A Copernican U-turn in German collective bargaining?

In June 1997, the collective bargaining parties in the west German chemicals industry agreed for the first time to a general "opening clause" on wages, which, under certain circumstances, allows companies to reduce the collectively agreed wage by up to 10% for a limited period of time.

The results of the new agreement in the chemical industry

On 3 June 1997, after three months of negotiations, the chemical workers' union, IG Chemie, and the sectoral employers' association, Bundesarbeitgeberverband Chemie (BAVC), agreed on the introduction of a new "opening clause" in the national pay framework agreement (Bundesentgelttarifvertrag) which covers about 590,000 workers in the west German chemicals industry. The opening clause provides for the introduction of a "wage corridor" which, under certain circumstances, allows companies to reduce the collectively agreed wage by up to 10% for a limited period of time.

According to the Works Constitution Act (Betriebsverfassungsgesetz) the social partners at plant level - the management and the works council- are usually not allowed to conclude works agreements on collective bargaining issues. The only exception is when the collective bargaining parties conclude an opening clause (Öffnungsklausel) which explicitly transfers the regulation of certain issues to the company level. Over recent years, a growing tendency towards the use of opening clauses has been observed in German collective bargaining, in particular in the field of working time.

The novel aspect of the recent agreement in the chemicals industry lies in the fact that, for the first time, a general opening clause on wages has been agreed. The agreement states that the opening clause can be used to save jobs and/or to improve competitiveness, in particular

  • in the event of new investments which save old jobs or create new ones;
  • to avoid redundancies;
  • to avoid a shift of production or other activities to foreign countries; and
  • to avoid outsourcing of certain activities.

In order to apply the opening clause, the company's management and the works council first have to conclude a works agreement on wage reduction. Afterwards it is necessary for the collective bargaining parties - BAVC and IG Chemie - to support these agreements, otherwise they will not become legally effective. Therefore, the final decision on the application of the opening clause lies not with the company parties, but with the industry-level collective bargaining parties - which in practice means that IG Chemie has the power of veto. The opening clause states that the wage reduction should be limited, though without defining a set period of time. However, IG Chemie has declared that wage reductions should usually not be concluded for a period longer than 12 months.

In addition to the opening clause on wage reductions, the new chemicals agreement contains a clause on profit-sharing. The agreement lays down that the collective bargaining parties expect that those chemical companies which are doing well, economically, should let their employees participate in their profits. The particular profit-sharing system should be decided at company level, through a works agreement.

The political and economic background to the agreement

The collective agreements in the German chemicals industry traditionally cover a relatively broad range of sub-sectors which all have to provide the same basic wages and working conditions. Over the last few years, the chemicals subsectors of plastic materials, rubber and synthetic fibres were particularly affected by growing economic problems, and employers called for substantial cost reductions through changes in collective bargaining policy. At the beginning of 1997, under the leadership of Germany's largest tyre producer, Continental AG; about 26 companies in the rubber sector decided to start setting up their own employers' association and threatened the general chemicals employers' association, BAVC, that they would make their own collective bargaining policy if BAVC was not able to achieve further cost reductions.

Under these conditions, the BAVC proposed the conclusion of separate collective wage agreements (Spartentarifverträge) for the three chemicals subsectors mentioned above. Given the threat of an opt-out by a significant number of companies from industry-wide collective bargaining in the chemicals industry, the IG Chemie trade union was ready to negotiate with BAVC, but rejected the proposal for separate collective agreements for the three subsectors. Instead, IG Chemie proposed the introduction of a "wage corridor" through an opening clause, which was finally also accepted by the employers in the three particular subsectors. For instance, after the conclusion of the new agreement, Continental AG declared that it would stop plans for a new employers' association in the rubber industry and would start negotiations with its works council on wage reductions in the near future.

Controversial public debates on the agreement

After the conclusion of the new chemicals collective agreement, a controversial public debate on the outcome started. Both chemicals collective bargaining parties have announced their satisfaction with the agreement and see it as a positive example of the way in which German collective bargaining can be reformed. According to the lead negotiator for IG Chemie,Hans Terbrack, the social partners are entering "a new age" of collective bargaining with this agreement. The German Minister of Labour, Norbert Blüm, has expressed a similar opinion in calling the new agreement a "Copernican U-turn" in German collective bargaining policy.

The president of the peak employers' association, Bundesvereinigung der deutschen Arbeitgeberverbände (BDA), Dieter Hundt, says that for the first time "flexibility on wages" has been agreed in an industry-wide collective agreement which should also become a signal for other branches. However, Mr Hundt also criticises the agreement for the fact that the final decision on the application of the opening clause lies with the sectoral collective bargaining parties. He would prefer, instead, to give the final decision to the social partners at company level.

The reactions of the other German trade unions to the chemicals agreement were far more sceptical. For instance, Margret Möning-Raane, the president of the retail, banking and insurance union, Gewerkschaft Handel, Banken Versicherungen, (HBV), declared that the chemicals agreement could not become a model for her own union. Similarly, Klaus Zwickel, the president of the IG Metall metalworkers' union, said that the results of the chemicals agreement were not transferable to metalworking. Finally, Wolfgang Scheremet, a labour economist at the German Institute for Economic Research in Berlin foresees far-reaching consequences for the German model of collective bargaining: "If the other unions go in the same direction the German style of collective bargaining would be dead."

Commentary

Since the beginning of the 1990s, the traditional German model of centralised branch-level collective bargaining has been under increasing pressure from employers demanding flexibilisation and cost reductions, which reflect the double challenge to the German economy of unification and international competitiveness. The collective bargaining parties have reacted to that pressure with a further decentralisation of collective agreements through various opening clauses, in particular in the field of working time, which shift bargaining competence to the company level. The recent agreement in the chemicals industry now marks a new quality in this development, because for the first time a general opening clause has been agreed relating to the core of wages and salaries. However, the question remains open as to whether this flexibilisation will stabilise the basic structure of centralised collective bargaining or accelerate its erosion even further. (Thorsten Schulten, Institute for Economics and Social Science (WSI))

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