Structures and patterns in collective bargaining reviewed

With the 1999/2000 collective bargaining round underway, we take the opportunity to examine Austria's system of bargaining. International observers often classify Austria as a case of centralised bargaining. Closer consideration shows that bargaining takes place at the sectoral level but is coordinated across the economy. This coordination rests on the pattern-setting role of the metalworking industry. While this coordination aligns bargaining with macroeconomic requirements, its rather decentralised form ensures flexibility in several respects.

In autumn and winter 1999, collective bargaining has been underway for a significant proportion of the Austrian labour force, with important agreements being negotiated in sectors such as metalworking (AT9911203N) and commerce (AT9912206N). We take this opportunity to review the Austrian system of collective bargaining.

Structure and contents of bargaining

In Austria, collective bargaining is limited to the private sector. In the public sector, there is no formal bargaining, but negotiations between public sector trade unions and government representatives, with parliament determining the terms of employment. Within the private sector, more than 95% of all employees are covered by collective agreements, negotiated, almost without exception, at the sectoral level. This sectoral bargaining system is differentiated according to employee category (blue-collar workers and white-collar workers) and also, in the area of the production of goods, according to manufacturing industry (Industrie) and small-scale craft production (Gewerbe). This reflects the internal differentiation within the two principal "peak organisations" of labour and business: the Austrian Trade Union Federation (Österreichischer Gewerkschaftsbund, ÖGB) has separate unions for blue-collar workers and white-collar workers; and the Chamber of the Economy (Wirtschaftskammer Österreich, WKÖ) has separate sectoral sub-units for employers in manufacturing industry and in small-scale craft production. All sectoral trade unions which conclude collective agreements are members of ÖGB, and almost all of its sectoral employer counterparts are under the umbrella of WKÖ.

Most of the sectoral agreements concluded cover the whole of national territory, with a minority also concluded at the federal state (Länder) level. Company agreements, in the strict sense of an agreement concluded by an individual employer, are the exception in Austria. This is because employers' associations have the exclusive right to conclude collective agreements, aside from a few, legally specified exceptions. More than 400 collective agreements are concluded per year, the majority comprising small numbers of employees in narrowly defined sectors and separate agreements on specific issues.

The strongest unions have been able to include in their collective agreements not only standard rates of pay but also "actual pay" clauses. The basis for this is the pay drift which results both from unilateral pay concessions by management and from informal pay agreements between management and works councils. Such agreements are necessarily informal, in the sense that the Labour Constitution Act (Arbeitsverfassungsgesetz) prohibits works councils from concluding agreements on pay increases, thereby granting the unions a monopoly over pay bargaining. Nevertheless, in companies with strong works councils a practice has grown up whereby such a secondary, informal pay bargaining round takes place.

Organised decentralisation

Over time, collective bargaining has undergone a continued process of organised decentralisation, in that higher-level bargaining parties have deliberately devolved bargaining tasks to a lower level but have maintained control over lower-level bargaining.

During the immediate post-war years of the Second Republic, pay policy was subject to predominantly central control: over the period 1947-51 there were five central agreements between the social partners on pay and prices. This was followed by a shift in bargaining activity to the sectoral level, although by setting up the Parity Commission for Pay and Prices (Paritätische Kommission für Lohn- und Preisfragen) in 1957 the central organisations retained a monitoring function. The Parity Commission for Pay and Prices is composed of delegates from ÖGB, the Chamber of Labour (Bundesarbeitskammer, BAK), WKÖ and the Standing Committee of Presidents of the Chambers of Agriculture (Präsidialkonferenz der Landwirtschaftskammern, PKLWK). The sectoral employers' organisations and trade unions are obliged to apply to the Commission's subcommittee on pay for approval before they can commence their pay negotiations. The Commission always refrained from influencing the content of these negotiations and confined itself to controlling the timing of bargaining rounds, the intention being to exert a moderating effect during periods of relatively high inflation.

Since the end of the 1980s, this control function has lost its practical importance. Since the mid-1980s the sectoral bargaining parties have included "opening clauses" in their agreements, which leave the regulation of explicitly defined issues to management and works councils. In such cases, the collective agreement lays down a certain framework within which management and the works councils are able to establish, by means of a works agreement, a more detailed solution tailored to their company situation, allowing more flexible regulation of terms and conditions of employment. The collective agreements concerned mainly relate to working hours, and combine opening clauses on greater flexibility as regards working time schedules with a reduction in weekly working hours. Since the 1990s, collective agreements concluded for the metalworking industry and other industries have, however, also included opening clauses relating to pay (AT9801155F).

Although collective bargaining is conducted at the sectoral level and is differentiated into a relatively large number of separate agreements, it is nevertheless coordinated across the economy. This is because a practice of "pattern bargaining" prevails, based on the leading role of the metalworking industry in the overall bargaining process. Traditionally, the collective agreements for blue- and white-collar workers in the metalworking industry are negotiated first, thus setting the pace for the other bargaining units in the course of the annual bargaining rounds (AT9911203N). In this respect, the "global" agreement for white-collar workers in most parts of manufacturing follows suit. These agreements set a guiding framework for negotiations in all remaining sectors, including the public sector. The metalworking industry sets the pace for routine bargaining as well as the trend regarding basic priorities for bargaining policy. The latter is manifested in the fact that the industry pioneered organised decentralisation of bargaining with regard to working time in the 1980s as well as pay in the 1990s. This leading role rests on the close cooperation between the Union of Metal Workers (Gewerkschaft Metall-Bergbau-Energie, GMBE), representing the highly unionised blue-collar workers in the metalworking industry, and the Union of Salaried Employees (Gewerkschaft der Privatangestellten, GPA).

This model of bargaining coordination through pattern bargaining dates back to the early 1980s. In 1983, GMBE proposed that macroeconomic growth and inflation should be the main criteria for wage policy and that the sector of the Austrian economy exposed to international competition should be recognised as the pace-setter for the "sheltered" sector. This concept was subsequently accepted by all the other unions affiliated to ÖGB.

Commentary

International observers often misinterpret Austria as a case of centralised, tripartite concertation of wages. This comes from overstating the role of the Paritätische Kommissionin wage policy. Even in its heyday, the Commission's role was solely procedural and it has become symbolic since the early 1980s. Government (albeit represented on the Commission) has in no way interfered in wage policy. During the 1970s, substantive coordination of wage policy was primarily an internal matter in ÖGB and WKÖ, with the exception of 1973, when a central wage accord was concluded. Therefore, the Austrian case demonstrates that the degree of bargaining centralisation (in the sense of the level at which collective agreements are fixed) may significantly differ from the degree of bargaining coordination.

As far as its macroeconomic effects are concerned, Austria's pattern bargaining does not simply mean a strongly unionised sector setting "union mark-ups" which spill over to other sectors, something which was characteristic of the USA until the early 1970s. By contrast, Austria's pattern bargaining "internalises the externalities" of wage increases, so that it delivers a special kind of incomes policy. This is evident from the fact that the rates of pay negotiated do not fully exploit the metalworking industry's own productivity increases. Since metalworking operates in the "exposed" sector, this prompts it to give high priority to the maintenance of international competitiveness and employment. The criteria and priorities established between pay-setting and external forces in this industry are then reflected in the pay-setting processes in other sectors. Austria's hard-currency policy (whereby the central bank and government have refrained from using the exchange rate as a mechanism to compensate for economic imbalances through devaluations) would not, for example, have been possible without a complementary pay policy which takes account of the effects on labour costs of fluctuations in exchange rates. From a comparative perspective, Austrian pay-setting has proved rather flexible over time, in that it is highly sensitive to fluctuations in employment. Furthermore, the pattern-setting role of metalworking has concentrated on average wage increases without any attempt at "solidaristic" pay policy. This explains why Austria is among the countries with the highest sectoral wage dispersion, despite the high level of collective bargaining coverage. As a result, wage formation in Austria combines two features which are generally seen as incompatible: a high degree of macroeconomic coordination and a high degree of pay differentiation and flexibility. (Franz Traxler, University of Vienna)