Collective bargaining coverage continues to decline

A study published in December 2001, based on establishment-level data for 2000, found that a declining share of German companies are covered by industry-wide collective agreements. Although there is still a significant number of companies which voluntarily apply the terms of collective agreements, without being legally bound by them, the speed of decline of bargaining coverage is increasing. While larger companies and their subsidiaries are more inclined to be covered, smaller, unincorporated and newly-established firms tend to fall outside industry-wide collective agreements.

According to a study published in December 2001, based on data provided by the establishment panel of the Institute for Employment Research (Institut for Arbeitsmarkt und Berufsforschung, IAB), the decline of collective bargaining coverage (DE9712140F) continued in 2000 (Tarifverträge – nein danke!? Einflussfaktoren der Tarifbindung west- und ostdeutscher BetriebeSusanne Kohaut and Claus Schnabel, Friedrich-Alexander-Universität Erlangen-Nürnberg, 2001). The study also finds that in west Germany 70.1% of all employees are still covered by some kind of collective agreement, while in east Germany coverage is much lower, at 55.4% in 2000.

No clear trend towards company-level agreements

German collective bargaining is relatively centralised and takes place mainly at the national or regional level, where trade unions and employers' associations negotiate sectoral collective agreements for an entire industry or trade. Trade unions, however, may also conclude collective agreements with individual employers (company agreement s). Both types of agreements are binding for all negotiating parties.

The new study indicates that industry-level collective agreements covered 45.4% of establishments (62.8% of employees) in west Germany in 2000, and 23.2% of establishments (45.5% of employees) in west Germany - see table 1 below.

Data provided by the Ministry of Labour indicate that since 1990 the total number of companies with company-level agreements has increased steadily from 2,550 in 1990 (DE9902196F) to 6,415 in December 2000. The share of the labour force which is covered by such agreements, however, does not follow this growth pattern. As shown in table 1 below, only 7.3% of all employees in west Germany and 9.9% in east Germany were subject to a company agreement in 2000, which was below the level of the previous year.

The survey data also reveal a great discrepancy between the share of companies covered by an industry- or company-level agreement.and the percentage of employees who are subject to the provisions of such agreements, with the latter considerably higher than the former. This is very much in line with findings from previous years that bargaining coverage tends to rise along with company size. While large firms are more inclined to be party to a collective agreement, small and medium-sized firms tend rather to determine wages, hours and working conditions through different mechanisms.

However, this does not necessarily mean that terms and conditions are negotiated on an individual basis between management and employees in such cases. The new survey finds that 39.1% of west German companies and 42.8% of east Germany companies not covered by a collective agreement still use the standards set by collective bargaining as a point of reference. In terms of employee numbers, this means that 49.3% of workers in west German companies not covered by collective agreements, and 53.8% of workers in such east German companies, enjoy the benefits of most of the standards set by collective bargaining, even though they are not legally covered by an agreement.

In sectoral terms, companies' industry-level bargaining coverage in west Germany was highest in the public sector, construction, and mining/energy and lowest in company-related services and agriculture. In east Germany, coverage was highest in the public sector, banking/insurance and in mining/energy, and lowest in transport/media and company-related services.