DGB quits Employment Alliance for eastern Germany: a chronology of failure

In May 1998, the DGB trade union confederation quit the Employment Alliance for eastern Germany. Nevertheless, DGB and the Social Democrats are demanding a national-level employment alliance for the period after the general elections in September 1998. This feature summarises chronologically the development of the Employment Alliance for the east, as well as the latest proposals for a new national alliance.

22 May 1997: the Employment Alliance for eastern Germany is born

On 22 May 1997, the German Federal Government, the German Trade Union Federation (Deutscher Gewerkschaftsbund, DGB), the German Salaried Employees' Union (Deutsche Angestellten-Gewerkschaft, DAG), the Confederation of German Employers' Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA), the Confederation of German Industries (Bundesvereinigung der deutschen Industrie, BDI), the German Association of Chambers of Commerce (Deutscher Industrie- und Handelstag, DIHT), the Central Association of German Crafts (Zentralverband des deutschen Handwerks, ZDH) and the Associations of the Credit Institutions (Kreditgewerbe) succeeded in forging a regional "Employment Alliance" entitled the Joint initiative for more jobs in eastern Germany (Gemeinsame Initiative für mehr Arbeitsplätze in Ostdeutschland) (DE9706117F). Its primary objectives were to: speed up the transformation process of the eastern German economy; boost growth; reduce unit labour costs; stabilise employment in 1997 at the level of 1996; and create 100,000 new jobs in each of the following years.

Among other measures to be executed by the state and the private sector - such as continuing federal subsidies until 2004 and an increase in investment and purchase by western companies - the Joint initiative provided for several guidelines regarding industrial relations in eastern Germany - such as employment-oriented collective bargaining, working time flexibility, "hardship clauses" and special regulations for small and medium-sized enterprises. The signatories agreed to review the implementation of the programme every six months. When presenting the programme in Berlin, Chancellor Helmut Kohl and Dieter Schulte, chair of the DGB, acknowledged that a chance existed that some elements of the programme could be carried westwards, and that the Employment Alliance could be the first step towards developing a similar agreement for the whole of Germany.

Late May 1997: the first trade union row

In the days following the presentation of the Employment Alliance, member unions of the DGB entered into a disagreement over its contents, its implications, and its usefulness. The Alliance was strongly opposed by the media industry employees' union, IG Medien, the trade, banking and insurance employees' union, Gewerkschaft Handel, Banken und Versicherungen (HBV), and the wood and plastics processing employees' union, Gewerkschaft Holz und Kunststoff (GHK). HBV, GHK and IG Medien openly criticised Dieter Schulte for not having consulted them during the preparation of the agreement. All three unions denied being bound by the pact and referred to the fact that the DGB neither conducts collective bargaining nor has any competence to influence its members' bargaining policies at branch level. According to Margret Mönig-Raane of the HBV, the pact signalled that the trade unions had not reacted adequately to the jobs crisis in eastern Germany. The public sector employees' union, ÖTV, did not openly criticise the pact, but did not see any need to reform its own practices. The reaction of IG Metall, the metalworkers' union, was ambiguous (DE9706117F).

December 1997: first review reports employment target missed

The agreed first review by the signatories of the Alliance's implementation took place on 5 December 1997. The Federal Minister of Economics, Günter Rexrodt, stated that contrary to expectations it had not been possible to stabilise the labour market in eastern Germany. Instead, according to figures provided by the Federal Employment Service, the average number of people in the eastern German labour force decreased by 187,000 to 6.2 million from November 1996 to November 1997. In the same period, the number of unemployed people in eastern Germany rose by another 262,700. As regards the social partners, the Minister welcomed the conclusion of numerous employment-oriented collective agreements in eastern Germany during the second half of 1997 (DE9712143N).

16/17 May 1998: DGB quits the Alliance

A few days before its first anniversary and the second review, the DGB quit the Employment Alliance. In an interview with the German weekly news magazine Der Spiegel, Dieter Schulte declared that the Alliance was finished for the DGB. He argued that employers and Federal Government had not kept their promises, and that private banks had not supported the new eastern Federal States (Bundesländer). The unions, for their part, had contributed to the Alliance by pursuing a moderate wage policy. A particular problem, stated Mr Schulte, was that the Federal Government had put a brake on labour market policy, with the result that the labour market was close to collapsing. Employers and government had de facto terminated the Alliance. Eastern Germany still needed the cooperation of politicians, business and unions, but with a more binding character and serious contributions from all parties.

During the whole year of existence of the Alliance, and increasingly after it became apparent that the ambitious goals would not be met, there had been continuing discussions among trade unions on whether to continue with the pact or not, especially as regards wage moderation as a means of contributing to the creation of jobs.

The Federal Minister of Economics, Günter Rexrodt, stated that DGB's decision was "a slap in the face of all people who are searching for jobs in eastern Germany", adding that the Federal Government would continue with its commitments. Furthermore, he invited the DGB to rejoin the joint initiative. Dieter Hundt, president of the BDA, condemned the decision to quit and stated that some elements of eastern German DGB trade unions had undermined the initiative right from the start and rejected the implementation of the guidelines regarding collective bargaining policy. Instead of allowing for more flexibility at company level, said Mr Hundt, IG Metall especially had not even agreed to talks on the implementation of the joint initiative. "The DGB had obviously quit the Alliance under pressure from IG Metall". Furthermore, Mr Hundt complained that, although the reform of collective bargaining in western Germany was proceeding and moderate, employment-oriented wage policy was supported by most of the unions, IG Metall refused reform in the east. He requested the unions to stick to the collective bargaining guidelines of the Employment Alliance. Furthermore, he said that the DGB should stop demanding a federal employment alliance if it was seeking to avoid its responsibilities. BDI chair Hans-Olaf Henkel and Rudi Geil, the Federal Government's special commissioner for eastern Germany, repudiated Mr Schulte's criticism. Mr Henkel accused the trade unions of "grave wage policy mistakes". Mr Geil said that the DGB had quit the Alliance without convincing reasons at a time where high unemployment in eastern Germany required joint action by politicians, business and trade unions.

After the failure: discussion on national employment alliance continues

Shortly after the DGB's decision to abandon the Alliance, Walter Riester, vice-chair of IG Metall and the designated Minister of Labour under a potential future Social Democratic Government, pleaded for a new employment alliance for the period after the general elections in September 1998.

On 21 May, at a DGB conference on employment for eastern Germany in Halle, Dieter Schulte stated that he was prepared to start talks on a revival of the employment alliance immediately and without preconditions. Mr Hundt of the BDA reacted sceptically but signalled preparedness for talks with trade unions and government, if no party would set preconditions.

At the beginning of June, the Social Democratic Party (SPD) reaffirmed its announcement of a new federal-level tripartite "alliance for employment and justice" in the event that it should come to power in the September elections. Furthermore, SPD party leaders have repeatedly announced that a future SPD Government would repeal the labour market reforms of the current conservative Kohl Government - especially the provisions on continued payment of remuneration in the event of sickness (DE9709131F), protection against dismissal, bad-weather allowances (DE9706215F) and reforms in the social security system.

Also at the beginning of June, Mr Schulte renewed demands for a pact for employment including binding job promises by employers and working time reductions. He also said that there was no chance of an employment alliance before the general elections. In an interview with the German news agency, dpa, Mr Schulte demanded the following elements in an employment alliance: the reduction of overtime; abolition of the so-called "620-DEM-jobs", which are not subject to social security contributions; the introduction of a general training tax (Ausbildungsabgabe) for companies which do not provide training, in the event that the mismatch in the vocational training market persists; and increased job options in services. As regards working time policy, the DGB leader repeated his demands for a 25-hour working week in the medium and long run.

Addressing Gerhard Schröder, the SPD candidate for chancellorship, IG Metall's chair, Klaus Zwickel, stated that a new employment alliance would not be possible without reduction in and redistribution of working time. Furthermore, any alliance must not restrict the trade unions' wage policy. IG Metall stated that it would not join an employment alliance if the current administration's legislative changes were not repealed.

BDA's Mr Hundt said that his organisation would be willing to participate in talks on an employment alliance at any time, but that the repeal of the labour market and social security reforms could not be a basis for a new employment alliance. The repeal would bring costs of several billion DEM and pose a threat to jobs. Hans Peter Stihl, DIHT president, demanded that there must not be an end to moderate wage policy. Furthermore, he rejected plans for a renewal of a federal-level employment alliance: "Employment alliances should be concluded where they belong - at company level." BDI's Mr Henkel signalled a willingness to participate in top-level tripartite talks, but excluded the possibility of binding employment targets in tripartite or collective agreements. He could not make biding promises on jobs on behalf of BDI's 82,000 member companies. This would be possible in a planned economy but not in a market economy.


Many industrial relations researchers, as well as officials of the trade unions and the political parties, long to (re)turn to the apparent security of tripartite decision-making as a means of governance for the entire economy. However, as the historic record - from the concerted action of the 1970s to the Employment Alliance in 1996 (DE9702202F) to the Employment Alliance for eastern Germany - shows, national-level tripartism in Germany is anything but a success story. Ironically, the Bavaria n employment alliance, with the participation and guidance of the region's conservative Christian-Social government, is the only regional-level employment alliance to survive the Employment Alliance of 1996 (TN9710201S).

Yet the belief is widespread that a type of German corporatism, however defined, and the integration of strong (DGB) unions into political decision-making yields superior economic and social performance. DGB leaders, the designated SPD minister of labour and IG Metall deputy chair Walter Riester, and last but not least the Social Democratic candidate for Chancellor, Gerhard Schröder, play the same tune and repeat their demand for a new national employment alliance which they would set up immediately after the general election in September 1998. However, much of the discussion has also to be seen against the background of the elections. Demands, proposals and reactions regarding an employment alliance, even sometimes from the same persons, change every other day. As a result, the impartial observer may have difficulties in filtering which statements go beyond supporting election campaigns.

As regards a future national employment alliance for Germany, there are two particular sets of problems regarding organisation and implementation which may cause scepticism about its success.

  1. The question of authority and representativeness. The most important problem to be considered is still the difficulty of making a corporatist deal binding and "stick" without moving from a market to a planned economy. Peak-level employers' associations have neither the competency nor the authority to agree on the binding job-creation targets which are demanded. There is the inherent danger in tripartite agreements that they place too much weight on what employers say, collectively, and too little on what is in their interest, individually. Furthermore, as regards the trade unions, the Employment Alliance for eastern Germany shows that there is no monolithic monopoly of representation on the employees' side, which corporatist thinkers consider a necessary theoretical requirement if "neo-corporatism" is to work successfully. From the beginning, the eastern Alliance suffered from disunity on the DGB union side. This is very likely to continue. IG Metall has already declared that a employment alliance should not restrict sectoral wage policies. By contrast, Hubertus Schmoldt, chair of the mining, chemical and energy workers' union, IG BCE, has repeatedly stated that a repeal of the conservative labour market and social security reforms makes no sense. In addition, there are currently discussions under way on the relationship and distribution of authority and competencies between the DGB and its member unions, which might weaken the DGB. Closely related to this is a structural problem deriving from the organisational properties of the German collective bargaining system: employers' associations and trade unions know well that collective bargaining is conducted at sectoral and regional level and that the sectoral and regional associations, which work according to democratic rules, thus hold and want to keep a very strong position in the bargaining system and within their peak associations.
  2. The question of reliability, accountability and reasonableness. All three attempts at tripartite decision-making have broken down due to the fact that trade unions quit the arrangements. Several possible explanations spring to mind. Possibly, it is the decision-making and conflict-resolution procedures which are faulty, in which case the procedures should be reviewed and made more efficient and effective. Alternatively, it is the substantive issues negotiated and decided on which are not realisable, yet cause high expectations. Overambitious and unreasonable targets and goals which are unlikely to be met may result in frustrations. In this case, it is the issues which ought to be reviewed. Lastly, it may be that the trade union side is not politically accountable and reliable as partner in tripartite decision-making. In that case, unions should face the facts and act accordingly.

Consensual and tripartite decision-making may under certain circumstances be effective and then, depending on its impact, even be applauded. However, preconditions for a successful employment alliance for Germany are that all parties involved realise and agree on what is possible and required in order to move the German social market economy in the right direction. (Stefan Zagelmeyer, IW Köln)

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