Germany: Latest working life developments – Q1 2017

The conclusion of several collective wage bargaining rounds and the nomination of Martin Schulz to run as the Social Democrats’ candidate for Chancellor in September’s federal elections are the main topics of interest in this article. This country update reports on the latest developments in working life in Germany in the first quarter of 2017.

Labour market situation

Lookin first at the end of 2016, Germany’s gross domestic product (GDP) continued to grow at a moderate pace in the fourth quarter of the year. The price-adjusted GDP grew by 0.4% compared with the third quarter of 2016. Overall, German GDP grew by 1.9% in 2016. However, from December 2016 to January 2017, the unemployment rate rose from 5.8% to 6.3%, remaining at this level in February 2017 but then falling to 6.0% in March 2017. The Institute for Employment Research (IAB) estimated that there were more than one million job vacancies in the fourth quarter of 2016.

Political background

Campaigning for the federal elections in September 2017 has begun. When the Social Democrats (SPD) nominated Martin Schulz, former president of the European Parliament, as their candidate for Chancellor, opinion poll ratings for the SPD leapt from 23% at the end of January to around 33% at the beginning of April. This revival of voter confidence in the SPD makes Mr Schulz a noteworthy candidate for the role of Chancellor, currently held by Angela Merkel. The Christian Democratic Union (CDU) and its sister party, the Christian Social Union (CSU) also hit 33% in the polls at the beginning of April.

During his campaign for the nomination, Mr Schulz called for many changes to be made to the Agenda 2010 labour market reforms initiated by former Chancellor, Gerhard Schröder (also SPD). This stance was applauded applauded by the trade unions. However, German employer associations warned of the economic consequences if parts of Agenda 2010 were to be withdrawn.

First collective bargaining rounds concluded in 2017

A collective wage agreement covering public administration in all federal states except Hesse was signed on 17 February. The agreement covers 855,200 employees. Negotiations were led by the United Services Union (ver.di). The other unions involved were the German Union of Education (GEW), the Trade Union for Buildings, Forestry, Agriculture and Environment (IG Bau) and the German Police Union (GdP).

Unions organised several token strikes in schools, universities, ministries and other local government departments. These strikes were spread over five days in different federal states at the beginning of February. However, the unions and the Employers’ Association of German States (TdL) finally agreed on a 2% wage increase (a minimum of €75 per month), backdated to January 2017. A further increase of 2.35% will take effect in January 2018. The agreement runs until the end of 2018. It also includes the two-step introduction of a new pay grade (pay grade 6).

After years of wage disputes and faltering negotiations between the professional trade union of air pilots, Cockpit, and the airline Lufthansa, a collective wage agreement was reached with the help of an arbitrator. The agreement will cover about 5,400 pilots and runs until the end of 2019. The pilots will receive a wage increase of 8.7% in four stages. Pilots will also receive a one-off payment worth approximately €5,000–€6,000 per full-time employee. At the same time, Lufthansa announced new jobs that will not be covered by the collective wage agreement. This will affect the flight crews on 40 aircraft. According to Lufthansa, this step is necessary to compensate for the higher costs caused by the new collective wage agreement.

Industrial relation’s architecture under scrutiny

At the end of February 2017, the Confederation of German Trade Unions (DGB) published a proposal on how to strengthen collective bargaining coverage (PDF) in Germany. DGB claims that employers try to avoid being bound by collective bargaining agreements and fewer employees are covered by collective bargaining standards. DGB has presented 14 measures to regain higher coverage rates. One proposal is to restrict OT (Ohne Tarifbindung) memberships in employer associations. (This kind of membership allows companies to belong to an employer association without being bound by its collective agreement.)

Another proposal seeks to strengthen a union’s right to take legal action if collective agreements are breached. However, the employer associations in Baden-Württemberg and Bavaria have rejected this, saying that it is impossible to legislate for true collective bargaining autonomy (PDF) and that rules for this should not be introduced by a third party, such as the State. The associations add that German Basic Law guarantees their freedom from interference and that collective bargaining partners are responsible for concluding agreements acceptable to all parties involved. They said that, instead of enforcing regulations, flexible and modern collective bargaining is needed.

Commentary

As the run-up to the federal elections has begun, commentators do not expect the current ruling coalition of SPD and CDU to be able to agree on further major reforms. Although unions welcome Mr Schulz’s announcements on reconsidering Agenda 2010, they warn against any tighter regulation of the German labour market.

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