Talks in trendsetting metal industry deadlocked

After three unsuccessful negotiation rounds in the trendsetting metal and metalworking industry, the 2008 collective bargaining process seems to be deadlocked as of the end of October. Against the background of high inflation, good economic performance in recent years but a poor outlook for the near future in the wake of the current financial crisis, the core point of controversy has proved to be the relationship between ‘standard’ wage increases and a flexible wage element.

On 26 September 2008, the trendsetting metalworking industry opened Austria’s autumn bargaining round, when the employee representatives formally handed over their joint list of demands to the employer side. This list mainly includes pay-related demands, particularly increases in minimum and real wages and salaries, plus equivalent increases in additional payments and apprentices’ remuneration. However, in terms of pay increases, the trade unions did not determine any specific percentages.

As a matter of principle, collective bargaining in Austria, which is confined to the private sector, takes place at sectoral or industry level. Private sector collective bargaining results in more than 400 separate collective agreements each year, covering at least 98% of all private sector employees (AT0410202F). Despite the large number of agreements, the wage bargaining system is strongly coordinated across the economy, primarily based on the trendsetting role played by the metalworking industry in the overall bargaining process. Accordingly, this sector traditionally opens the Austrian autumn bargaining round and sets the tone for subsequent negotiations in other sectors and branches of the economy. This system of strongly coordinated pay and incomes policy ensures that macroeconomic objectives, such as price stability and maintaining international competitiveness, can be observed (AT0711029I).

Bargaining parties involved

The bargaining parties for the sector’s 106,500 blue-collar workers, 62,000 white-collar workers and 9,800 apprentices include: the Union of Salaried Employees, Graphical Workers and Journalists (Gewerkschaft der Privatangestellten – Druck, Journalismus, Papier, GPA-DJP) and the Metalworking, Textiles and Food-Processing Union (Gewerkschaft Metall, Textil, Nahrung, GMTN) on the employees’ side and the various branch subunits of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKO) on the employer side. The joint bargaining team on the latter side is comprised of representatives of seven separate sector-related associations – all under the umbrella of the WKO, which have banded together for the purpose of joint interest representation. However, this bargaining union representing employers involves a certain risk, since profit margins widely vary among the distinct branches within the overall metal and metalworking industry. Whereas the core steel production industry has continued to yield high profits over the past years, the metalworking industry has had to struggle hard due to high prices for raw material and energy. Therefore, with rising wage agreements concluded in the overall sector, the bargaining unity on the employer side is being increasingly threatened.

Negotiations reach a standstill

In order not to unduly burden companies with low or no profit at all, the employers want to strengthen a flexible wage element in relation to the ‘standard’ collectively agreed wage accounts. Such a flexible wage element would be in the form of an extra one-off payment which should, like in previous years, be dependent on each company’s performance. In contrast, against the background of a prospective inflation rate in 2008 of more than 3.5% and considerable profit growth in the sector during 2007–2008, the trade unions demand that the pay increases must have a lasting rather than a one-off effect.

After three intense negotiation rounds in September and October 2008, talks appear to be in deadlock as of the end of October 2008. Pointing to the current global financial crisis affecting also the real economy, the employers have refused to agree on wage increases exceeding 3.6%. Business has emphasised that higher wage accounts are not acceptable due to an imminent economic downturn, which has already begun to show in declining order intakes. The offer of a 3.6% wage increase plus additional one-off payments was indignantly rejected by the trade unions. They argued that such a low percentage pay rise would only compensate for the particularly high inflation rate, but would by no means consider Austria’s prospective economic growth of almost 2% in 2008.

Works council conference

As a consequence, the two trade unions involved organised a nationwide works council conference on 29 October 2008 in St. Pölten in Austria’s northeastern state of Lower Austria. At this conference, about 3,000 employee representatives at establishment level were informed about the present state of affairs. The conference participants finally adopted a resolution according to which the employers are urged to agree on increases in wages and salaries ‘which compensate in a sustained manner for the high rate of inflation and grant the employees to duly benefit from the current growth in gross domestic product (GDP)’. Moreover, the resolution calls on the respective leadership of GPA-DJP and GMTN to take all necessary measures to push through these demands.

Commentary

Despite the current deadlock in wage negotiations, commentators are expecting an agreement to be concluded in the course of November 2008. This is due to the fact that the social partners in the metalworking industry are traditionally interested in maintaining social peace rather than ‘winning’ one or two decile percentage points.

Georg Adam, Department of Industrial Sociology, University of Vienna