New study analyses development of employers' associations

A survey of employers' associations in the German sawmill, woodworking/plastics and construction materials industries, published in 2002, finds that many associations have started to offer a special 'OT' membership status, whereby companies are not covered by the industry-wide collective agreements concluded by the associations but still receive a full range of other membership services. This status was introduced as a response to some employers' opposition to some of the major provisions of industry-wide agreements. The study also finds that, while some member companies have decided to change their status, others maintain regular membership but breach collective agreements by applying terms and conditions of employment which deviate from the agreed standards.

Since the beginning of the 1990s, the German system of industry-wide collective bargaining has seen a continued process of decentralisation and flexibilisation. While part of the process has been associated with the increasing use of 'opening clauses' ('Öffnungsklauseln') which – under certain conditions – allow companies to apply lower standards for wages, hours and working conditions than provided in the collective agreement (DE0103212F), some observers have also been concerned about declining membership of employers' associations.

Within the German system of industry-wide 'patterned' collective bargaining, strong employers’ associations are crucial in order to maintain a high level of collective bargaining coverage, in that these associations negotiate agreements which are directly binding on all their member companies. While single-employer bargaining exists as well, with such agreements covering about 7% of all employees in west Germany and 10% in the east, basic standards are mostly determined in negotiations between the eight unions affiliated with the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) and the 500 or so employers’ associations, many of them directly or indirectly affiliated to the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA). Concerns have mostly been expressed with reference to the declining membership of Gesamtmetall, the pattern-setting employers’ associations for the metalworking industry. Because reliable membership data of employers’ associations is scarce, the future of German employers's associations has basically been associated with Gesamtmetall's situation. As table 1 below indicates, until recently Gesamtmetall has continuously lost members since 1970, which is most striking when focusing on the percentage of companies within the metalworking industry which are members of the association.

Table 1. Membership of Gesamtmetall, 1970-2001
. West Germany East Germany
. Companies Employees (million) Companies Employees (million)
2001 5,697 2.02 396 0.08
2000 5,826 2.04 426 0.08
1999 6,066 2.03 442 0.09
1998 6,263 2.07 504 0.09
1997 6,504 2.07 540 0.10
1996 6,731 2.11 655 0.12
1995 7,094 2.21 792 0.14
1994 7,458 2.31 983 0.16
1993 7,752 2.46 1,111 0.20
1992 8,081 2.74 1,278 0.27
1991 8,168 2.92 1,365 0.54
1990 8,173 2.94 1,192 0.94
1985 8,374 2.82 N/A N/A
1980 9,108 2.95 N/A N/A
1975 9,471 2.87 N/A N/A
1970 9,594 3.26 N/A N/A

Source: Gesamtmetall.

Surveying small and medium-sized companies

Some researchers question whether the development of Gesamtmetall is actually indicative of the entire German economy and predict that the situation might be even worse in sectors which are dominated by small and medium-sized enterprises (SMEs). A new study published in 2002 (Der Mittelstand und die Tarifautonomie. Arbeitgeberverbände zwischen Sozialstaat und Dienstleistung, Martin Völkl, München and Mering, 2002) provides for the first time a comprehensive study of employers' associations in the SME 'Mittelstand' area. The study is based on a survey of 10 associations in the sawmill, woodworking/plastics and construction materials industries, and includes companies’ answers to a written questionnaire as well as numerous in-depth interviews with representatives of employers’ associations and the corresponding trade unions. In contrast to earlier studies, which predominantly focused on formal representation and membership, this new study emphasises those developments within the ranks of organised employers which affect their capacity to negotiate and comply with collective agreements.

Associations without collective bargaining functions

Traditionally, coverage by an industry-wide collective agreement comes with membership of the employers' association which is party to the agreement. As Völkl reports, this is no longer true for a large number of employers' associations covered by the new study. In the late 1980s, the Association of Employers in the Wood and Plastics Processing Industry of Rhineland-Palatinate (Verband der holz- und kunststoffverarbeitenden Industrie Rheinland-Pfalz eV) was the first of a number of associations to introduce a special membership status, known as 'Ohne Tarifvertrag' (OT) status, which provides companies with the full range of services of the association but relieves them of the duty to comply with the standards set by the industry-wide collective agreement. Some companies took advantage of this special OT status and later negotiated company-level agreements, often with the support of their employers’ association. Most 'OT' members, however, have simply refrained from collective bargaining altogether.

Two different versions of 'non-coverage membership' of an employers’ association can be observed. In the first version, companies remain members of the original association but switch to a separate membership status which is included in the association’s constitution. In the second version, a second 'non-coverage association' is created and companies are invited to transfer from the regular association into this new organisation. As a result of this development, being a member of an employers' association is no longer identical with being covered by an industry-wide collective agreement.

According to Völkl, a driving force for companies’ desire to shift to 'OT' status is their dissatisfaction with the terms and conditions provided by the industry-wide collective agreement. Asked about the provisions of the relevant collective agreement which should be subject to change, those member companies which are still covered by the agreement identified working time issues as the most problematic. As shown in table 2 below, basic pay is considered to be much less important.

Table 2. Employers' association member companies' wishes for changes in the industry-level collective agreement
. Area where change is desired (% of companies)
Sector Working time Basic pay Bonuses More company level differentiation Other No changes required
Sawmill industry 61.3 37.3 38.7 21.3 2.7 9.3
Woodworking and plastics 79.5 56.4 53.8 20.5 7.7 5.1
Construction material industry 44.8 32.8 28.8 21.6 4.8 24.0

Source: Völkl 2002.

Because German employers' associations traditionally offer a wide variety of additional membership services - such as legal assistance, political lobbying, support in business administration, human resource management, and the introduction of technology, as well as support in the field of further and vocational training - the study also surveys the interest among member companies in services other than collective bargaining. To find out whether such additional services are potentially appealing enough to motivate companies to join an employers' association or to maintain their membership, Völkl asked the management of member companies to rank the importance of the associations' services on a scale of 1 (most important) to 5 (least important) As shown in table 3 below, collective bargaining is considered to be the single most important function, closely followed by legal assistance and assistance in human resource management.

Table 3. Ranking of importance of functions of employers’ associations by member companies (1 = most important, 5 = least important)
Sector Collective bargaining Legal assistance, human resource management Lobbying Consulting in business administration, import/export, insurance Assistance in technology, equipment, environmental standards, energy supply Training, vocational training and public relations
Sawmill industry 2.3 2.4 2.6 2.7 4.0 3.4
Woodworking and plastics 1.5 2.0 4.3 3.6 4.3 4.0
Construction material industry 1.8 2.0 3.2 3.1 4.2 3.6
Associations without collective bargaining function (wood and sawmill industry) 2.8 1.9 3.8 3.0 4.5 4.2

Source: Völkl 2002.

This high emphasis on collective bargaining is reduced, however, when the member companies of the so-called 'OT' associations are asked for their priorities. In this case, collective bargaining ranks (value 2.8) second after legal assistance and human resource management (value 1.9) but still has a much higher priority than all the other items which were included in the survey. This result appears surprising, given that these companies chose to transfer to the 'OT' associations mostly because they were dissatisfied with the terms and conditions provided by the industry-wide agreement. According to the study, many companies which seek to escape from being covered by an industry-wide agreement still need some external assistance either to negotiate a separate company-level agreement or to provide standards which help the companies’ management to negotiate wages individually with their employees.

The take-up of 'OT' membership varies widely between industries as well as individual associations - at one extreme, 100% of companies in the sawmill industry in Rhineland Palatinate are not covered by an industry-wide agreement, and at the other extreme, in the construction materials industry the associations’ leadership have not yet decided to offer 'OT' status. However, the take-up of this option is closely related to companies’ size. According to Völkl, 'OT' status is mostly used by medium-sized and large companies, because managers in these companies fear that they would be an easy target for unions’ 'strike power' if they left an association. As long as they are a member of an 'OT' association, however, they could quickly retransfer into regular membership and thus find a safe haven from union strike threats. Smaller 'Mittelstand' companies, by contrast, are less exposed to union power, and union membership in these companies is usually far below the industrial average, but management largely depends on the basic membership services provided by the employers’ association. While these companies tend to remain members of the association, they practice what is known as 'unlawful decentralisation', ie they more or less openly contravene collective agreements.

Breaches of collective agreements at establishment level

As shown in table 4 below, a notable majority of member companies of the employers’ associations examined revealed that they deviate from standards set by the industry-wide agreement. Given that the survey explicitly asked about those practices which are not permitted by the agreement (ie not based on an 'opening clause' or other mechanisms of 'regulated' decentralisation), such practices could be considered to be against the law. Even in the construction materials industry, the industry with the lowest percentage of incidences of 'unlawful decentralisation', 69% of member companies deviate form collectively agreed standards. In contrast to earlier studies on this issue, the survey finds that the vast majority of deviations occur in the field of working time, while pay issues are much less important. This result may be due to the nature of the three industries surveyed, in that they are dominated by SMEs.

Table 4. Breaches of industry-level collective agreement by employers' association member companies
Sector Do you deviate from the standards set by the industry-wide collective agreement? If so, in which areas do you apply standards which deviate from the industry-wide agreement?
. Yes No Working time Pay Bonuses Other
Sawmill industry 80.0% 20.0% 86.7% 40.0% 38.3% 1.7%
Wood and plastics industry 84.6% 12.8% 84.8% 39.4% 45.5% 3.0%
Construction materials industry 68.0% 29.6% 78.8% 35.3% 36.5% 8.2%

Source: Völkl 2002.

While it is not possible to compare the results of different surveys, due to substantial differences in methods, industries, sample size and time of the survey, table 5 below shows the broad spectrum of 'unlawful decentralisation' found in recent surveys. Future research will tell whether these differences between various industries and types of companies will hold.

Table 5. Surveys on deviations from collectively agreed standards
. Date of survey Industries covered Sample size (no. of companies) Respondents Method Companies which deviate from the industry-wide agreement (%)
Völkl 1998/9 Sawmill, wood/plastics and construction materials 235 Chief executives of member companies of employers’ associations Written survey 68%-80%
Second WSI Works Council Survey 1999/2000 Whole private sector apart from chemical engineering 1,390 Works councillors Written survey 15%
First WSI Works Council Survey 1997/8 Whole private sector apart from chemical engineering 1,931 Works councillors Written survey 17.5%
Oppolzer/Zachert 1997/8 Metalworking, chemical engineering, print, food processing, retail, some craft occupations 200 Experts (works councillors, representatives of employers's associations and unions, and management) Written survey (N=170), interviews (N=30) 16%-33%
Artus et al 1997 Metalworking, chemical engineering and construction industry (east Germany only) 38 Experts (works councillors, management representatives) Structured interviews 37%
Arbeitsgemeinschaft Selbständiger Unternehmer (ASU) 1997 Various industries (private sector) Approx. 900 Representative selection of ASU member firms N/A 55%

Source: author's own composition, data sources as indicated in first column.

Commentary

The nationwide spread of 'OT' associations and 'OT' membership, along with practices applying standards for wages, hours and working conditions which deviate from the binding terms and conditions of a valid collective agreement, have the potential to destabilise the German system of industry-wide collective agreements. While 'OT' status in some cases might contribute to stabilising an existing employers' association in providing a 'safety valve' for those employers that feel dissatisfied with a collective agreement, it also hurts those companies which opt to maintain their regular membership, in that it might provide their competitors with an advantage without limiting their access to other valued services provided by the employers' association. The same is true for those regular members of an employers' association that deviate from collectively agreed standards by breaking the law. This development upsets trade unions, which seek to take wages out of competition and now fear that they do not have the strength to target each and every 'rebellious' employer. Surprisingly, there is also a growing unease among some groups of organised employers, particularly large member companies of employers' associations which feel short-changed by the prevailing practices of those small member companies which are taking a 'free ride' by deviating from a valid collective agreement. (Martin Behrens, Institute for Economic and Social Research, WSI)

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