The 1997 collective bargaining round in the German construction industry

After more than two months of negotiations in the German construction industry, the collective bargaining parties found a compromise on most of the issues in April/May 1997. The social partners agreed to a 1.3% wage increase and the introduction of 100% continued payment of remuneration from the fourth day of sickness. In compensation for the latter, a cut in Christmas and holiday bonuses was concluded. The social partners also finally reached a new agreement on bad weather allowances.

The 1997 collective bargaining round for the 1.3 million employees in the German construction industry started on 27 February. In contrast to most branch-level bargaining, which takes place at regional level, negotiations in the construction industry are traditionally held at national level. The collective bargaining parties - the construction union IG Bauen-Agrar-Umwelt (IG BAU) and the two employers' associations, Hauptverband der Deutschen Bauindustrie (HDB) and Zentralverband des Deutschen Baugewerbes (ZDB) - had to find new agreements on at least four main issues:

  1. an agreement on bad weather allowances;
  2. an agreement on the development of wages and salaries;
  3. an agreement on the Christmas bonus; and
  4. an agreement on continued payment of remuneration in the case of illness (sick pay).

Agreement on bad weather allowances

The negotiations in the construction industry were overshadowed by an economic slump and a sharp increase in unemployment. Between November 1996 and February 1997, the number of building workers officially registered as unemployed doubled to nearly 400,000. As a result, the rate of unemployment in the construction industry was more than twice as high as the rate in the whole economy.

One major source of this upsurge in unemployment lay in the rules on the "bad weather allowance" (Schlechtwettergeld). Until 1996, in the event that an employment relationship could not be maintained on the grounds of the weather, a bad weather allowance had been paid by the state through the Federal Employment Service (Bundesanstalt für Arbeit) as a special form of unemployment insurance benefit. After the Government decided to withdraw the state bad weather allowance from 1 January 1996, the collective bargaining parties signed an agreement on compensation payments for employees for time lost through bad winter weather. According to that agreement, building workers laid off through bad weather should receive a bridging payment (Überbrückungsgeld) from their employers for up to 20 days or 150 hours, for any time lost between 1 November and 31 March each year. The employer could be reimbursed at a rate of 20% of this new payment from the industry-level social fund, while the employee had to contribute one-third to the financing, by relinquishing up to five days' holiday a year.

The sharp increase in unemployment during the winter of 1996/7 could be taken as a clear sign that, in practice, the new collective agreement did not work. To avoid the payment of bad weather allowances, many employers simply fired parts of their workforce and thereby created a new form of "winter unemployment". As a consequence, the IG BAU union called for the reintroduction of the state bad weather allowance, but after the Government rejected these demands, the union proposed a new collective agreement which would include the creation of an employer's social fund for bad weather allowances. The employers rejected this proposal and instead called for the introduction of annual working time accounts and full compensation for the reduced winter working time through overtime work during the rest of the year.

After IG BAU organised a "week of protests and demonstrations" in March 1997, the collective bargaining parties finally reached a compromise on measures to cover income losses for employees affected by bad winter weather on 12 April 1997. The so-called "Gravenbrucher declaration" provides for the following:

  • the introduction of a working time account of up to 150 hours per year, which means that employees can accumulate 150 credit hours to cover the bulk of any likely winter reduction in activity;
  • employers offer a guaranteed minimum salary equivalent to 162 hours at minimum rates during each winter month;
  • employees will have to meet the first 50 hours of any temporary stoppage either from their time credit, or, if this is not sufficient, from their annual leave entitlement;
  • if sufficient credit hours are available, up to 120 lost hours during winter must also be met from the working time account; and
  • from the 121st lost hour during winter, employees will receive a payment to make up for lost earnings which should be paid by the Federal Employment Service, but be financed from a levy of 1.7% on employers' paybills.

Agreements on wage increases, Christmas bonus and sick pay

The parties' positions on pay, Christmas bonus and sick pay were even more opposed, as the table at the end of this section indicates, and the collective bargaining parties were not able to find an agreement. On 12 April, IG BAU broke off the negotiations and called for joint dispute resolution. Consequently, a central joint dispute resolution board, composed of four members of each collective bargaining party and an impartial chair, tried to find a compromise. On 7 May 1997, chaired by Heiner Geißler, a member of Parliament for the Christian Democratic Party (CDU), the board presented a compromise, which contained:

  • a 1.3% wage increase;
  • the introduction of a new low-wage "income group" or pay scale of DEM 19 per hour for long-term unemployed people and unskilled workers (previously the lowest income group had been DEM 20.62 per hour);
  • a reduction of the Christmas bonus from 100% to 77% of one month's average income; and
  • 80% sick pay in the first three weeks of sickness, and 100% sick pay from the fourth week of sickness.

While the employers gave support to this compromise, IG BAU expressed strong criticism, in particular on the sick pay provisions, because in most of the other branches 100% sick pay had been collectively agreed (DE9702203F). The president of IG BAU, Klaus Wiesehügel, pointed out that it could not be accepted that building workers, who because of their work are particularly susceptible to illness, receive only 80% sick pay. On 12 May, lG BAU's commission on collective bargaining rejected the joint dispute resolution results and started to prepare for industrial action. At the same time, IG BAU offered further negotiations to the employers and declared that it was ready to accept full financial compensation for the introduction of 100% sick pay. On 15 May 1997, the collective bargaining parties finally reached a new compromise which foresees 100% sick pay from the fourth day of sickness. To compensate for the additional costs, IG BAU agreed to a cut in holiday bonuses from 30% to 25% of one month's average income and a limited additional individual cut in the Christmas bonus, depending on the sickness record of each individual employee.

Collective bargaining round 1997 in the German construction industry: Positions of the social partners and final results
Issue Union's demand Employers' demand Final agreement
Bad weather allowances Employers should create a social fund, which should provide the base for bad weather allowances. A clear limitation on working time accounts Introduction of annual working time accounts and full compensation for reduced working time in the winter period through overtime work during the rest of the year Introduction of a working time account of up to 150 hours per year; guaranteed minimum salary during the winter month
Wage increases Originally no concrete demand for the wage increase, but a demand for an increase which secured real income. Later the union demanded a 2.9% wage increase No wage increases A wage increase of 1.3% and the introduction of a new low wage income group
Christmas bonus Safeguarding a Christmas bonus of 100% of one month's income A reduction of the Christmas bonus from 100% to 50% of one month's income A reduction of the Christmas bonus from 100% to 77% of one month's income
Sick pay A new collective agreement to secure 100% sick pay No collective agreement on sick pay and, instead, the application of the legal regulation which provides 80% sick pay 80% sick pay for the first three days of sickness; 100% sick pay from the fourth day of sickness

Source: Own composition

Commentary

The 1997 collective bargaining round in the German construction industry took place under very difficult economic circumstances. In view of this, the employers could be very satisfied with the bargaining results, because they not only achieved a very moderate wage increase, but also received a broad range of cost reductions (eg the cut in Christmas and holiday bonuses or the new agreement on bad weather allowances). The employers' association estimates that the total cost reduction will run to DEM 770 million.

For the union, the results are much more ambiguous. A small symbolic victory was achieved as regards sick pay, but only at the price of full cost compensation. The long-term implications could, however, become even more important, if the union continue to follow the path of concession bargaining. (Thorsten Schulten, Institute for Economics and Social Science (WSI))

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