According to the Federal Statistical Office (Statistisches Bundesamt), German GDP rose by 2.8% in real terms in 1998, following a 2.2% increase in 1997. In 1998, GDP rose by 2.9% in the former territory of the Federal Republic, while it increased by 2.1% in the new Länder(federal states) and east Berlin. The government deficit (DEM 84.2 billion) was smaller than in 1997 (DEM 101.5 billion). At 2.2% (2.1%, according to the EU definition), the deficit ratio thus moved further below the reference value defined in the Maastricht Treaty (3% of GDP). Inflation, as measured by the consumer prices index, amounted to 0.9 % in 1998. According to the Federal Labour Office (Bundesanstalt für Arbeit), unemployment averaged 11.1% of the civilian labour force in 1998, compared with 11.4% in 1997. The figures for west and east Germany were 9.3% and 18.2% respectively.
This record reviews 1998's main developments in industrial relations in Germany
Introduction
According to the Federal Statistical Office (Statistisches Bundesamt), German GDP rose by 2.8% in real terms in 1998, following a 2.2% increase in 1997. In 1998, GDP rose by 2.9% in the former territory of the Federal Republic, while it increased by 2.1% in the new Länder(federal states) and east Berlin. The government deficit (DEM 84.2 billion) was smaller than in 1997 (DEM 101.5 billion). At 2.2% (2.1%, according to the EU definition), the deficit ratio thus moved further below the reference value defined in the Maastricht Treaty (3% of GDP). Inflation, as measured by the consumer prices index, amounted to 0.9 % in 1998. According to the Federal Labour Office (Bundesanstalt für Arbeit), unemployment averaged 11.1% of the civilian labour force in 1998, compared with 11.4% in 1997. The figures for west and east Germany were 9.3% and 18.2% respectively.
The general election held on 27 September 1998 saw a substantial drop in the vote for the former ruling government coalition, which was composed of the Christian Democratic Party (Christlich Demokratische Union, CDU), its Bavarian associate party the Christian Social Union (Christlich-Soziale Union, CSU), and the Free Democratic Party (Freie Demokratische Partei, FDP). After 16 years in power, the conservative/liberal government coalition was replaced by a new "red-green coalition" composed of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen), which gained a majority of 21 seats in the parliament (Bundestag).
Key trends in collective bargaining and industrial action
The 1998 collective bargaining round was mainly concerned with wages and salaries and produced a continuation of rather moderate wage increases, above the rate of inflation but below the increase in labour productivity. Other issues such as working time did not play an important role in negotiations. While tendencies towards decentralisation and creeping erosion of branch-level collective bargaining continued, several new collective agreements were concluded in emerging sectors such as "industry-related services" and new telecommunications operations.
Altogether, 49,500 collective agreements were officially registered by the Ministry of Labour in 1998 (compared with 47,300 in 1997). In 1998, new collective agreements were concluded by the trade unions affiliated to the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) for about 13.3 million employees. According to figures from the Institute for Employment Research (Institut für Arbeitsmarkt und Berufsforschung, IAB), 49.0% of all western German private sector companies, employing 65.3% of private sector employees were covered by industry-level collective agreements in 1997 (DE9902196F). These figures are significantly lower than those recorded in 1995. The respective figures for eastern Germany were 25.7% and 43.9%. In 1997, approximately 9% of west German and 14% of east German private sector companies were covered by company agreements.
According to figures from the collective agreement archive of the Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI), collectively agreed basic wages and salaries rose on average by about 1.8% in 1998 - see table 1. The 1998 increases were above the 1.4% increase in 1997, but still below the 2.3% increase in 1996 and 3.6% in 1995. Since the inflation rate was 0.9% in 1998, employees experienced an average increase in real wages of about 0.9%. This is significantly lower than the 2.8% increase in labour productivity.
According to figures from the Federal Statistical Office, employees' share of national income (the "wage quota") fell to a historic low of 68.2% in 1998 (compared with 69.7% in 1997). Unit labour costs decreased by about 1.3%. While in western Germany collectively agreed basic wages and salaries grew on average by about 1.7%, eastern wages rose by 2.5%. As a result, eastern average basic wages have reached about 90.9% of the western levels (WSI figures, calculated on the basis of the 22 most important collective bargaining areas).
The scope of agreed wage increases was between 1.3% in construction and 2.3% in the retail and wholesale trade.
| Sector | Germany (total) | Eastern Germany | Western Germany |
|---|---|---|---|
| Retail and wholesale trade | 2.3% | 3.7% | 2.0% |
| Raw materials | 2.1% | 2.2% | 2.0% |
| Horticulture, agriculture, forestry | 2.0% | 2.5% | 1.7% |
| Food industry | 2.0% | 5.9% | 1.7% |
| Private transport | 2.0% | 4.3% | 1.5% |
| Public services | 1.9% | 2.9% | 1.5% |
| All sectors | 1.8% | 2.5% | 1.7% |
| Investment goods | 1.8% | 1.8% | 1.8% |
| Consumption goods | 1.6% | 2.1% | 1.5% |
| Energy, water, mining | 1.5% | 2.6% | 1.2% |
| Banking, insurance | 1.5% | 3.1% | 1.4% |
| Private services | 1.5% | 1.6% | 1.5% |
| Construction | 1.3% | 0.8% | 1.5 |
| Source: WSI collective agreement archive 1999. |
The year brought a continuation of the debate on the future of the branch-level collective bargaining system. There is, on the one hand, evidence of a further decentralisation and a continued creeping erosion of branch-level bargaining taking place (DE9802248F). An indicator of the insidious decentralisation of collective bargaining may be the increase of the total number of companies which conduct company-level collective bargaining in the private sector, and thus are not very likely to be members of an employers' association. According to the Ministry of Labour, the total number of such companies has more than doubled since 1989, from something over 2,000 companies to roughly 5,000 (DE9803152F). Furthermore, a recent WSI works council survey found that about 15.6% of west German and 29.8% of east German companies with works councils breach valid collective agreements (DE9901290N).
On the other hand, several new company collective agreements were concluded in emerging sectors such as industry-related services or new telecommunications operations, which previously had no agreements. Prominent examples were the agreements at Debis (DE9803257F) or at the outsourced service companies of Siemens AG (DE9804260N). New collective agreements in telecommunications were concluded at Otelo (DE9806168N) and Arcor (DE9812189N). A first collective agreements on telework was signed at Deutsche Telekom (DE9810181N).
Among the relatively few strikes reported in 1998 were: a number of warning strikes during the negotiation of a new collective agreement for public services (DE9804258F); and an innovative "Internet strike" at the GMD FIRST research institute (DE9811185N).
Industrial relations, employment creation and work organisation
Against the background of persistently high levels of unemployment, the debate on part-time work, working time, labour market flexibility and deregulation continued in 1998. However, there were no significant attempts by the government to reform the labour market before the general elections in September. After the elections, the new "red-green" government passed a number of laws and acts which came into effect from 1 January 1999 (DE9811281F). The most significant change with regard to industrial relations was the repeal of the changes of the Labour Law Act on the Promotion of Employment (Arbeitsrechtliches Beschäftigungsförderungsgesetz), which had come into effect on 1 October 1996. The 1996 Act had eased redundancy provisions, reduced the statutory level of continued payment of remuneration in the event of sickness, and relaxed limitations on fixed-term employment contracts.
As in previous years, the social partners and the federal government, as well as the Länder(federal states) governments, discussed the issue of preserving and creating employment. Employment alliances and pacts were concluded or renewed at all levels to avoid redundancies, and sometimes in order to create new jobs. However, exact figures on employee coverage and on the number of agreements are not available.
In May 1998, the DGB quit the "Employment Alliance" for eastern Germany because it believed that the employers and federal government had not kept their promises. It also critcised the private banks for not having supported the new eastern federal states. The unions, for their part, believed that they had contributed to the Alliance by pursuing a moderate wage policy (DE9806166F).
Whereas the eastern German employment alliance failed, Bavaria's tripartite employment pact was reviewed by all parties involved in July 1998 and found to have been successful. From June 1996 to June 1998, 153,000 jobs were saved and another 52,000 created (DE9807171N).
Furthermore, there were a number of company pacts concluded in the private and the public sector. In most cases, the intention was to stop the increase in unemployment, to reduce unemployment and/or to create new jobs. In 1998, company-level alliances were, for example, concluded at Opel (DE9802247F), Hoechst Marion Roussel (DE9805165N), Deutsche Bahn AG (DE9810277N), and Dasa Airbus (DE9812190N). In the public sector, a pact for jobs was concluded for the municipality of Wuppertal (DE9812284N).
Following the election of a Social Democrat-led red-green government in September 1998, a small circle of leading representatives of the government, trade unions and employers' associations met officially for the first time in December and agreed to establish a new national "alliance for jobs" (Bündnis für Arbeit), taking the form of a permanent tripartite body. The results of the meeting were set out on 7 December in a Joint declaration of the alliance for jobs, vocational training and competitiveness (Gemeinsame Erklärung des Bündnisses für Arbeit, Ausbildung und Wettbewerbsfähigkeit), which describes the parties' common goals and contains concrete plans on how to organise the further work of the tripartite alliance. All parties agreed that a positive development of the labour market required permanent cooperation between the state, trade unions and employers' and business associations. Therefore the "alliance for jobs" should be constituted as a joint tripartite body, whereby all parties have the opportunity for a regular exchange of views and for the mediation of different interests (DE9812286N).
In April 1998, the former government presented its National Action Plan (NAP) for employment, which contains a broad range of economic, financial, training and labour market policy initiatives aimed at realising the EU Employment Guidelines for 1998. In the first part, the government expressed its view that "the key to higher employment lies in adjusting to structural changes. New employment opportunities are won through competition in the market." The overall governmental employment policy was essentially following a "supply-side approach" which had the central aim of creating predictable and favourable conditions for new investments on the assumption that these new investments will lead to the creation of new jobs. Therefore, the Government saw its main contribution to fighting unemployment as "an employment-friendly taxation policy, more competition and privatisation, cutting the red tape and simpler and faster planning procedures". In the second part of the German NAP, the federal government presented a broad catalogue of current measures and activities, listed in relation to the various EU guidelines (DE9805263F).
The European Council's Resolution on the 1998 Employment Guidelines pointed out that the social partners are expected to make an important contribution and should become involved in the implementation of the guidelines in NAPs. Therefore, in March and April 1998 the German federal government organised several rounds of joint talks with representatives from the trade unions and the employers' and business associations on the implementation of the Employment Guidelines. However, none of the discussions resulted in the adoption of a joint statement or recommendation on how to implement the EU guidelines into an NAP. Although there was some consensus on certain measures for the promotion of vocational training and better support for long-term unemployed people, in most political fields the gap between the positions of the social partners proved impossible to bridge. There were thus no systematic contributions by the social partners to the German NAP.
After the government had announced its final plan, the DGB called it "all in all disappointing", arguing that the proposed measures were neither sufficient nor suitable to make real progress in reducing the number of unemployed people. The Confederation of German Employers' Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) supported the main parts of the German NAP while at the same time stating its concern that the idea of a state-sponsored employment policy might gain more influence in Europe (DE9805263F).
With regard to the debate on the reduction of working time, 1998 was again a year of stagnation. At the end of 1998, average collectively agreed working time in Germany was 37.7 hours per week or 1,659.5 hours per year - see table 2. The average weekly working time in east Germany was still about two hours longer than in the west.
With regard to greater working time flexibility, the introduction of so-called individual "working time accounts" (Arbeitszeitkonten) has become a major instrument for introducing flexible working time arrangements (DE9803255F).
| Germany (total) | Eastern Germany | Western Germany | |
|---|---|---|---|
| Overall average weekly working time | 37.7 hours | 39.3 hours | 37.4 hours |
| Proportion of employees with weekly working time of: | . | . | . |
| 35 hours | 17.9% | - | 21.9% |
| 36-37 hours | 11.1% | 5.1% | 11.1% |
| 37.5-38.5 hours | 44.1% | 26.5% | 47.9% |
| 39 and more hours | 26.7% | 68.3% | 17.6% |
| Average annual working time | 1,659.5 hours | 1,735.5 hours | 1,642.2 hours |
| Source: WSI collective agreement archive 1999. |
Developments in representation and role of the social partners
Since the early 1990s, both trade union and employers' organisations have had growing problems in keeping their membership. This is true, particularly, for the DGB-affiliated trade unions. The total membership of the DGB unions stood at 8,623,471 on 31 December 1997, a fall of roughly 350,000 (or 3.9%) since 31 December 1996. Since 1991, when membership of DGB-affiliated unions stood at a historic high of almost 12 million as a result of the absorption of the members of the former East German trade unions, the membership of DGB unions has dropped by 3.2 million or 27%. However, the total annual membership figures of the DGB have not yet fallen below the 1989 pre-unification level, as the membership of several individual unions has done. The dramatic decline in membership of DGB-affiliated unions may have serious implications for trade union finance and bargaining power.
Outside the DGB, membership of the German White-Collar Workers' Union (Deutsche Angestelltengewerkschaft, DAG) and the Christian Trade Union Federation of Germany (Christlicher Gewerkschaftsbund Deutschlands, CGB) also fell to 489,266 and 302,874 in 1997, as compared with 1996 and 1995 respectively. In contrast, membership of the German Federation of Career Public Servants (Deutscher Beamtenbund, DBB) rose to 1,116,714 in 1997.
The DGB blames the decreasing number of jobs as well as the high level of unemployment for the drop in membership of its industry unions. Other reasons quoted include: the "back-to-normal adjustment effect" following the significant membership growth associated with unification; changes in workforce composition in the direction of people who have a lower probability of being trade union members; changes in job characteristics which make it more difficult to regulate the employment relationship with traditional collective agreements; and structural change away from manufacturing to the service sector, but also within the industrial sector. A closely related problem that trade union strategists are currently facing is the increasing competition between unions for members. Reasons for this include the development whereby demarcations between blue-collar workers and salaried employees, as well as between the organisational domains of several DGB unions, are becoming increasingly blurred (DE9803153F).
Although equivalent data are not available, membership in BDA-affiliated employers' associations appears to be declining, in particular in eastern Germany. The reasons for this might be that more and more companies feel dissatisfied with branch-level collective bargaining policy. Organisational changes among the social partners' organisations must also be seen against the background of their growing membership problem.
The presidents of six service sector trade unions signed a general declaration on restructuring the union organisations in the sector in October 1997. Five months later, in February 1998, the six unions published a joint draft for a "political platform on the restructuring of trade union representation of interests in the service sector" (DE9803256N). However, at the beginning of July 1998, the Teachers and Science Union (Gewerkschaft Erziehung und Wissenschaft, GEW) abandoned the talks with the other unions. The reason for this change of mind was the fear among an increasing number of its officials and regional committees that GEW would lose its independence and identity within a new large service sector union (DE9807169N).
According to an empirical analysis conducted by the Commission on co-determination, there has been a significant decline in the number of employees who work in companies with co-determination on supervisory board s (DE9806267F). In the mid-1990s, about 24.5% of all employees in the private sector were affected by supervisory board co-determination, compared with 30.5% in the mid-1980s. In 1996, approximately 5.2 million employees fell under the 1976 Co-determination Act and about 400,000 employees fell under the 1951 Coal, Iron and Steel Industry Co-determination Act.
The number of employees who were represented only through works council co-determination saw a significant decline, from 19% to 15%, in the private sector during the past decade. As a result there has been a sharp increase - to more than 60% - in the proportion of all employees in the private sector who work in a "non co-determination area" (mitbestimmungsfreie Zone). The proportion of employees affected by co-determination is higher if the highly-organised public sector is taken into consideration. For the whole economy, the share of employees with no co-determination still lies at about 45%, though the tendency is clearly increasing.
The results of the 1998 works council elections clearly indicate the high level of employee acceptance of works councillors as their representatives, and of the "works constitution" system as a whole. According to a survey by the Cologne Institute of Business Research (Institut der deutschen Wirtschaft, IW), despite losses, the DGB remained by far the most influential of the trade union confederations, with 62% of works councillors and 73% of works council chairs affiliated to its member unions. With 3.2% of works councillors and 3.0% of chairs, DAG is the second most important union. The CGB, the Confederation of Executives (Union der leitenden Angestellten, ULA), and the other unions are far behind and of minor importance. Most notable, however, is the gain of the non-union candidates among both works councillors and works council chairs. After the 1998 elections, 33.9% of the works councillors are non-union, an increase of almost seven percentage points. As regards the chairs, 21.9% are non-union, up by two points (DE9810180F).
Since Germany has a unique system of co-determination, another important European topic for German social partners was the planned introduction of the European Company Statute (ECS) (DE9806268F). German trade unions are particularly afraid that the ECS could weaken the German co-determination system. Therefore, the unions supported the proposals on worker involvement in the ESC drawn up by the UK Council Presidency in the first half of 1998, as it gave priority to the quantitatively highest existing level of employee participation in company boards: thus a European Company involving a German firm would usually have had to apply the German co-determination system. For the same reason, however, German employers' associations strongly criticised the British proposal, seeing the de facto priority to German co-determination within the European Company as a significant competitive disadvantage.
With regard to European Works Councils (EWC s), German employers' associations strongly oppose any extension of their participation or co-determination rights. Employers see no need for new action at European level in the near future. German trade unions, on the other hand called for the German EU Presidency of the first half of 1999 to support all initiatives for an extension of employee rights in EWCs. The DGB demanded that the Directive be extended to companies with fewer than 1,000 employees within the countries affected (DE9811184F).
In 1998, Germany saw several global "mega-mergers" - like the merger of Daimler and Chrysler (DE9805264N) - which placed the question of world-level workers' representation on the agenda. In May 1998, Volkswagen was the first German company to set up a "world group council" (DE9806271N).
Industrial relations and the impact of EMU
The introduction of EU Economic and Monetary Union (EMU) and its impact on industrial relations has become a prominent issue in the debates within social partners' organisations. German trade unions have emphasised the need for closer European cooperation on collective bargaining and other industrial relations issues. In 1998, several new initiatives for transnational trade union cooperation were established - for example, the cooperation agreement between German and Italian construction unions (DE9804259N) or the foundation of an interregional council for the "Southern Baltic Sea" involving unions from Denmark, Germany and Sweden (DE9808177N).
In September 1998, as an explicit reaction to the introduction of the euro, a number of trade unions from the Benelux countries and Germany adopted a joint declaration which states a strong need for close cross-border coordination of collective bargaining under EMU. In order to prevent possible downward competition on wages and working conditions, the unions involved agreed on a set of joint bargaining guidelines. The so-called "Doorn declaration" states that unions should seek bargaining outcomes at least equivalent to "the sum total of the evolution of prices and the increase in labour productivity" (DE9810278F). With the strong support of Germany's IG Metall, a similar initiative was taken by the European Metalworkers' Federation (EMF), which adopted a "European coordination rule " for national bargaining, which refuses national wage competition and calls for a return to a productivity-oriented bargaining policy (DE9812283F).
German employers' associations, however, see no need for any "Europeanisation" of collective bargaining because of the euro. On the contrary, representatives of the BDA stated that, under the conditions of EMU and increasing international competition, pressure for even more flexible and decentralised collective agreements will increase. As far as European social, labour and employment policy is concerned, German employers' associations generally take a rather sceptical view and emphasise the principle of subsidiarity, which they argue implies that these affairs are best regulated at a more decentralised level (DE9811184F).
Conclusions and outlook
In 1998, German industrial relations were overshadowed by the general election in September and the subsequent change in the federal government from a conservative-liberal to a social democratic-green coalition. Before election day almost all developments in industrial relations seemed to be blocked. After the election the new "red-green" government started with an ambitious programme which has several consequences for industrial relations, including the adoption of new labour laws and the introduction of a more active labour market policy (DE9811281F).
The most important initiative of the new government, however, was the creation of a new "alliance for jobs" as a permanent tripartite institution at national level (DE9812286N). Whether this national social pact succeeds or fails will be the crucial question in 1999. The functioning of the "alliance for jobs" will have a significant influence not only on the development of unemployment figures but - perhaps even more importantly - on the future of German industrial relations in general.
The development of the "alliance for jobs" might be influenced by the outcome of the 1999 collective bargaining round. The 1998 bargaining round still followed the path of very moderate wage increases, although trade union leaders were already calling for an "end to modesty". For 1999, however, most trade unions announced demands for wage increases between 5% and 6.5% (DE9810279F). According to the unions, a U-turn in pay policy is necessary for two reasons: firstly, the unions seek more fairness in distribution between wages and profits; and secondly, the unions argue for strengthened purchasing power in order to increase domestic demand as a major precondition for new employment. By contrast, employers' associations sharply reject this view. They object to all demands for more expansive wage developments and press for: a continuation of moderate wage increases, which should be clearly below the increase of productivity; further reductions of labour costs; more flexibility in working time and conditions; and further differentiation and decentralisation of collective bargaining.
Overall, the 1999 collective bargaining round, especially in metalworking, involves several uncertainties: it is not sure that the collective bargaining parties will find a compromise which is acceptable for both sides; nor is it clear how the bargaining results will influence the functioning of the "alliance for jos". (Thorsten Schulten, WSI, and Stefan Zagelmeyer, IW)
Eurofound recommends citing this publication in the following way.
Eurofound (1998), 1998 Annual Review for Germany, article.
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