Background for Germany

In 2021, GDP increased by 2.6% and, in 2022, it increased by 1.9% (preliminary figures). However, Germany’s economic recovery in 2021 was slower than that of the EU (the EU’s GDP per capita grew by 5.5% compared with the previous year). On the other hand, in comparison with the average unemployment rate in the EU27 (7.2% in 2020 and 7.0% in 2021), the German labour market has fared comparatively well, with average unemployment rates of 3.7% in 2020 and 3.6% in 2021. Due to the Russian war against Ukraine and the sanctions imposed against Russia in 2022, inflation has risen significantly. In 2022, it reached a 30-year high, with a 7.9% increase in comparison with the previous year. Between 2012 and 2022, GDP growth in Germany was 8.2%, which is below the EU average for the same period (15.29%). In 2020, real GDP decreased by 5% compared with the previous year. Unemployment rates for all categories continued to decrease into 2022 and were below the EU average figures. Youth unemployment stood at 6% in 2022, which was well below the EU average for that year (14.5%).

The basic structures of the German industrial relations system have not changed since its inception after the Second World War. The Basic Law (Grundgesetz, GG) and the Collective Agreements Act of 1949 (Tarifvertragsgesetz, TVG) guarantee the freedom of coalition and the autonomy of trade unions and employer organisations/single employers in concluding binding collective agreements. Worker representation is regulated under the 1952 Works Constitution Act (amended in 1972; Betriebsverfassungsgesetz, BetrVG) and the 1955 Staff Representation Act (Personalvertretungsgesetz), which grant employees the right to elect a worker representation body in establishments and public administrative units with at least five employees. These legal acts define consultation and co-determination rights in Germany.

The Co-determination Acts (Betriebsverfassungsgesetz, BetrVG) of 1951 and 1976 introduced worker representation for supervisory boards of companies with at least 2,000 employees.

The Catholic and Protestant churches and their institutions, including social welfare organisations and private establishments, are covered not by German labour law but by church law. Workers may individually decide to become trade union members but do not have the right to strike. Wages are set unilaterally in agreement with employee representatives. Employee representation is regulated under the Employee Representation Act of the German Protestant Church (Mitarbeitervertretungsgesetz) and that of the Catholic Church (Mitarbeitervertretungsordnungen).

The German industrial relations system was shaped in the post-war period in West Germany. Transferring the West German industrial relations system to the eastern part of the country after reunification has remained a challenge, as eastern Germany is characterised by a lack of large manufacturing companies and a dominance of small and medium-sized enterprises (SMEs). Collective bargaining coverage and works council coverage have remained significantly lower in eastern Germany than in western Germany. In 2021, 54% of workers in western Germany were covered by a collective agreement, compared with 45% in eastern Germany; in the same year, the proportion of workers in establishments with a works council stood at 39% in western Germany and 34% in eastern Germany.

One overall challenge has been the decline in membership of employer organisations, due to difficulties in organising new establishments, SMEs and enterprises in newly emerging economic sectors. As a result, most sectoral employer organisations have decided to offer membership without a binding obligation to apply sectoral collective agreements (which is referred to in German as Mitgliedschaft ohne Tarifbindung, OT). Employer organisations typically do not publish a breakdown of different types of members. An exception is the employer organisation of the metal sector, Gesamtmetall, which reported that, in 2016, the member companies with OT membership slightly outnumbered other types of members.

Similarly, not even a fifth of workers are members of a German trade union. As of 2019, trade union density in Germany was 16.3% (data from the Organisation of Economic Co-operation and Development (OECD)). However, recent trade union membership figures show diverging trends, namely clear signs of recovery (in occupational and sectoral trade unions in privatised companies and in the public sector), stability because of strong organising activities (in the metal and machinery sectors), an ongoing decline because of restructuring activities (in the construction, chemicals and mining sectors) and ongoing difficulties in organising certain service sectors. In additions, a number of small occupational trade unions stand in competition to established unions.

Collective bargaining coverage and works council coverage are still strong in the core zone of the industrial relations system – large manufacturing companies – but are considerably weaker in private service sectors. In Germany, some 56% of all manufacturing workers were covered by a collective agreement in 2021– compared with only 28% of German retail workers (Ellguth and Kohaut, 2022). However, by and large, employer organisations and unions in different sectors continued to negotiate collective agreements during the COVID-19 pandemic and find solutions that fit the developments in their sectors. During the 2020 collective bargaining rounds, social partners in some sectors postponed collective wage increases due to the economic uncertainties of the times (that is, in the metal and electrical sectors, by the automotive manufacturer Volkswagen and by the railway company Deutsche Bahn). In other sectors, social partners resorted to the use of one-time payments or combined one-off payments with newly negotiated wage increases for 2021 and 2022 (e.g. the metal, public administration, construction and energy sectors). In addition, collective agreements on short-time work were also concluded by employer organisations/single employers and unions to safeguard employment during the COVID-19 pandemic.