New collective agreement in the east German steel industry

In January 1998, after very difficult negotiations, the collective bargaining parties in the east German steel industry accepted the same wage increases as had earlier been concluded for the west German steel industry.

On 7 January 1998 the metalworkers' trade union, IG Metall, and the Steel Employers' Association (Arbeitgeberverband Stahl) signed a new collective agreement for the about 8,000 employees in the east German steel industry. The collective bargaining parties agreed on a flat-rate payment of DEM 330 for the period October 1997 to December 1997 and a 2.6% wage increase from January 1998.

Difficult negotiations

The new collective agreement marks a compromise after a very controversial bargaining round. Originally, IG Metall demanded for a 5% wage increase, which could be reduced in exchange for working time reductions and job security. Later on, the union demanded the adoption of the 2.6% wage increase which had already been agreed in the west German steel industry in October 1997 (DE9710234N). For its part, Arbeitgeberverband Stahl sought an 11-month wage freeze (from October 1997 to August 1998) and offered a 2.6% wage increase from September 1998. The demands of the collective bargaining parties reflected different assessments of the economic performance of the east German steel industry. While representatives of Arbeitgeberverband Stahl referred to the fact that most east German steel companies are still making no profits, IG Metall officials emphasised the recent very good situation of the companies. According to the trade union, the negative profit situation is mainly the result of high deprecations which have arisen from the high investments in recent years and created the current negative balance sheet.

After three unsuccessful negotiation rounds, at the beginning of December 1997, the collective bargaining parties agreed to call for voluntary joint dispute resolution (Schlichtung) and the president of the Institute for Economic Research in Halle (Institut für Wirtschaftsforschung Halle), Rüdiger Pohl,was nominated as the conciliator (Schlichter). On 14 December, Mr Pohl made a proposal which contained a wage freeze from October 1997 to December 1997, a flat-rate payment of DEM 60 per month between January and August 1998 and a 2.6% wage increase from September 1998. While Arbeitgeberverband Stahl was ready to accept the results of the joint dispute resolution, IG Metall heavily criticised the conciliator for having taken a one-sided employers' view. According to the union, the conciliator's proposal added up to only little more than half of the wage increase which had been agreed for the west German steel industry.

The IG Metall chief negotiator and leader of the IG Metall districts of Berlin/Brandenburg and Saxony, Hasso Düvel, accused the employers of wanting to establish a permanent low-wage region in eastern Germany and declared that the union would not accept any agreement which is below the results of bargaining in the west. Since 1996, collectively agreed basic wages in the eastern steel industry have reached 100% of the western level. However, since working time in the eastern steel industry still stands at 38 hours per week (in comparison with 35 hours per week in the west) the effective wages of east German steelworkers are only between 80% and 83% of their western colleagues.

After rejecting the conciliators' proposal, IG Metall organised a strike ballot (Urabstimmung) in which 77.44% of the IG Metall members supported a strike. Consequently the union announced that a strike in the east German steel industry would start on 12 January 1998. Against the background of IG Metall's strike decision, some of the leading east German steel companies started to put pressure on their employers' association and demanded new negotiations to avoid a strike at the last moment. At the same time, the solidarity within the employers' camp apparently started to disintegrate. At the end of December 1997, the Preussag-Walzwerk Ilsenburg steel company in Sachsen-Anhalt decided to adopt the collective agreements for the west German steel industry. At the beginning of January, the management of the biggest east German steel company, Eko Stahl GmbH in Eisenhüttenstadt, declared that one day of strike action would cost the company about DEM 750,000 and threatened the employers' association with the possible conclusion of a company agreement.

Settlement reached

Finally, on 7 January 1998 IG Metall and Arbeitgeberverband Stahl agreed on new negotiations in which they reached a new collective agreement. According to the employers' association, the results of the new agreement lies about 0.3% below the results of the agreement for the west German steel industry. Afterwards the president of Arbeitgeberverband Stahl, Josef Fidelis Senn, expressed his dissatisfaction with the agreement and said that the unions had blackmailed the steel companies, which could only chose between the cost of the agreement and the even higher costs of a possible strike. On the other hand, IG Metall praised the new agreement as a success and expressed its satisfaction that the union was able to avoid a fall-back in east German wage development. Unsurprisingly, in a second ballot more than 84% of the union members voted in favour of the new collective agreement.

Commentary

The new collective agreement in the east German steel industry, which is the first collective agreement concluded in 1998, is of particular importance. Firstly it demonstrates the unions' aim to avoid the establishment of a permanent low-wage area in eastern Germany and secondly it shows that the union concerned is able to succeed in obtaining a certain wage standard and preventing a fall-back in east German wage development. However, the situation in the relatively well-organised steel industry is not comparable with other sectors. On the contrary, many sectors in eastern Germany have a rather unstable collective bargaining structure and many companies simply do not fulfil the provisions of valid collective agreements. Recently, even the president of the Federation of German Industries (Bundesvereinigung der deutschen Industrie, BDI), Hans-Olaf Henkel, praised the "offences" against valid collective agreements in eastern Germany as an advantage for foreign investors. In contrast, the new collective agreement in the eastern steel industry is a positive sign to stabilise collective bargaining in the east and to follow the path of creating a real German collective bargaining unity. (Thorsten Schulten, Institute for Economics and Social Science (WSI))