1997 Annual Review for Luxembourg

This record reviews 1997's main developments in industrial relations in Luxembourg.


Luxembourg has continued to experience a period of economic growth. The public debt accounted for 6.7% of GDP in 1997, and projections for 1998 are in the order of 7.7%. Eurostat calculates a public spending surplus of 1.7% in 1997 and the state budget for 1998 is virtually balanced. The population is 418,300 (of whom 142,800 are foreigners), while total employment stood at 224,000 at the end of 1997, of whom 63,200 are cross-border workers. Unemployment is rising slowly and stood at 3.6% at the end of 1997. The rate of inflation was 1.4% in 1997.

A coalition Government of the Christian Social People's Party (Chrëschtlich Sozial Vollekspartei, CSV), and the Luxembourg Socialist Workers' Party (Lëtzebuergesch Sozialistesch Arbechterpartei, LSAP) is currently in office. The next elections are due in June 1999.

Key trends in collective bargaining and industrial action

The national minimum wage was increased by 3.3% in January 1997, and all pay went up by 2.5% in February 1997 in line with statutory automatic indexation. The social partners had agreed to be bound by moderate wage rises in collective bargaining, and this undertaking was generally adhered to.

The National Conciliation Office (Office National de Conciliation), which handles industrial disputes, had a quiet year in 1997. Over the year, there was a disagreement between government and trade unions over the former's plans to reform public sector pensions (LU9706111F), while the social partners were unable to agree on changes to sickness insurance contributions (LU9712135N)

Industrial relations, employment creation and new forms of work organisation

Luxembourg is one of the few countries in which the number of jobs has increased steadily over the past 10 years - by 3%-5% a year (LU9707116N). Although unemployment is low by comparison with rates in neighbouring countries, it is rising slowly. The current unemployment situation in Luxembourg is due not to an absence of job creation, but rather to a system of matching unemployed workers with vacancies that is not working as well as it might. There is also the issue of a large cross-border workforce that is highly motivated, and often better trained and strongly attracted by Luxembourg's high wages.

The issue of reducing unemployment, boosted by the European Employment Summit organised in November under the aegis of the Luxembourg Presidency, was high on the agenda in 1997. Following debates and preparations during 1997 (LU9712134F), tripartite employment discussions are planned for February-April 1998 (LU9801138N). Talks are to focus on encouraging the social partners to take more responsibility in the field of employment and vocational training, especially by focusing on young and long-term unemployed people (in line with the EU employment guidelines). As well as job creation, the talks will consider additional training for unemployed people and cash incentives for employers who recruit unemployed workers registered with the Employment Administration.

The trade unions have stressed the role of working time reductions in reducing unemployment (Luxembourg is unusual in the EU, in that even a 40-hour normal week is not yet universal). However, in the Luxembourg context, it is not at all clear to all parties that a reduction in working hours would necessarily lead to jobs being created for registered unemployed workers. One thing is quite clear: any reduction in working hours can only be achieved through a negotiated agreement within tripartite structures, and greater flexibility will necessarily have to be conceded in exchange.

Industrial relations and the impact of EMU

Following a government reshuffle in February 1998, a new minister was allocated the budget and justice portfolio together with a special mission to oversee and coordinate EMU entry and the introduction of the single currency, the euro.

As Luxembourg's membership of EMU is not in doubt, the imminent introduction of the single currency has not been a major issue. However, the social partners are now considering what effect EMU will have on employment levels - particularly in banking, a key sector in the Luxembourg economy.

Employers' associations and trade unions have begun to prepare their members for EMU through national conferences, seminars and other events.

Conclusions and outlook

The main industrial relations issues of 1997 will continue to dominate in 1998, and all of them are likely to be resolved during the coming year in line with the Government's wishes.

Employee representative elections will take place during November 1998 in all enterprises with more than 15 employees. The 2,500 or so companies concerned will have to organise elections for employee committees/works councils (délégations du personnel) and joint committees (comités mixtes) (LU9711127F).

In addition, a number of inter-linked social security issues will affect all the social partners in 1998:

  • it will be necessary to resolve the problem of the future funding of state pensions and annuities. Reform of public sector pensions will be a central issue during 1998, as in 1997 (LU9706111F and LU9802146N), and the outcome will inevitably have repercussions on public finances and on draft legislation issued in 1997 aimed at modifying private sector pensions (LU9711121F);
  • on complementary pensions, proposed legislation introduced by the Government will need to be amended on several points, including measures to facilitate the development of international pension funds in Luxembourg (LU9711126F); and
  • the issue of "dependence insurance", to cover against becoming dependent through disability, illness or age, is becoming increasingly important, and will require a considerable effort from the social partners, particularly with regard to funding (LU9712136N).

(Marc Feyereisen, ITM)

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