Agreement reached in construction after strike

On 25 June 2002, after seven days of strike action, the bargaining parties in the German construction industry reached a new collective agreement. The agreement provides for a two-stage pay increase - 3.2% from September 2002 and 2.4% from April 2003 - and employees in western Germany also receive a lump-sum payment of EUR 75 each month from June to August 2002. Furthermore, increases were agreed in minimum wages in eastern and western Germany, while the IG BAU trade union's demand for a second minimum wage for skilled workers was successful and this higher rate will be introduced from September 2003. The deal is now subject to approval by the members of the signatory organisations.

On 25 June 2002, after seven days of strike action, the collective bargaining parties in the construction industry reached a new collective agreement. While most sectoral bargaining in Germany occurs at regional level, negotiations in the construction industry take place at national level. The collective bargaining parties are the Building, Agricultural and Environmental Union (IG Bauen-Agrar-Umwelt, IG BAU) and the two employers' associations, the Federal Association of the German Building Industry (Hauptverband der Deutschen Bauindustrie, HDB) and the Central Association of the German Building Industry (Zentralverband des deutschen Baugewerbes, ZDB).

Strike

On 1 June 2002, after talks lasting over 100 hours, the negotiations over a new collective agreement for the 950,000 employees in the German construction industry failed. IG BAU called a strike ballot of its members, which resulted in 98.63% support for a strike - well above the 75% margin required by the union's constitution. On 17 June, IG BAU called a strike - the first nationwide strike in the construction industry in Germany's post-war history. On the first day, about 8,000 employees at more than 400 building sites were called out on strike, and the strike was then extended to all regions of the country in the course of the first week. On the seventh day of the action, there were 32,600 workers on strike at 2,837 construction sites.

Following the agreement concluded on 25 June, the strikes were halted from the next day. The deal has been put to IG BAU's 350,000 members for approval in a ballot which will be completed by 2 July, while HDB and ZDB members must also approve the deal.

Details of the agreement

The agreement concluded by IG BAU and the employers' associations associations provides for:

  • a two-stage pay increase for employees in both eastern and western Germany, with a 3.2% rise from 1 September 2002 until 31 March 2003, and a 2.4% rise from 1 April 2003 to 31 March 2004;
  • a lump-sum payment of EUR 75 each month from June to August 2002 for employees in western Germany
  • increases in the hourly minimum wage for unskilled workers ('minimum wage 1') in western Germany from the present EUR 9.80 to EUR 10.12 from September 2002, and to EUR 10.36 from September 2003;
  • increases in the hourly minimum wage for unskilled workers ('minimum wage 1') in eastern Germany from the present EUR 8.63 to EUR 8.76 from September 2002, and to EUR 8.97 from September 2003; and
  • the introduction of a second level of minimum wage for skilled workers ('minimum wage 2') from September 2003, which will amount to EUR 12.47 per hour in western Germany and EUR 10.01 in eastern Germany. This reflects a demand from IG BAU.

The table below summarises the changes to minimum wage rates in construction resulting from the new agreement.

Minimum wages in the construction industry
. To September 2002 (EUR) From September 2002 (EUR) % increase on previous year From September 2003 (EUR) % increase on previous year
Minimum wage 1 - western Germany 9.80 10.12 3.2% 10.36 2.4%
Minimum wage 1 - eastern Germany 8.63 8.76 1.5% 8.97 2.4%
Minimum wage 2 - western Germany - - - 12.47 -
Minimum wage 2 - eastern Germany - - - 10.01 -

Source: author's own composition.

Furthermore, the collective bargaining parties agreed to a modernisation of the sector's central framework agreement (Rahmentarifvertrag) - though without dismantling any of it, according to IG BAU. In addition, reorganisation measures for the industry's supplementary pension fund, caused by financial difficulties, were negotiated.

Main issue

The employers' rejection of an increase in the minimum wage for eastern Germany was seen as the main problem in the failed negotiations. The refusal of employers in eastern Germany to increase the minimum wage would have resulted in a wage freeze in the eastern construction industry, because most workers there receive the minimum wage - about 80%, according to IG BAU. Moreover, collectively agreed pay in the construction industry in eastern Germany is only 89% of the western level.

This issue highlights the problems for collective bargaining caused by the different organisational situation of employers in eastern and western Germany, alongside the different interests of large and small/medium-sized companies (HDB mainly represents larger construction firms, and ZDB mainly smaller ones). Approximately 30% of eastern German construction employers are members of the HDB or ZDB. Some employers have left HDB or ZDB and joined a new central association for the eastern German building industry, which was set up because of employers' dissatisfaction with the central collective bargaining policy (DE9703106N). The number of employers who therefore no longer participate in the construction industry collective bargaining system has increased competitive pressures, because in accordance with the system of extension of collective agreements (Allgemeinverbindlichkeitserklärung, AVE), employers which are not members of employers' organisations only have to pay the minimum wages laid down in the agreement.

Through the AVE system, the Minister of Labour applies a collective agreement's minimum wage rates to employees who are not covered by the agreement. A condition for the extension of an agreement is that at least 50% of the employees in the sector concerned must be covered by that agreement. A split between HDB and ZDB because of different company interests could thus have endangered the conditions for the AVE and therefore the minimum wage for the whole industry, if IG BAU had not been able to negotiate a common collective agreement with both associations. However, a single agreement was reached, and the collective bargaining parties agreed to apply for the extension of the agreement's two minimum wages as soon as possible.

Social partners' comments

Thomas Bauer, the negotiator for the employers' associations, commented that the agreement concluded represented the limit of the 'pain threshold' which was economically acceptable for employers. He added that the introduction of the second minimum wage for skilled worker shows the innovative ability of both collective bargaining parties and could better prepare the German construction industry for the extension of the European construction industry. Overall, according to Mr Bauer, the results were equally acceptable for employees and employers, and there were 'neither losers nor winners'. However, Klaus Bertram, the manager of the construction employers' association in Saxony, commented that the consent of eastern employers to the deal is doubtful.

Dietmar Schäfers, the IG BAU representative who led the strike, assessed the agreement as an 'acceptable compromise' which could not have been reached without the strike. In particular, he saw the wage increase in western Germany and the prevention of a 'zero-round' in eastern Germany as a major success. According to Mr Schäfers, the introduction of a new minimum wage for skilled workers will bring a noticeable increase in the income of many employees, particularly in eastern Germany. Michael Knoche, a press spokesman for IG BAU, stated that the union expected an approval vote of over 50% in the ballot of its members. IG BAU had received considerable positive feedback from members on construction sites for the successful outcome of the strike.

Commentary

The members of IG BAU demonstrated a high level of support for the first nationwide strike in Germany's construction industry since the Second World War. The ballot result showed that the members were highly motivated. Moreover, IG BAU's strategy to extend the strike day by day until a new agreement was concluded seemed an effective way to bring the employers back to the negotiating table.

The context for the strike is clearer if one considers the relatively low level of minimum wages in the industry and the fact that even these minimum wages are frequently not paid because of illegal employment, 'wage dumping', illicit work and insufficient controls at building sites. Furthermore, since 1995, about 500,000 jobs - around one in three - jobs have been lost in the industry, and the downward trend in the construction sector continues. Particularly in eastern Germany, overcapacity continues to exist. In addition, the number of employers leaving the sector's employers' associations has increased competitive pressure and weakened the collective bargaining parties.

The new agreement could be seen as a success, though IG BAU did not achieve an adjustment of the minimum wage in eastern Germany to western levels. Overall, as IG BAU sees it, the strike seemed both necessary and successful. The new agreement provides for an increase in the eastern minimum wage and prevented a year without a pay increase in eastern Germany. Moreover, the introduction of a second minimum wage for skilled workers was a particular success in this bargaining round. Even if this involved a certain danger of a break occurring between the two employers' associations, ZDB and HDB, particularly because of differences between eastern and western employers, it must be taken into consideration that the employers have no interest in weakening themselves with such a break. In addition, IG BAU sent a signal to employers which had left the associations and are therefore not bound by the collective agreement, while the final deal showed a willingness by both parties to achieve a new collective agreement. Now both parties have to convince their members to approve the new agreement. While approval may be expected from IG BAU's members, the employers' associations will have to exercise more powers of persuasion over their members. (Verena Di Pasquale, Institute for Economic and Social Research, WSI)

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