Downward wage flexibility agreed for the German construction industry

On 15 July 1997, the bargaining parties in the construction industry concluded a collective agreement for eastern Germany containing an "opening clause" on wages to save jobs, which allows companies to reduce the collectively agreed wage by up to 10%. On the next day, the bargaining parties agreed on a reduction in the minimum wage from 1 September 1997.

On 15 July 1997, the collective bargaining parties in the east German construction industry, the construction union IG Bauen-Agrar-Umwelt (IG BAU) and the two employers' associations, Hauptverband der Deutschen Bauindustrie (HDB) and Zentralverband des Deutschen Baugewerbes (ZDB), signed an agreement which covers 360,000 employees and includes the following:

• an "opening clause" (öffnungsklausel) on wages aimed at saving jobs which, under certain circumstances, allows companies to reduce the collectively agreed wage by up to 10%. The opening clause can be used not only by companies in difficulties, but also by other companies in order to save jobs, take on vocational trainees and avoid outsourcing of activities. In order to apply the opening clause, the company's management and the works council have to conclude a works agreement on wage reduction. In order to become effective, the works agreement has to be approved by the regional bargaining parties. In cases where there is no works council, individual contracts have to be concluded; and
• instead of full alignment of wages in the east with those paid in the west from October, it has been agreed that eastern wage levels will remain at the level worth around 93.8% of their western counterparts until March 1998, when the agreement is to be renegotiated.

The agreement will run until 31 March 1998. IG BAU president Klaus Wieshügel said the difficult situation in the east had forced the union to make the agreement. HDB vice-president Wilhelm Küchler welcomed the agreement, especially the provisions regarding the alignment of wages and the opening clause. In August 1996, HDB's affiliated employers had already given notice to terminate the then current agreement due to the recession. This new deal would bring east German wages "back to reality" without risking a case in the labour courts. After the deal was struck, all parties to the agreement appealed to the regional construction employers' associations of Berlin-Brandenburg (DE9703106N), Mecklenburg-Vorpommern and Thuringia, which have either already quit the HDB and the ZDH, or have announced their intention to do so, to rethink their decision and to rejoin both peak associations and the centralised collective bargaining system.

On 16 July 1997, IG Bau, HDB and ZDH agreed on a reduction in the minimum wage from 1 September 1997. Under the deal, minimum pay in west Germany will be cut from DEM 17 to DEM 16 per hour and in east Germany from DEM 15.64 to DEM 15.14. The new minimum wage, which now has to be approved by the Federal Ministry of Labour and Social Affairs, is planned to be valid until the end of August 1999. The new minimum wage applies to the Posted Workers Act (DE9702202F) which governs foreign companies operating in Germany and requires them to pay the minimum wage to their workers, as well as having to make contributions to a holiday fund. According to IG BAU, the law is frequently violated, and both employers and unions have called for stricter controls and for higher fines. IG BAU, the employers' associations and building minister Klaus Töpfer said they were pleased with the new agreement.