Last-minute compromise over new agreements averts strike in public sector

In June 2000, the bargaining parties in the German public sector concluded new collective agreements for about 3.1 million employees. A compromise was reached just before the trade unions were ready to call a strike, after more than two months of controversial negotiations and the failure of joint dispute resolution. The new agreements provide for: wage increases in two stages over 31 months; the adjustment of east German pay levels from 86.5% to 90% of west German levels by 2002; and new provisions on partial retirement and the promotion of vocational training.

On 13 June 2000, after more than two months of relatively controversial negotiations and the failure of joint dispute resolution, the collective bargaining parties in the public sector reached a "last-minute compromise" over new collective agreements, just before the trade unions were ready to call a strike. The compromise was finally supported by all the organisations participating in the public sector negotiations. On the trade union side, these were:

• the Public Services, Transport and Traffic Union (Gewerkschaft Öffentliche Dienste, Transport und Verkehr, ÖTV);

• the German White-Collar Workers' Union (Deutsche Angestellten-Gewerkschaft, DAG);

• the Teachers and Science Union (Gewerkschaft Erziehung Wissenschaft, GEW);

• the Police Union (Gewerkschaft der Polizei, GdP) and

• the collective bargaining arm of the German Federation of Career Public Servants (Deutscher Beamtenbund, DBB);

The employer-side bargaining parties were:

• the Federal Ministry of the Interior (Bundesinnenministerium);

• the bargaining representatives of the federal states (Tarifgemeinschaft der deutschen Länder, TdL); and

• the municipal employers' association (Vereinigung kommunaler Arbeitgeberverbände, VKA).

The new collective agreements cover about 3.1 million employees in the public sector and provide for pay increases, adjustments of east German pay towards west German levels, and new provisions on partial retirement and vocational training. The new pay agreement includes a flat-rate payment of DEM 400 for April to July 2000, a 2% pay increase from 1 August 2000 and a further 2.4% increase from September 2001, and runs for 31 months. The adjustment of east German pay nearer to west German pay levels will occur in three stages from the current 86.5% to 90% by January 2002. Furthermore, the new agreements extend the possibility of using partial retirement to part-time employees and commit public employers to take on vocational trainees for at least 12 months at the end of their period of training. Finally, both parties have agreed to negotiate a reform of the public sector's supplementary pensions scheme in order to find, by the end of 2001, a joint proposal which can solve the growing financial problems of the pensions scheme.

Failure of the negotiations

Originally, the trade unions in the public sector had two major demands for the 2000 bargaining round. The first was a pay claim of 5% over 12 months, which the unions justified with reference to developments in inflation and labour productivity. The second demand was for a binding plan for an increase in east German pay to 100% of west German levels, with the unions arguing that, 10 years after German unification, there is an urgent need for real harmonisation of pay, in particular because the cost of living in east and west Germany is almost the same.

The public employers, however, sharply rejected these demands by arguing that most public budgets still show significant deficits. According to the employers, the unions' pay claims would have led to additional personnel costs of DEM 20 billion, forcing public sector establishments further to reduce their workforces. Regarding the situation in east Germany, the employers rejected the idea of a further adjustment of pay levels as there had been no further adjustment of economic performance.

Moreover, the employers initially planned to limit pay increase in public services to the rate of inflation. Under the federal government's state budget consolidation plan, applying from June 1999, the pay increase for career public servants, which is not freely negotiated but determined by law, should be only 0.6% in 2000. Since the public employers also seemed to use this figure as a benchmark for wage bargaining in the public sector, the unions held a large demonstration against this "statutory pay dictate" in autumn 1999 (DE9910218N).

In the 2000 negotiations, the public employers first came up with a proposal which foresaw a pay agreement with a term of 24 months, providing for a 1% pay increase from 1 June 2000 and a further 1.3% from 1 June 2001. While the employers made no proposal for an adjustment of east German pay levels, they demanded some significant changes in the calculation methods for the supplementary pensions scheme in public sector, which would have led to reductions in pension payments.

Since both parties continued to have quite opposing positions after three rounds of negotiations, the trade unions declared the failure of the negotiations on 6 May 2000. As a result, only two days later, the public employers called for the use of the joint dispute resolution procedure.

Joint dispute resolution fails and unions call for a strike

The joint dispute resolution procedure in public services is carried out by a special commission composed of nine representatives of both the trade unions and the employers, plus two independent arbitrators. On 25 May 2000, the arbitration commission presented a joint dispute resolution agreement which tried to find a compromise for the three most controversial bargaining topics. First, the arbitration commission proposed a pay agreement with a term of 24 months, providing for a 1.8% pay increase from 1 April 2000 and a further 2.2% from 1 April 2001. Second, the joint dispute resolution agreement foresaw the adjustment of east German pay from 86.5% to 90% of west German levels by January 2002, carried out in three stages and then fixed at 90% until 31 March 2003. Third, the arbitration commission suggested a freeze of supplementary pensions until the end of 2003.

The results of the joint dispute resolution procedure were supported by almost all members of the arbitration commission, including eight of the nine trade union representatives. While the public employers declared their readiness to conclude new collective agreements on the basis of the arbitration proposals, a majority within the trade unions' collective bargaining commissions rejected the compromise, although the unions' leaders recommended its acceptance.

As a result of the failure of the joint dispute agreement, the trade unions organised a strike ballot between 5-8 June, in which more than three-quarters of union members voted for a strike. The unions announced that a strike would begin on 14 June, but at the same time made clear that they would still be open to seeking an agreement before the industrial action started. The unions demanded that the employers present a "better offer", which should:

• guarantee that pay developments in the public sector would be in line with developments in other sectors;

• provide a better perspective for the adjustment of east German pay levels; and

• exclude the issue of reform of the public sector supplementary pensions scheme from the current bargaining round.

Although the public employers declared that they had no financial resources to present a "more costly" offer, one day before the strike would have started they came forward with a new proposal which set the basis for the final agreements. After a majority within the trade unions' bargaining commissions accepted the latest employers' proposal, the new compromise was also supported by a majority of union members in a second ballot. Since new agreements have finally been reached on the basis of the latest employers' offer, the trade unions are now demanding that the government repeat the same conditions for the 1.9 million or so civil servants.

Commentary

In comments on the final compromise, trade union representatives emphasised that the new agreements show some important improvements in comparison with the proposals of the arbitration commission - such as the one-off, flat-rate payment (which favours in particular low income groups), higher wage increases, a shorter period for bringing east German pay to 90% of west German levels and the prevention of cuts in the supplementary pensions scheme. However, there have also been some critical comments within the unions, arguing that the higher wage increases were fully compensated by the longer term of the final pay agreement. Criticism also came from some east German trade union representatives, who expressed their dissatisfaction with the slow adjustment of east German pay levels and the fact that the prospect of real pay unity is still missing. Finally, the public employers expresed their relief that it was possible to reach, without industrial action, an agreement which in their view is "no more expensive" than that proposed earlier by the arbitration commission. (For a detailed comparison of the different claims and offers, the proposals of the arbitration commission and the final agreements, see the table in the annex.) (Thorsten Schulten, Institute for Economic and Social Research (WSI))

Annex