Unions in Benelux and Germany favour close transnational coordination of bargaining policy in EMU

In September 1998, Belgian, Dutch, German and Luxembourg trade unions adopted a joint declaration which states a strong need for close cross-border coordination of collective bargaining under EU Economic and Monetary Union. In order to prevent possible downward competition on wages and working conditions, the unions involved agreed on a set of joint bargaining guidelines. These state that unions should seek bargaining outcomes at least equivalent to "the sum total of the evolution of prices and the increase in labour productivity".

On 4-5 September 1998, trade union leaders from Belgium, Germany, Luxembourg and the Netherlands met in the Dutch town of Doorn to discuss recent trends in collective bargaining and the possible impact of EU Economic and Monetary Union (EMU). The participants represented the major national confederations - FGTB/ABVV and CSC/ACV from Belgium, CNV, FNV and MHP from the Netherlands, DGB and DAG from Germany and CGT-L and LCGB from Luxembourg - as well as major sectoral unions representing metalworking, chemicals, construction and private and public services.

The initiative for closer cooperation between the Benelux and German trade unions came, originally, from the Belgian unions in 1996, when they were confronted with a new national law which stated that collectively agreed pay increases had to be limited to a so-called "wage standard" (BE9809242F). Since this "wage standard" is calculated on the basis of the expected pay trends in Belgium's major trading partners (France, Germany and the Netherlands), the Belgian trade unions have a particular interest in cooperating with unions in neighbouring countries. In June 1997, the Belgian, Dutch and German unions held a first meeting, where they decided to establish a transnational working group which was to organise regularly an intensive exchange of information on current developments in collective bargaining. In addition, an annual summit conference with leading representatives from all major national union organisations was planned. The Doorn summit was the second meeting of this kind.

The Doorn declaration

Summarising the main results of the Doorn summit, the participating trade unions adopted a joint policy statement in which they agree on a broad range of common aims and demands for collective bargaining. According to the "Doorn declaration", the participating unions see a great need for close cross-border coordination of their national bargaining policy in order to prevent possible downward competition on wages and working conditions under the conditions of EMU. Considering the recent results of bargaining in Europe, the unions state that: "The economic growth of recent years has produced too few results for workers in terms of more jobs, the reduction of unemployment and the improvement of purchasing power. In the participating countries - and in Europe as a whole - the rise in labour productivity has been to the unilateral benefit of capital. Employees' share of the national income (the wage quota) has gone down."

The viewpoint taken in the Doorn statement has been supported by recent research from Germany's Institute for Economic and Social Research (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) which finds that in the European Union the average "wage quota" (employees' share of national income) declined from 74.4% in the 1970s down to 69.9% in the 1990s (see table below). The same trend can be observed in almost all European countries with only a few exceptions, such as Luxembourg. According to the WSI study, the significant redistribution from wage earners to profit income can be interpreted as the result of a fundamental shift from a "productivity- to a competition-oriented bargaining" which, since the early 1980s, has mostly led to wage increases notably below the growth of productivity (see "Collective bargaining in metal industry under the conditions of European Monetary Union", Thorsten Schulten, in "The impact of EMU on industrial relations in European Union", Timo Kauppinen (ed), Helsinki (1998)). By concluding very "moderate" wage increases, the report states, collective bargaining has become more and more subordinated to the goal of national competitiveness and profitability. However, since all countries have been following more or less the same strategy, a downward spiral of employees' share in national income has been set in motion.

Adjusted share of labour in national income (wage quota) in % of GDP at factor costs, 1971-97
1971-80 1981-90 1991-7
Belgium 74.5 73.2 71.5
Netherlands 74.2 67.6 65.8
Luxembourg 70.9 72.1 72.7
Germany* 73.7 70.9 67.7
EU 15 74.4 73.1 69.9

*1971-94: West Germany.

Source: European Commission , cf. Schulten 1998.

According to the Doorn declaration, "a continuation of this trend in the macroeconomic distribution of income is unjustifiable." Therefore, "the participating trade union organisations call for a change of trend, to the benefit of workers and their full participation in economic growth in the form of more jobs and improved purchasing power." To reach that goal the declaration calls for a return to a productivity-oriented collective bargaining policy: "The participating trade unions aim to achieve collective bargaining settlements that correspond to the sum total of the evolution of prices and the increase in labour productivity."

Furthermore, the Doorn statement points out that "the trade unions of the four countries intend to examine how they can back up their demands beyond national frontiers when necessary. The trade unions are aware of the importance of responsible wage-setting within a European trade union strategy for more growth and employment. Their bargaining aims are economically justifiable and will promote a positive evolution of employment, particularly in the long term. In order to achieve this, the other economic actors (states, the European Central Bank, the employers) will also have to live up fully to their responsibilities."

The document goes on to call for employment-creation agreements at the sectoral and enterprise levels, including redistribution of work and shorter working hours. Measures to create jobs for underprivileged groups are given high priority, as are steps to make it easier to combine work with family duties. Further training must be available, and the undesirable forms of work "flexibilisation" must be avoided. Governments must base their policies on job creation and a welfare state. In particular, "social benefits must keep pace with wage developments." European tax systems should be harmonised in such a way as to reduce the burden on wage earners and promote employment. Union and employer organisations must be fully involved in socio-economic decision-making.

Comments and reactions

The trade unions in the four countries involved see the Doorn declaration as an important step towards European cooperation on collective bargaining, and hope that their initiative will set an example for other countries in the European Union. In a first comment, the general secretary of the European Trade Union Confederation (ETUC), Emilio Gabaglio, endorsed the idea of multilateral initiatives of this kind between ETUC member organisations, which could help to improve the ETUC's internal discussion and policy development. On 7-8 September 1998, the ETUC itself held a seminar, together with the European Industry Federations, on collective bargaining under EMU which came to the conclusion, that "EMU and the use of the euro make effective coordination of national collective bargaining ... more imperative than ever." Therefore, the European "labour movement also needs to develop strategic alert machinery based on commonly-agreed indicators and forge alliances to promote the European social model in EMU."

The Doorn initiative was also welcomed by the chair of the Danish union confederation, LO, Hans Jensen, who said that against the background of today's European economic integration "it is difficult to reach a bargaining breakthrough in one country, if the neighbours at the same time practise wage restraint." Mr Jensen, therefore, endorsed the idea of coordinated bargaining demands and declared that LO would be ready to join the initiative, if it were invited.

At the moment, however, it is still unclear whether the Doorn initiative should be extended to include to other countries or if other regional initiatives should be established. The DGB secretary responsible for European collective bargaining, Joachim Kreimer-de Fries, for example, made the proposal that the recently established interregional trade union council for southern Baltic Sea (DE9808177N) - which involves trade union representatives from, Denmark, Sweden and Germany - could deal with questions of collective bargaining in a similar manner.

Commentary

Since the 1980s, collective bargaining in Europe has become increasingly subordinated to the goal of economic competitiveness. Under the pressure of growing unemployment, European trade unions have been more and more ready to accept rather moderate bargaining results, notably below the increase in productivity. As a result, labour share of national income has declined almost everywhere in Europe. Since the introduction of the euro will lead to a further increase in international competition, there is a clear danger that the already existing downward competition on wages and working conditions might accelerate.

Against this background, the challenge for the European trade unions is to reconstruct their essential function of "taking wages and working conditions out of competition" at European level. Considering the existing national differences in economic performance as well as in bargaining structures, however, European collective agreements seems to have no realistic perspective in the foreseeable future. Instead, the alternative approach of close cross-border coordination of national bargaining might be much more reasonable (EU9809128F).

In particular, the concept of a productivity-oriented bargaining policy, which is the core of the Doorn initiative of the German and Benelux trade unions, seems to be an approach which will be operational for at least two reasons. On the one hand, a productivity-oriented bargaining policy is, in macroeconomic terms, "distribution- and competition-neutral" policy and, therefore, could help to prevent further downward competition on wages. On the other hand, the concept takes account of the economic and industrial relation differences in Europe and gives the national social partners freedom on how to use the productivity-oriented "wage space" (eg for wage increases or working time reduction).

The Doorn initiative can be seen as a genuine pioneering step towards a Europeanisation of collective bargaining. Now it seems to be the task of the ETUC to develop an even broader concept for a Europe-wide bargaining policy which is able to meet the new challenges for collective bargaining in EMU (Thorsten Schulten, Institute for Economic and Social Research (WSI))

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