of migration on pay, the effects of the presence of multi-national firms within a sector and whether comparisons have been made between the pay offered by multinationals and local companies
There is no data available with regard to the IT industry as such (NACE 72) and there are no studies available which would address the specific issues addressed above. According to an analysis of IG Metall with regard to the IT and telecommunications sector (ITK-Sektor) which includes communication services and companies such as Deutsche Telekom, the union found that in 2007 wages in those companies which are covered by a collective agreement rose by 4% whereas overall wages in the IT and telecommunications industries declined by 7%. This is despite the fact that the industry is growing and in need of specialist employees. According to survey data published by BITKOM there were about 43,000 vacancies for IT specialists in December 2007. 18,000 of these vacancies were in the IT sector and 25,000 in other industries.
- III Analysis on trends and views of the actors
a) Are there any major differences between this sector and the rest of the economy in terms of wage formation?
Overall, the sector is less regulated by collective bargaining as the rest of the economy where sectoral collective bargaining is still the prevalent form. However, as indicated above the situation is highly complex.
b) Are there any noteworthy trends at company level, such as an increasing individualisation of pay setting?
There is no specific information concerning this issue available for the IT sector.
c) What are the main views of the social partners in this sector on wage formation?
With regard to the fragmented and complex bargaining situation and the absence of an employers’ association it is not possible to identify specific views of the bargaining parties in the IT sector on wage formation.
d) Are there any positions of the authorities on the sector’s wage policy ?
No, the authorities are not intervening in this sector.
5 Views of the national centre
The German system of collective bargaining is still largely based on sectoral collective bargaining. Company level collective agreements, although increasing over recent years, are still the exception rather than the rule. However, overall bargaining coverage of sectoral collective agreements has been declining - albeit at a slow pace - over the last ten years. There is an overall tendency of decentralisation. First we can observe the splitting-up of large national bargaining areas into subsectoral and regional bargaining areas such as for example in the public sector. Secondly, there are a large number of collective agreements which contain so-called opening clauses which allow the bargaining parties at company level to deviate under certain conditions from the sectoral collective agreements. Most often such deviations are still bound to the final consent of the employers’ associations and trade unions concerned. In particular in private sector services where trade unions struggle to build up a strong presence largely due to the fragmented nature of most of these industries, bargaining coverage is often patchy.
Heiner Dribbusch, Institute of Economic and Social Research, WSI