1998 Annual Review for Austria

This record reviews 1998's main developments in industrial relations in Austria

Introduction

The first half of 1998 in particular was characterised by unexpectedly buoyant economic growth. In the second half of the year, growth slowed from over 4% in the first two quarters to 2.7% in the third quarter, with a final annual rate of 3.3%. However, these high economic growth rates failed to translate into significant increases in employment. Indeed, contrary to the previous year's predictions (AT9712165F), unemployment did not decline to 4.3% but rose to 4.5% from 4.4% in 1997. Inflation was reduced to 1.2% and the overall public deficit stood at 2.2% of GDP.

Projections for the period until 2002, by forecasters at the Austrian Institute for Economic Research (Österreichisches Institut für Wirtschaftsforschung, WIFO), expect an average annual growth rate of real GDP of 2.8%. Unemployment over the same period is forecast to decline to 3.7%. Inflation is expected to remain steady at 1.2% or 1.3%. The budget deficit is expected to remain unchanged in 1999 and to decline thereafter to 1.4% in 2002. Nevertheless, public debt is forecast to remain above the Maastricht convergence target of 60% of GDP.

A survey carried out at the end of 1998 found 45% of Austrians to be facing 1999 with optimism, compared with 37% in the previous year. The number of those with a sceptical outlook remained stable at 30%, while the percentage of pessimists decreased from 24% in 1997 to 17% in 1998.

Despite some turbulence in the relationship between the coalition partners in the Austrian government, the two-party coalition between the majority partner, the Social Democratic Party (Sozialdemokratische Partei Österreichs, SPÖ), and the minority christian democrat Austrian People's Party (Österreichische Volkspartei, ÖVP) remained stable. The only elections to take place in 1998 were those for the presidency, which returned the incumbent. The date for the federal elections remains set at October 1999, after some debate whether to hold them earlier in the year. One of the key issues for discussion in the election campaign is likely to be the question of tax reform, which already began to take centre stage in 1998.

Among the key events in industrial relations was the negotiation of agreements in the metalworking sector which raised minimum wages and salaries by 3.7% (AT9810108N). These agreements became a yardstick for all subsequent agreements and remain controversial (AT9811110F). However, this and other key issues debated at national and sectoral level - such as the organisation of working time and the fight against undeclared employment - were overshadowed by unemployment as a primary national concern.

Key trends in collective bargaining and industrial action

The standard for increases in minimum wages and salaries was set by a number of key agreements reached in the metalworking sector in October and November 1998. As mentioned above, these agreements provided for an increase of 3.7% in minimum wages and salaries and had significant repercussions on all agreements negotiated subsequently.

Industrial action in 1998 occurred mostly in the public services, including state-owned companies (AT9805183F). This involved, for example, the railways (AT9809101F), teachers (AT9809104N), postal services (AT9806196N) and the courts (AT9805190N).

As in 1997, there was a continued preoccupation with the reform of wage and salary scales. Automatic two-yearly increments were either diminished or reduced in number, or scrapped altogether. In return, entry wages and salaries were raised. The aim of such reforms was to make jobs more attractive to young workers, with lifetime incomes supposed to remain unaffected. The removal of any remaining differences between wage and salary earners also remained a concern in 1998, both for the legislator and in collective bargaining (AT9801160N). It is anticipated that a full harmonisation in their status may be accomplished in 1999.

Another key area of debate in 1998 was the intended introduction of legislative changes aimed at facilitating the fight against undeclared employment (AT9810106F). As a result of disagreement between the social partners over the definition of undeclared employment, progress in this debate remained elusive until January 1999, when agreement on the new measures was finally reached (however, the resulting bill was facing difficulties and an uncertain future in parliament in early 1999).

One of the predominant issues of debate in 1997, the problem of youth unemployment, was superseded by the debate on tax reform. This was partly the result of an easing of demographic pressures, but was also due to the introduction in 1997 of a variety of measures aimed at improving the employability of young people. Part of the package of labour market policy "activation" measures announced in the National Action Plan (NAP) for employment, in response to the EU Employment Guidelines, was also an assessment of the tax and social security framework in which the labour market operates. Tax reform aimed at reducing the burden on businesses thus became a major issue of debate in 1998 (AT9809102F). It was intended that the level of tax concessions should be agreed prior to the 1999 general elections. While economists had argued that any tax concessions of less than ATS 20 billion would be inconsequential, the Federal Ministry of Finance (Bundesministerium für Finanzen, BMF) insisted that a maximum of only ATS 10 billion was available. Ultimately, the government set itself a target of ATS 30 billion.

Industrial relations, employment creation and work organisation

Employment rose by 22,000 to 3.077 million and is expected to increase by another 24,000 in 1999. Much of this growth is thought to have occurred in part-time service sector employment (of between 12 and 36 hours per week) and in temporary agency work. The latter is expected to increase by 50% in 1999, from the current level of about 30,000. Approximately 60% of all temporary agency work is in manufacturing. Not included in these employment creation figures is the number of employees in so-called "limited part-time employment" (geringfügig Beschäftigte- AT9705115N), ie those earning less than ATS 3,880 gross per month or working less than 12 hours per week. The number of workers in such employment relationships rose from 170,724 at the end of 1997 to 184,354 at the end of 1998, an increase of 8%, despite the introduction of new regulations intended to make it less attractive (AT9711144F).

Despite the unexpectedly high economic growth rates in the first half of 1998, unemployment stood at an annual average of 237,794 in 1998, 4,356 more than in 1997. Unemployment is expected to remain static in 1999.

The Public Employment Service (Arbeitsmarktservice, AMS) expects the number of persons formally unemployed at least once during a calendar year to rise to 716,600 in 1999 from 705,000 in 1997. Approximately 88% of job-seekers find employment within six months, with 12% unemployed for longer. In 1998, long-term unemployment rose, as did the unemployment rates of women and of older workers. The labour market situation of young people improved compared with 1997. If the employment targets set by the NAP are to be reached (AT9901120F), the AMS estimates a shortfall of ATS 3 billion over and above the funds already allocated to the NAP. One third of this sum could be raised within the AMS.

The issue of working time was hotly debated at national level, as well as in different sectors, without much significant progress being made, particularly in relation to the reduction of working time in favour of job creation. It has been argued that if overtime hours were converted into full-time employment, the NAP's job creation target of an additional 100,000 jobs would be realised and exceeded instantly. While these issues are ever-present in collective bargaining as well as in the political debate, no progress was made towards resolving them in 1998. The main reason for this lack of progress is that reduced working time, especially reduced overtime, would mean losses in income, which workers remain unwilling to accept. In the autumn, working time was to be included in the manufacturing collective bargaining agenda (AT9810107F) but was then deferred (AT9812115F).

Collective agreements permitting night work by women are a concern in manufacturing industry, while Sunday AT9811111N) and public holiday employment (AT9811113N) remains an issue in the commerce sector. In the seasonal industries such as tourism and construction, bargaining focused on the question of how to reduce overtime during the high season in favour of a shorter duration of seasonal unemployment.

The level of part-time employment remained practically unchanged over 1997, with 28.4% of women working part-time, compared with 4% of men.

Developments in representation and role of the social partners

The year proved to be one of significant change in the area of employee and employer interest representation. Membership of the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB), which encompasses almost all trade union members in Austria, declined by a further 2.4% in 1997, according to official figures published at the end of June. This decline occurred despite a membership drive which resulted in the recruitment of 70,000 new members. A continued decline in membership is expected in 1999. The single largest trade union within the ÖGB, the Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA), which suffered the greatest losses in absolute terms and the second largest in percentage terms, began to think about ways of organising employees in smaller firms, though so far, it seems, to little avail.

The ÖGB's main response to the decline in membership has been to focus on cost-cutting. Steps were thus encouraged that may lead to mergers among its 14 component unions. A number of cooperation agreements among trade unions have already been reached (AT9806192F). The latest such agreement, finalised in August 1998 and effective from 1 September 1998, was between the Agriculture and Food Trade Union (Gewerkschaft Agrar-Nahrung-Genuß, ANG), the Construction and Timber Trade Union (Gewerkschaft Bau-Holz, GBH) and the Union of Chemical Workers (Gewerkschaft der Chemiearbeiter, GdC). The agreement is aimed at "cooperation at all levels and in all areas in the medium term." Together, the ANG, GBH and GdC organise approximately 250,000 workers, two-thirds of them belonging to the GBH. This brings together a larger membership than the cooperation agreements previously announced between: the Trade and Transportation Trade Union (Gewerkschaft Handel, Transport, Verkehr, HTV), the Hotels, Restaurants, Personal Services Trade Union (Gewerkschaft Hotel, Gastgewerbe, persönlicher Dienst, HGPD) and the Railway Employees' Trade Union (Gewerkschaft der Eisenbahner), which together have approximately 195,000 members; or between the Textiles and Garments Trade Union (Gewerkschaft Textil und Bekleidung) and the Union of Metal, Mining, and Energy Workers (Gewerkschaft Metall-Bergbau-Energie, GMBE) with a total of 230,000 members (AT9801161N). However, neither of them approaches the GPA's membership of 300,000, many of whom receive salaries enabling them to pay fairly substantial membership contributions. More cooperation agreements are expected in 1999 in the run-up to the ÖGB's 14th congress.

The year also saw the founding of a new trade union which is not part of the ÖGB (AT9805185N). The Austrian Free Trade Union (Freie Gewerkschaft Österreichs, FGÖ) is an offspring of the electoral success of right-wing populism during the last 10 years. It focused its membership drive especially on the police force, and elected a police officer as its chair. The anticipated application to the Federal Conciliation Office (Bundeseinigungsamt) for the right to conclude collective agreements (AT9705113N) was never made. No information is available, but it is thought that an insufficient number of members is the reason for the FGÖ's restraint.

On the employers' side, the Austrian Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ) changed its pension and promotion regulations from the beginning of 1999, but only for new employees. The cost of running the organisation is about ATS 2.4 billion out of a total budget of about ATS 8.2 billion (1997). Of the latter, ATS 6.6 billion is drawn from members, which was the background to a challenge from the Federation of Austrian Industry (Vereinigung österreichischer Industrieller, VÖI) to reduce the burden on enterprises (AT9805187N).

Legislation governing the operation of company supervisory boards was changed with the aim of ensuring that information is provided at regular intervals. In Austria, one-third of the seats on a company supervisory board are occupied by works council delegates (TN9809201S). Supervisory boards are intended to oversee the work of the management board and are also responsible for authorising strategic decisions. As a result of the new legislation, at least one session of the supervisory board is to be held during each quarter, and management is to provide an annual report detailing all its goals for the future. No individual is in future allowed to hold more than five supervisory board positions in enterprises. Trade unionists and sympathetic managers have been complaining about a gradual sidelining of employee representatives. Important strategic decisions, they claim, are being made between management and investment bankers, or are agreed before the meeting even opens. As a result, the role of works council delegates is seen to be reduced to devising social protection plans for employees affected by management decisions.

Two new European Works Councils were formed by Austrian companies (ATB Austria Antriebstechnik AG and Vogel & Noot AG) in 1998. These were the country's first two agreements to be based on Article 6 of the EWC Directive (AT9901126N). Another interesting development was the siting of its European headquarters in Austria by a large Canadian manufacturer explicitly opposed to works councils (AT9812119N).

During its Presidency of the European Union, Austria attempted to finalise an agreement on the European Company Statute but failed due to a veto by Spain (EU9812143N). During the Presidency, the Austrian social partners intensified their efforts to establish the Austrian form of social partnership as a model for the EU at large. For the time being, though, they have shown satisfaction with the existing consultations at Commission level.

Industrial relations and the impact of EMU

Austria is one of the countries which joined the single currency in January 1999. The social partners' preparations for EMU have so far focused primarily on consumer protection, with employment protection a distant second, and industrial relations being unaffected in substance. However, calls are increasingly being voiced for a greater European coordination of wages policy, social standards, and especially of taxation policy, as a necessary corollary to EMU. Employment protection in the aftermath of the introduction of the single currency was an issue discussed in the banking sector, but management continued to emphasise that in the short run no redundancies should be expected. It is argued that the threat to employment is from electronic banking rather than from EMU (AT9901121F). However, a study by Creditanstalt, a subsidiary of Bank Austria, made public in January 1999, sees only a few industries as losers from EMU, foremost among them the banks. Others expected to be affected negatively are the food industry (which was already battered by Austria's accession to the EU in 1995), insurance, retail, wholesale and manufacturers of furniture and sports equipment. As the likely impact of EMU on employment is so far seen to be limited, there has therefore only been a low level of social partner activity on this issue.

Conclusions and outlook

The persistence of the phenomenon of unemployment growth was among the key concerns in a year characterised by relative economic buoyancy. The problem of youth unemployment was overtaken on the list of labour market policy priorities by the desire to lower the tax burden on enterprises and by the institution of measures for the reintegration of disadvantaged groups. The reduction of working hours in favour of job creation was hotly debated, but continued to stumble over the issue of the proportional loss of incomes. The fight against undeclared employment also ranked highly on the political agenda, although progress in these debates was slow as a result the social partners' difficulties in agreeing on what constitutes undeclared employment. Reorganisation among social partner organisations continued apace to compensate for the decline in membership in the case of the unions, or to meet members' complaints about costs in the case of the employers. These trends, as well as the debate on how to fight unemployment, are set to continue to feature strongly in the industrial relations arena in 1999 - a year which is sure to be dominated by the federal general elections to be held in October (August Gächter, Institut für Höhere Studien).