Germany: Latest working life developments Q4 2018
The current labour market situation in Germany, the recent collective bargaining agreement in the German railways sector and the 100th anniversary of the Stinnes-Legien agreement are the main topics of interest in this article. This country update reports on the latest developments in working life in Germany in the fourth quarter of 2018.
German labour market weakness – just a temporary slip?
By the beginning of the fourth quarter, GDP decreased by 0.2% compared to the previous quarter. This is the first time since 2015 that a decline in economic growth has been recorded. Experts suggest that this drop correlates with reduced production in the automotive industry, which is due to the introduction of a new emissions test – the Worldwide Harmonised Light Vehicle Test Procedure (WLTP) – leading to a lower number of exports.
Germany is also suffering from the ongoing trade conflict with the United States of America (US). Unlike in previous months, private consumption did not grow in the second half of 2018. The unemployment rate remained at 4.9% in December and the number of employed persons rose by 34,000 in November compared to the previous month. Overall, the government expects a growth in GDP of 1.8% for 2018 as well as for 2019. In comparison, Germany’s economic growth was 2.2% in 2017.
- Federal Office of Statistics: Volkswirtschaftliche Gesamtrechnungen
- NTV: Deutsche Wirtschaft schrumpft
- Federal Employment Agency: Der Arbeitsmarkt im Dezember 2018: Positive Entwicklung auch am Jahresende
New wage agreement concluded in German railways sector
In October 2018, German railway operator Deutsche Bahn (DB) started negotiations on a new collective bargaining agreement with the German Engine Drivers’ Union (GDL) and the Railway and Transport Union (EVG), which will affect approximately 160,000 employees. Demands by both unions included:
- a 7.5% wage increase
- the option to choose between a wage increase, a reduction in the number of working hours per week or additional holiday leave entitlement
- a significant increase in bonuses for shift work
Negotiations proved to be complicated and no significant progress had been made by the start of December 2018 due to complex union demands. After a sudden halt in negotiations and a token strike by the EVG in mid-December, the DB and the EVG were able to agree on a new collective agreement on 4 January 2019.  The agreement will last for 29 months and includes an overall wage increase of 6.1% in two phases: 1 July 2019 (3.5%) and 1 July 2020 (2.6%) as part of an option plan. The option plan will allow employees to choose one of three options:
- a wage increase of 2.6%
- six additional leave days
- a reduction in working hours
A one-off payment of €1,000 is due in February 2019. Also, the employer-financed company pension will be increased to 3.3% of the monthly gross wage or a minimum of €75. 
100th anniversary of the Stinnes-Legien agreement
In November 2018, employer organisations and trade unions celebrated the 100th anniversary of the Stinnes-Legien agreement. This agreement laid the foundation for German collective bargaining autonomy and for social partners to negotiate working conditions, wages and working hours independently. Ingo Kramer, President of the Confederation of German Employers’ Association (BDA), emphasised the importance of responsible collaboration between social partners and their independence from governmental intervention for Germany’s economic success: ‘Such practised social partnership […] has been a stroke of luck for our country and is unique in Europe’.  Reiner Hoffmann, Chair of the Confederation of German Trade Unions (DGB), highlighted the importance of greater collective bargaining coverage in order to continue the socio-political success of collective bargaining in these times of globalisation and digitalisation. 
The declining collective bargaining coverage has led to political and academic debate about the future of the German collective bargaining system and how best to deal with the decline, including through government intervention. The DGB, for example, calls for the abolition of so-called ‘OT’ membership in employer organisations (i.e. membership that does not bind the employer to the sectoral collective agreement of its organisation). The union confederation also suggests using extension mechanisms more often. Employer organisations, such as the BDA, reject calls for state intervention and highlight the importance of independent (wage) negotiations.
In autumn 2017, the German Economic Institute (IW) conducted a company survey in the metal and electrical industries. The latter is one of Germany’s largest sectors; it represents over 10% of Germany’s total workforce and generates around 15% of the national gross value added.  In comparison to other available data sources, the IW survey was entirely devoted to the motives of metal companies in terms of their participation in collective bargaining. Survey results indicated that a majority of companies bound by the metal sectoral agreement were dissatisfied with three aspects:
- the level of collectively agreed earnings for simple tasks (68.1%)
- the collectively available working time volume (66.3%)
- collectively agreed privileges for older employees (64.6%) 
The first two of these also discouraged companies not bound by sectoral agreements from joining collective bargaining agreements. Given these findings, researchers view government intervention to strengthen bargaining coverage unfavourably, as social partners seem not to have exhausted all possibilities in terms of strengthening the collective bargaining system from within. More appealing pay and working time clauses could prove a good starting point as companies still value collective agreements for their ability to guarantee smooth production cycles or lower transaction costs. The debate on how to improve bargaining coverage and the future cooperation of social partners will continue in 2019, as both are fundamental for Germany’s economic success.