New collective agreements signed in public services

In April 1998, new collective agreements were concluded for the 3.3 million employees in the German public services. The agreements are based on proposals made in the joint dispute resolution procedure called after the negotiations had broken down. The new agreements include a 1.5% wage increase, a further adjustment of east German wages to western levels, the safeguarding of 100% continued payment of remuneration in the event of sickness, the introduction of partial retirement and, for the first time, the introduction of an employee contribution to the occupational pension scheme.

In recent years, German public services have seen a sharp decline in employment. Caused by a persistently high public budget deficit and exacerbated by the introduction of "new public management" or "lean state" concepts, the number of public service jobs was reduced by about half a million between 1991 and 1996. In early 1997, against this background, the Public Services, Transport and Traffic Union (Gewerkschaft Öffentliche Dienste, Transport und Verkehr, ÖTV), which is the most important trade union in public services, decided that safeguarding and creating employment should be at the core of the 1998 collective bargaining round for the 3.3 million workers in public services.

Since public sector working time is among the longest in Germany, with a 38.5-hour week in western Germany and a 40-hour week in eastern Germany, the ÖTV decided to give further working time reductions top priority in its collective bargaining policy, in order to safeguard jobs through a better distribution of work. However, what was heavily disputed within the ÖTV was the question of whether the union should demand working time reduction with full wage compensation or accept only a partial wage compensation, at least for the higher income groups. A majority within the ÖTV finally insisted on full wage compensation, partly as a reaction to the fact that increases in collectively agreed wages and salaries in public services over the last few years have been far below average wage increases in Germany. While in 1997, for example, the average wage increase in west Germany was 1.4%, in west German public services it was only 0.7% (DE9802250N).

In July 1997, the ÖTV together with the other unions involved in public services - the German White-Collar Workers' Union (Deutsche Angestellten-Gewerkschaft, DAG), the Teachers and Science Union (Gewerkschaft Erziehung Wissenschaft, GEW) and the Police Union (Gewerkschaft der Polizei, GdP) - proposed to the public employers that the 1998 collective bargaining round should start in autumn 1997, in order to find joint solutions to the safeguarding and creation of employment. The public employers - which are represented by the Federal Ministry of the Interior (Bundesinnenministerium), representatives of the federal states (Tarifgemeinschaft der deutschen Länder, TdL) and the municipal employers' association (Vereinigung kommunaler Arbeitgeberverbände, VKA) - agreed to this proposal and preliminary joint talks started in October 1997.

From the employers' viewpoint, however, employment in public services could only be safeguarded through a substantial reduction in labour costs. Therefore, they used the preliminary talks to demand cuts in continued payment of remuneration in the event of sickness (DE9709131F), as well as in the occupational pension scheme. Furthermore the public employers rejected the unions' proposals for working time reduction and, instead, insisted on the necessity of further working time flexibility, which should also include the possibility of working time extension. To sum up, the first talks between the unions and the employers showed quite clearly that both parties had rather conflicting positions and demands which made joint initiatives on employment very unlikely.

Conflicting demands lead to failure of negotiations

After the joint talks on employment in autumn 1997 had shown no results, official collective bargaining started in January 1998. In the first negotiating round, the unions came forward with a "collective bargaining package" (Tarifpaket) which included demands such as:

  • a wage increase which at least compensated for the inflation rate;
  • a further adjustment of east German wages, either through an additional wage increase or through a working time reduction from 40 to 38.5 hours per week;
  • retaining 100% of continued payment of remuneration in the event of sickness;
  • different forms of working time cuts, such as weekly working hours reduction, reduction of overtime, or introduction of working time accounts;
  • a new collective agreement on partial retirement; and
  • a guarantee that vocational trainees would obtain a permanent contract after training.

Meeting the unions' demands would have meant that the whole collective bargaining package would be equivalent to a 4.5% wage increase, which could be flexibly distributed throughout the different parts of the package. The public employers, however, sharply rejected the unions' demands and insisted on talking about labour cost reducing measures instead. After another two negotiating rounds with no results - which were accompanied by several warning strikes involving more than 60,000 employees - in the fourth negotiating round in March 1998 the employers presented their own collective bargaining package which, among other points, included:

  • a wage increase of 1.0% and a freeze of vocational training payments;
  • a new calculation method for Christmas and holiday bonuses, which for some employees would lead to a reduction of the bonuses;
  • a new calculation method for continued payment of remuneration in the event of sickness - which for some employees would lead to a reduction - and also a 1% reduction in the Christmas bonus for every day of illness;
  • the introduction of an employee contribution to the occupational pension scheme, starting with 0.4% of pay;
  • a deduction of two days' holiday for every week spent at a health resort for medical reasons;
  • further working time flexibility, such as introducing Saturdays as a normal working day without any special bonuses; and
  • the introduction of partial retirement on the conditions laid down in the partial retirement law (DE9708224F).

According to ÖTV calculations, the employers' package would have been equivalent to a 4.7% wage decrease. The unions, therefore, rejected the employers' demands as unacceptable and announced the failure of the negotiations. Afterwards both collective bargaining parties called for the joint dispute resolution procedure, which under the chair of the former major of Bremen, Hans Koschnick (SPD) and the former minister president of Rhineland-Palatinate, Carl-Ludwig Wagner (CDU), immediately started its work.

The outcomes of the final agreements

On 2 April 1998, both collective bargaining parties gave their support to the conciliators' proposals and concluded new collective agreements on the basis of the joint dispute resolution results. The most important agreed provisions are:

  • a 1.5% increase in wages and vocational training payments from 1 January 1998;
  • a further adjustment of east German wages from 85% to 86.5% of west German wage levels from 1 September 1998, but no more adjustments thereafter until the end of 1999;
  • no changes in the provisions for 100% continued payment of remuneration in the event of sickness;
  • an increase in the employers' contributions to the occupational pension scheme from 4.8% to 5.2% of pay and, for the first time, the introduction of employees' contributions. From January 1999 all increases in contributions will be paid half by the employees and half by the employers. Furthermore, employee representatives will become members of the governing board of the occupational pension scheme;
  • no major changes in working time. The collective bargaining parties declared, however, their readiness to negotiate on further working time flexibility and reduction of overtime;
  • a new provision on partial retirement - employees who take partial retirement will receive 83% of their former net wages; and
  • employers gave a declaration of intent to keep the current number of vocational trainees, while every vocational trainee will receive job for at least six months after training.

The chief negotiator for the employers, the Minister of Interior, Manfred Kanther, stated that the new collective agreements contain an acceptable compromise. Since payments and working conditions for German career civil servants (Beamte) are not covered by collective agreements but are determined by a special law (Gesetz zur Besoldungs- und Versorgungsanpassung) (DE9707123F), Mr Kanther also declared that the main results of the agreements will be extended to the 1.7 million or so career civil servants.

The leader of the ÖTV, Herbert Mai, declared that major demands of the employers for cuts in social benefits had been rejected. On the other hand the unions expressed their disappointment that it was not possible to conclude new initiatives on promoting and safeguarding employment. Furthermore, there is a strong dissatisfaction, in particular among east German trade unionists who pointed out that they are still lacking a plan for the full adjustment of eastern wages to western levels.


The 1998 collective bargaining round in public services is a good example of the changing pattern in German collective bargaining. The employers are ready to accept - rather moderate - wage increases only when at the same time the unions agree on cuts in other collectively agreed social benefits. This new pattern of "concession bargaining" leads the unions to a structurally defensive position where it becomes more and more unlikely that substantial improvements for employees can be reached.

Furthermore, the defensive character of "concession bargaining" seems to avoid new initiatives which could really deal with the major challenge of growing unemployment. Analysing the results of the new collective agreements in public services, this becomes quite obvious. On the one hand, the 1.5% wage increase might in fact lead to a decrease in real wages and thereby to a further decline in purchasing power. On the other hand, further initiatives which might help to stabilise employment, such as new working time arrangements, are practically blocked. (Thorsten Schulten, Institute for Economics and Social Science (WSI))

The 1998 collective bargaining round in German public services: Positions of the collective bargaining parties
Issue Unions' demand Employers' demand Result of the joint dispute resolution/ final agreement
Overall demand Package worth a total of 4.5% Reduction of labour costs -
Wage increases At least compensation for inflation. Increase of 1.0% and freeze of trainee payments. 1.5% increase of wages and trainee payments from 1 January 1998.
Adjustment of eastern pay and conditions to western levels Further adjustment through extra pay increase in east or cut in weekly hours from 40 to 38.5. No further adjustment. From 1 September 1998, eastern wages up from 85% to 86.5% of western levels; no further adjustment before end of 1999.
Christmas bonus - New calculation method leading to cuts for some employees. No change.
Holiday bonus - New calculation method leading to cuts for some employees. No change.
Continued remuneration during sickness Retention of 100% continued payment. 1% cut in Christmas bonus for every day of sickness and new calculation method leading to cuts for some employees. No changes, 100% payment retained.
Occupational pension scheme No employee contribution. Employee's contribution of 0.4% of pay from 1 July 1998, increasing in stages in following years. Increase in employers' contribution from 4.8% to 5.2% of pay. From January 1999 employees will contribute for the first time - all contribution increases will be paid half by employees and half by employers. Employee representatives will join the scheme's governing board .
Time spent in health resorts for medical reasons - For every week spent in resort, employer deducts two days' holiday. No change.
Working time General hours reduction, reduction of overtime, introduction of working time accounts. Extension of working time. Saturday to become normal working day without special bonuses. Core working time, attracting no overtime premia, to be extended/ No major changes. Parties declare readiness to negotiate on further flexibility and reduction of overtime.
Partial retirement Agreement improving pay during partial retirement and containing binding provision on compensation by the creation of new jobs. Introduction of provisions of the partial retirement law, which gives employees taking partial retirement 70% of former net wages. Employees taking partial retirement receive 83% of former net wages
Provisions to safeguard jobs Creating new jobs through further working time cuts. Every trainee to receive permanent contract after training. Eastern Germany: opening clause on working time reduction to 26 hours with no wage compensation or below 26 hours with partial wage compensation. Eastern Germany: opening clause on working time reduction to 32 hours with no obligatory wage compensation or 30 hours with obligatory partial wage compensation. Employers' declaration of intent to keep 1998 number of trainees. Every trainee to receive job for at least six months after training.

Source: ÖTV, own composition.

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