The significance of the new red-green government for German industrial relations

In October 1998, the Germany's new "red-green" (Social Democrat/Green) federal government presented its coalition agreement, which determines its political programme for the next four years. In the field of industrial relations, the new government's programme contains various legal and political initiatives for a more active labour market policy, fairer conditions on the labour market and improved employees' rights. The new administration's most important project is the establishment of a new "alliance for jobs" as a permanent tripartite institution at national level. However, since employers' associations and trade unions have rather different views on the new government's policy, the construction of such a national employment pact is still uncertain.

The German general election held on 27 September 1998 saw a substantial drop in the vote for the former ruling government coalition, which was composed of the Christian Democratic Party (Christlich Demokratische Union, CDU), its Bavarian associate party, Christlich Soziale Union, (CSU) and the Free Democratic Party (Freie Demokratische Partei, FDP). After 16 years in power, the Conservative/Liberal government coalition was replaced by a new "red-green coalition" composed of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen), which gained a majority of 21 seats in parliament (Bundestag) (DE9810280N).

Industrial relations aspects of the new government's programme

On 20 October 1998, the Social Democrats and the Greens signed a 50-page coalition agreement, entitled Awakening and renewal - Germany's way into the 21 century (Aufbruch und Erneuerung - Deutschlands Weg ins 21. Jahrhundert) which determines the new government's political programme for the forthcoming four years. As far as industrial relations aspects are concerned, the agreement outlines at least five major fields of action:

  1. the creation of an "alliance for jobs and vocational training";
  2. a more active labour market policy;
  3. initiatives to create fairer conditions on the labour market;
  4. initiatives to strengthen collective bargaining autonomy and to improve employees' rights, by reforming labour law; and
  5. reduction of non-wage labour costs.

Alliance for jobs and vocational training

The reduction of the persistently high level of unemployment has been defined as the top political priority of the new government. As one major instrument in reaching that goal, it believes that a new national "alliance for jobs and vocational training" (Bündnis für Arbeit und Ausbildung) must be established, wherein the new government, together with the trade unions and the employers, would agree concrete measures for the reduction of unemployment and the safeguarding of vocational training places. The first initiative for a national "alliance for jobs" failed under the old Conservative/Liberal government in 1996 (DE9702202F) and the new red-green coalition will now make a second attempt, aiming to establish a new permanent tripartite institution at national level.

The coalition agreement contains a lengthy list of topics on which the new government wishes to reach agreements within the framework of an "alliance for jobs", such as:

  • safeguarding qualified training places for all young people;
  • integrating young unemployed people into the labour market;
  • better employment opportunities for low-skilled workers;
  • more flexible and employment-creating working time arrangements (for example, part-time work, partial retirement, reduction of overtime and better compatibility of family and work life);
  • new regulation of unemployment benefits;
  • modernising vocational and continued training;
  • improving employee participation in productive capital; and
  • more social dialogue at sectoral and regional level, with the aim of improving innovation in the sectors and regions.

To support these possible agreements within the "alliance for jobs", the government has agreed to take the corresponding political and legal action, in particular in the fields of vocational training, employee participation in productive capital and working time policy. In addition to the "alliance for jobs", however, the red-green coalition agreement also states that all the social actors involved have their own specific responsibilities in improving the employment situation. Therefore, the "alliance for jobs" should be based on the principles that:

  • trade unions and employers are responsible for an employment-oriented collective bargaining policy and organisation of work, which fulfils the company's need for flexibility and the employees' wish for "time sovereignty";
  • companies are responsible for improving innovation and investment and increasing the number of training places, in order to guarantee every young person a vocational training place; and
  • the government is responsible for creating the framework conditions for sustainable growth and employment by reforming the tax system, decreasing social security contributions, modernising public services and launching a new "innovation offensive" in training, research and sciences.

Active labour market policy

Under the coalition agreement, the new German government places much more emphasis on active labour market policy than its predecessor. This is particularly true in the field of youth unemployment, where the new government wants to adopt a political action programme immediately, aimed at about 100,000 young unemployed people in order to find them a job or a vocational training place as soon as possible. Priority under this programme should be focused on eastern Germany.

Since unemployment in Germany currently costs about DEM 170 billion per year, the new government wants to transform as much of that money as possible into active labour market policy. Thereby, it promises to improve the Employment Promotion Act (Arbeitsförderungsgesetz) and to promote, in particular, the employment of women and employment in private services.

In contrast to its predecessor, the new administration also strongly supports a more active European employment policy. The government has already announced its intention to use its EU Presidency in the first half of 1999 to come forward with concrete proposals for a European employment pact which should give the EU Employment Guidelines a more binding and verifiable character (DE9811184F).

Fairer conditions on the labour market

According to the coalition agreement, it is a central aim of the new government to fight against illegal employment and "wage dumping". The latter has become a growing problem, in particular in the German construction sector. Therefore, the new government intends to:

  • increase drastically the fines for illegal employment;
  • make user companies responsible when the subcontractors they work with use illegal employment; and
  • improve the Posted Workers Act (DE9702202F) and extend it for an unlimited period (the current Act runs only until August 1999).

In addition, the new government wants to take initiatives against the misuse of marginal part-time workers and "pseudo self-employment" (Scheinselbstständigkeit).

Improvement of employee rights

During the election campaign, one of the major pledges of the Social Democrat and Green parties was to repeal some of the changes in labour law which had been introduced, to the detriment of the employees, by the previous Conservative-Liberal government. The red-green coalition agreement, therefore, lays down the following initiatives:

  • the reintroduction of 100% payment of remuneration in the event of sickness, which was reduced to 80% by the old government in 1996 (DE9709131F);
  • the reintroduction of comprehensive dismissal protection for small companies with five or more employees;
  • the reintroduction of the bad-weather allowance for the construction industry (DE9705211F); and
  • the introduction of equality among the collective bargaining parties regarding the opportunity to organise industrial action.

Furthermore, the new government announces a modernisation of the Works Constitution Act (Betriebsverfassungsgesetz) and a renewal of the procedures to extend collective agreements. Finally, the government wants to safeguard and to develop "qualified co-determination" in Europe through European Works Councils and the European Company Statute.

Reduction of non-wage labour costs

To improve competitiveness and to create new employment, the new government has declared the reduction of statutory non-wage labour costs as one of its major aims. Since social security contributions, in particular, have risen constantly in recent years, the new administration wants to reverse this development and attempt to reduce these contributions from the current 42.3% of gross pay to below 40% by reforming the social security and tax system. As a first step, the new government has announced that it will use the revenue from a new energy tax for a 0.8 percentage point reduction in social security contributions.

Reactions from trade unions and employers' associations

During the election campaign, the trade unions and employers' associations expressed significant differences in their political expectations of a new government (DE9803254F). The publication of the coalition agreement, therefore, led to rather controversial debates and reactions among the labour market parties. While the unions generally welcomed the agreement as a "good basis" for a "change in German politics", the employers heavily criticised the new government's policy programme as a "programme of discouragement for investment and economic growth", which largely worsens the framework conditions for competitiveness and employment.

Trade union reactions

After 16 years of Conservative-Liberal government, the German trade unions greatly appreciate the election victory of the red-green coalition and have expressed their hope that the "change in power" would also lead to a real "change in politics". In a first comment, the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) said that the red-green coalition agreement constituted "significant progress" in the direction of more employment and social justice. DGB welcomes, in particular, the new government's announcement that it will repeal the old government's directives in the fields of sick pay, dismissal protection, bad-weather allowances and equality of bargaining parties in industrial action. DGB also encourages all proposals for a more active labour market policy.

DGB strongly supports the creation of a new "alliance for jobs" as a permanent tripartite institution. On 6 October 1998, the DGB executive board agreed a policy paper on a "new alliance for jobs, vocational training and social justice", which contains a broad catalogue of topics for tripartite talks. According to the this document, a new "social pact" should be based on seven guidelines:

  1. a fair and solidaristic distribution of income and work;
  2. innovative and modern companies in industry and service;
  3. a socially acceptable and employment-creating environmental and energy policy;
  4. a "future-oriented" vocational and continuing training system;
  5. a functioning welfare state and a fair tax system;
  6. a fair distribution of wealth; and
  7. a "social and employment-oriented process of European integration"

According to the president of DGB, Dieter Schulte, new agreements for a better redistribution of work must be at the core of an "alliance for jobs". DGB thus argues for: further individual and collective working time reduction; more part-time work; a stricter limitation of overtime; and a new "pact between generations" (Pakt der Generationen), which should allow employees to retire at the age of 60 without any losses in pension rights.

For the unions, the question of partial or early retirement has become a top priority for any tripartite jobs alliance. Early retirement before the statutory retirement age of 65 years is not currently very attractive to employees, since most of them have to accept a reduction of up to 18% in their pension. Therefore, the president of the IG Metall German metalworkers' union, Klaus Zwickel, has proposed creating a "collective bargaining fund," jointly financed by employers, employees and the state, to guarantee older employees a full pension from the age of 60 when accepting voluntary early retirement.

As far as wages are concerned, the trade unions have made clear that, in line with the principle of collective bargaining autonomy, concrete wage guidelines or wage restraint could not be a topic covered in an "alliance for jobs". On the contrary, after several years of moderate wage increases, many unions are now calling for an "end of modesty" in the 1999 bargaining round (DE9810279F). However, some union leaders have also stated that a tax policy which provides relief for employees might have a damping influence on the unions' pay policy.

Employers' reactions

Employers' associations had sharply criticised the election programmes of the Social Democrat and Green parties. In a comment on the red-green coalition agreement, the Confederation of German Employers' Associations (Bundesvereinigung der deutschen Arbeitgeberverbände, BDA) called the new government's programme a step backward which will worsen Germany's competitiveness and is, therefore, not able to create new employment. BDA criticised, in particular, the planned reintroduction of 100% sick pay and the bad-weather allowance, as well as the strengthening of dismissal protection, which will lead to a significant increase in labour costs. In addition, BDA expressed its strong disagreement with the government's plan for a reform of taxes and social security, which might lead to an increase in companies' financial burdens. Finally, BDA rejected as impracticable and too expensive the trade unions' proposals for a collective bargaining fund to compensate for losses in pensions in the event of early retirement. Instead, the employers propose introducing a company pension scheme for partial retirement, similar to that agreed in the chemicals industry (DE9805265N).

Overall, BDA has stated that German employers will not accept an "alliance for jobs" which is based on the new government's political programme. BDA, however, has also expressed its openness to cooperation with the new government and declared that it will not reject tripartite talks at national level. On 17 November, the president of BDA, Dieter Hundt, presented a rather different concept for an "alliance for jobs and competitiveness," which should focus mainly on three topics:

  1. tax policy;
  2. social security; and
  3. collective bargaining.

According to Mr Hundt's proposal, a jobs alliance should agree on a significant reduction in tax burdens for companies and a comprehensive reform of the welfare state, which would lead to a significant reduction of social security contributions as well as a continuation of an "employment-oriented" moderate pay policy. The BDA president made clear that there will be no jobs alliance if the unions insist on their position of leaving pay policy out of consideration.


The election of the new red-green government will obviously have an impact on the development of German industrial relations. In the short run, the new government will revoke some of the legal initiatives of the old Conservative/Liberal coalition, which were introduced against the resistance of the trade unions in favour of the employers' side. From a trade union point of view, these measures have a high symbolic value, since they seem to demonstrate a real change in German politics.

Even more important for the future of German industrial relations is, however, the question, whether the country's "corporatist actors" will be able to create an "alliance for jobs" as a permanent tripartite institution at national level, as has been established in many other European countries. The preconditions for such a jobs alliance are not very favourable, since employers' associations and trade unions seem to have rather different opinions on almost all relevant political topics and quite unbridgeable differences in views in the crucial field of pay policy. In this situation, the new government has a really difficult task to moderate among the collective bargaining parties. Whether it will be successful might be seen on 7 December 1998, when tripartite talks for a new "alliance for jobs" will start. (Thorsten Schulten, Institute for Economic and Social Research (WSI))

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