Private sector collective bargaining coverage analysed
Published: 27 February 1999
The legal background to collective bargaining in Germany is the concept of collective bargaining autonomy [1] (Tarifautonomie- implying self-legislation), which describes the right of coalitions of employers and employees to regulate the terms and conditions of employment on their own responsibility and independently of any influence exercised by the state, and thus to determine the labour market's constitution autonomously. Bargaining is protected by the German Basic Law and has the functions of:[1] www.eurofound.europa.eu/ef/efemiredictionary/collective-bargaining-autonomy
According to figures published at the end of 1998, industry-level collective bargaining covered 49.0% of private sector west German establishments and 25.7% of private sector east German establishments in 1997. In addition, the number of German companies which are subject solely to company agreements further increased to 5,369 in 1998, and has more than doubled since 1990.
Collective bargaining in Germany
The legal background to collective bargaining in Germany is the concept of collective bargaining autonomy (Tarifautonomie- implying self-legislation), which describes the right of coalitions of employers and employees to regulate the terms and conditions of employment on their own responsibility and independently of any influence exercised by the state, and thus to determine the labour market's constitution autonomously. Bargaining is protected by the German Basic Law and has the functions of:
creating social and industrial peace by reconciling the conflicting interests of employers and employees (the "peace function");
creating an order for the labour market (the "order function"); and
protecting employees against the unilateral regulation of work by employers (the "protective function").
German collective bargaining is relatively centralised and takes place mainly in the form of regional industry-level bargaining. In certain industries, however, collective bargaining is also quite frequent at national or company level. Trade unions may conclude collective contracts with employers' associations (Verbandstarifverträge, or association-level agreement s), or with individual employers (Firmentarifverträge, or company agreement s). Collective agreements are legally binding for all members of the negotiating parties. Formally, it is just the signatories and their members which are legally bound by the collective agreement but, as a result of the principle of equal treatment, employers usually apply the contracts to all workers within a company. At the request of one of the social partners, the Federal Minister for Labour and Social Order can declare a collective contract which covers not less than 50% of the employees to be generally binding on all the employees within that region and industry (a mechanism known as Allgemeinverbindlicherklärung, or extension of collective agreements).
There are three main types of collective contracts: pay agreement s; general agreements on pay grades; and framework agreements on employment conditions. In addition, hybrid forms and contracts concerning special issues, such as work organisation, exist. The decisions about issues, duration and level of negotiation are left to the social partners. During the period of validity of agreements, a peace obligation is imposed on the parties. Each year, around 8,000 collective agreements are concluded.
Industry-level bargaining coverage
A recent empirical study, based on information from the establishment panel (Betriebspanel) of the Institute for Employment Research (Institut für Arbeitsmarkt- und Berufsforschung, IAB) has investigated the coverage of collective bargaining in Germany - "Flächentarifvertrag im Westen sehr viel weiter verbreitet als im Osten - Ergebnisse aus dem IAB-Betriebspanel", S Kohaut and C Schnabel, in IAB kurzbericht No. 19, 23 December 1998. The findings on the coverage of industry-level bargaining are set out in table 1 below.
| Industry | Western Germany 1995 | Western Germany 1997 | Eastern Germany 1997 | |||
|---|---|---|---|---|---|---|
| . | Estabs. | E'ees. | Estabs. | E'ees | Estabs. | E'ees |
| Agriculture | 43.5 | 62.1 | 42.6 | 57.3 | 18.7 | 22.6 |
| Mining, energy | 78.2 | 78.4 | 52.4 | 71.4 | 52.2 | 84.6 |
| Basic material processing | 61.4 | 80.0 | 60.6 | 77.7 | 31.2 | 52.8 |
| Investment goods industry | 58.5 | 81.7 | 58.2 | 77.4 | 34.9 | 43.2 |
| Consumer non-durables industry | 68.7 | 79.0 | 73.0 | 77.2 | 42.3 | 46.2 |
| Construction | 79.3 | 90.9 | 70.2 | 85.3 | 40.6 | 49.8 |
| Trade, commerce | 52.7 | 70.7 | 54.2 | 69.2 | 23.8 | 47.0 |
| Transport, media | 51.7 | 50.4 | 36.5 | 44.6 | 25.1 | 42.5 |
| Credit, insurance | 68.6 | 92.5 | 61.0 | 83.8 | 44.5 | 88.1 |
| Other services | 37.0 | 46.5 | 33.6 | 42.2 | 14.4 | 31.2 |
| Total | 51.8 | 69.9 | 49.0 | 65.3 | 25.7 | 43.9 |
* Excluding non-profit organisations, private household and public services.
Source: IAB Establishment Panel.
The study found that in 1997, industry-level collective bargaining covered 49.0% of west German establishments and 65.3% of west German employees. The respective figures for 1995 were 51.8% and 69.9%. In eastern Germany, 25.7% of the establishments and 43.9% of the employees were covered by industry-wide collective agreements in 1997. Earlier comparable data for eastern Germany are not available.
Across sectors, industry-level bargaining coverage in western Germany in 1997 was highest in construction and in consumer non-durables industries, and lowest in transport and communication and in other services. In eastern Germany, coverage was highest in mining and energy, and lowest in agriculture and in "other services".
Between 1995 and 1997, coverage rates in western Germany decreased by three percentage points in terms of establishments and give percentage points in terms of employees. The decline was highest in mining/energy, transport/communication, credit/insurances and construction.
Table 2 below breaks down the 1997 industry-level bargaining figures by company size, revealing that industry-level coverage rates increase with company size. It is interesting that companies with 500 and more establishments in eastern Germany are more likely to be covered by industry-level agreements than western German establishments of the same size.
| No. of employees (30 June 1997) | Western Germany | Eastern Germany |
|---|---|---|
| Total | 49.0 | 25.7 |
| 1-4 | 35.7 | 18.9 |
| 5-9 | 56.7 | 26.5 |
| 10-19 | 57.5 | 32.5 |
| 20-49 | 59.9 | 40.3 |
| 50-99 | 70.3 | 56.2 |
| 100-199 | 72.8 | 54.3 |
| 200-499 | 73.8 | 64.8 |
| 500-999 | 73.3 | 80.2 |
| 1,000 and more | 75.8 | 77.7 |
* Excluding non-profit organisations, private household and public services.
Source: IAB Establishment Panel.
The study's authors conducted a regression analysis of the association between the bargaining coverage of private enterprise establishments as a dependent variable and several independent variables, which leads to some interesting and significant results (for both western and eastern Germany):
the larger the establishment, the higher is the probability that establishments are covered by industry-level collective bargaining;
the probability of being covered by industry-level agreements is higher for subsidiaries/branches of larger companies than for independent companies of equal size;
new establishments set up after 1992 are less likely to be covered by industry-level collective bargaining than older establishments of the same size; and
no significant association is found between the probability of being covered by bargaining and the percentage of qualified employees in the workforce, returns/profits or the share of exports in percentage of turnover. Legal status proved significant for eastern Germany only.
More companies conclude company agreements
Another indicator of the decentralisation of collective bargaining may be an increase in the total number of companies which conduct company-level collective bargaining, and thus are not very likely to be members of an employers' association. The total number of such companies has more than doubled since 1990, from around 2,500 companies to roughly 5,400 - as table 3 shows.
| Year | Western Germany | Eastern Germany | Total |
|---|---|---|---|
| 1990 | 2,100 | 450 | 2,550 |
| 1991 | 2,300 | 850 | 3,150 |
| 1992 | 2,422 | 1,178 | 3,600 |
| 1993 | 2,562 | 1,403 | 3,966 |
| 1994 | 2,689 | 1,445 | 4,134 |
| 1995 | 2,924 | 1,588 | 4,512 |
| 1996 | 3,081 | 1,652 | 4,733 |
| 1997 | 3,293 | 1,685 | 4,978 |
| 1998 | 3,606 | 1,765 | 5,369 |
Source: Bundesministerium für Arbeit und Sozialordnung.
However, the importance of company-level collective bargaining in Germany should not be overestimated. The IAB Establishment Panel shows that in 1997 only 9% of western German and 14% of eastern German enterprises were covered by company agreements.
Commentary
The new figures reveal that:
industry-level bargaining coverage is lower than the traditional (gu)estimates of 80% of companies and 90% of employees, even if it is - unrealistically - assumed that public sector coverage is 100%;
at least for the west, there is a tendency towards a decline in private sector coverage. Since the study also shows that newly created establishments are less inclined to be subject to industry bargaining, this trend is likely to continue;
there are considerable differences regarding collective bargaining and industrial relations between western and eastern Germany, with the latter being notably less inclined to be subject to industry-level bargaining; and
the number of companies which are subject only to company agreements has been increasing steadily.
All this provides further evidence in favour of the hypotheses that German private sector industrial relations structures are becoming decentralised and "decollectivised", with the locus of bargaining shifting from the regional to the enterprise level and an increase in the non-union, non-collective bargaining sector. However, the extent of those two trends should not be overestimated and should be scrutinised in further research. (Stefan Zagelmeyer, IW)
Eurofound recommends citing this publication in the following way.
Eurofound (1999), Private sector collective bargaining coverage analysed, article.
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