Implications of the new 'red-Green' government for industrial relations

In October 2002, German's new Social Democrat-Green government concluded a coalition agreement which sets out its programme for the next four years. In the areas of industrial relations and employment, the new government will focus on the implementation of a labour market reform plan, a more growth-oriented employment policy and several legislative initiatives promoting employees' rights and gender equality. The response of the trade unions has been mostly positive but the employers, on the whole, are not in favour of the intended measures.

After gaining a parliamentary majority in the general election held in September 2002, the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen) were able to continue with their coalition government, which had been in power since 1998 (DE9811281F). A coalition agreement negotiated between the two parties, outlining the government programme for the next four years, was accepted by the SPD on 19 October and by the Greens on 20 October. In the fields of industrial relations and employment, the core elements of the agreement are:

  • a reform of the labour market in line with the suggestions recently made by the 'Hartz Commission' (see below);
  • a continuation of public budget consolidation, whereby improved growth and the coordination of employment and economic policies at the EU level will gain in relevance; and
  • several legislative initiatives aimed at strengthening employees' rights and promoting equal opportunities for men and women.

In their reactions to the coalition agreement, the employers' associations disagreed with many of the intended measures. Response from the trade unions was more positive - although there is some criticism of the details, the unions welcome the agreement in principle.

Main industrial relations and employment plans

Most of the issues discussed by the Greens and the Social Democrats in their manifesto proposals before the election have been taken up in the coalition agreement (DE0208204F). As a new main focus, however, importance is attached to the implementation of the recommendations of the government-appointed Hartz Commission, which in August 2002 presented a reform proposal aiming at modernising Germany’s labour market and reducing persistent unemployment (DE0209205F). A tripartite body to fight unemployment, as set up by the red-Green government in 1998 in the form of the Alliance for Jobs, Training and Competitiveness (Bündnis für Arbeit, Ausbildung und Wettbewerbsfähigkeit) (DE0202205N), is no longer a core issue.

Labour market

The red-Green government promises to implement all of the Hartz Commission’s suggestions as soon as possible in order to create more employment, reduce the mismatch between unemployed people and the jobs available and increase efficiency within the Federal Employment Service (Bundesanstalt für Arbeit, BA), the public agency for job placement. The person responsible for this reform of the labour market is the new 'super-minister' Wolfgang Clement, former prime minister of North Rhine-Westphalia, who now holds combined responsibility for employment and economic policy.

The central planks of the reform are: combining unemployment assistance and social assistance; creating so-called 'personnel service agencies' (Personal-Service-Agenturen, PSAs) which will employ jobless people and hire them out on a short-term basis; and strengthening the 'promotion and demand principle' in order to create incentives to take up jobs (DE0209205F). Controversial subjects in the discussion at present are whether the combined unemployment assistance and social assistance should remain at the current level or be set at a lower level, and whether the employees of PSAs should be covered by a collective agreement or not.

Industrial relations

In the coalition agreement there is a clear commitment to collective bargaining autonomy (ie the right of the social partners independently to regulate terms and conditions of employment). Furthermore, some legislative measures are planned in order to improve the situation of employees:

  • the government wants to propose again in the parliament a law on 'loyalty to collectively agreed standards' ('Tariftreuegesetz'), whereby the award of public contracts in the areas of construction and local public transport should be restricted to companies which pay collectively agreed wages. Attempts to legislate on this issue failed in the last government period because of opposition in the Bundesrat, the second chamber of parliament which represents the federal states’ governments (DE0208201N and DE0201202F);
  • a reform is planned of the law on 'occupational education' (Berufsbildungsgesetz), based mainly on linking vocational and advanced training, and certifying each segment of education;
  • a law on the protection of employees’ data is to be introduced; and
  • as a result of the implementation of the Hartz Commission’s proposals, legislative measures will have to be created relating to the new PSAs. At the moment it is not clear whether this will substitute for a collective agreement between the social partners.

It is intended to carry on with the tripartite Alliance for Jobs, but the implementation of the Hartz Commission’s proposals - and not the Alliance for Jobs - is now the main tool to fight unemployment.

Employment and budgetary policy

The Minister of Finance, Hans Eichel, supports further budget consolidation and promises to reduce new debts to zero by 2006. However, some proposals in the coalition agreement indicate a correction of this consolidation course: it is planned to strengthen public investment and allow 'automatic stabilisers' (ie accepting public deficits in economic recession in order to stabilise demand). Furthermore, the government appeals to the European Central Bank for a more growth-oriented monetary policy and insists on an active coordination of European growth and employment policy based on the EU’s Broad Economic Policy Guidelines. In the case of the EMU Stability and Growth Pact, the red-Green government argues that the Pact should remain untouched in its present form because there is enough room for flexible interpretations.

The coalition agreement contains few concrete propositions on tax policy but after the election there was an extensive discussion on new taxes and on the reduction of tax privileges, which has not led to a clear result so far.

Lowering non-wage labour costs, which was especially important for the Greens before the election, no longer has priority and has been adjourned sine die because of the current situation of the state budget. By contrast, the financing of a new 'Jump-plus' programme - involving 100,000 jobs and vocational training places for young people - is guaranteed.

Gender policy

In order to raise the labour force participation rate of women above 60%, the government wants to implement EU guidelines on equal opportunities for women and men and is seeking new legislative regulation of gender equality in the private sector similar to a law on equal opportunities for federal civil service employees adopted in the last government period (DE0112206N).

A further central concern of the government’s gender policy is the promotion of 10,000 'full-day' schools and better childcare for young children, which will be explicitly exempt from any budget cuts and supported by legislative measures for children aged under three years.

Moreover, a new 'gender institute' is planned in order to promote gender mainstreaming. Finally, the award of public contracts should be linked to equal opportunities measures in the companies concerned.

Reactions from employers' associations and trade unions

The first reactions from the employers to the coalition agreement were negative, while trade union representatives welcomed the agreement in principle. Nevertheless they criticised parts of the government programme.

Employers' reactions

According to Michael Rogowski, president of the Confederation of German Industries (Bundesverband der Deutschen Industrie, BDI), the coalition agreement expresses a hostile attitude to companies. The agreement’s proposals would lead to higher taxes, more social insurance contributions, and rising debts which would not create more growth or employment.

Dieter Hundt, president of the Confederation of German Employers’ Associations (Bundesvereinigung der Deutschen Arbeitgeberverbände, BDA) predicts that the government programme will accelerate the economic downturn. Massive tax increases and increasing social insurance contributions will strangle growth. Savings through the reduction of unemployment assistance and the Hartz Commission’s proposals for a more flexible labour market, stated Mr Hundt, are not sufficient and will not give employment a new impulse. Before the government announced its programme, Mr Hundt had demanded that social security provision be concentrated into a reduced basic security, and that the labour market be deregulated including lowered protection against dismissal and facilitated short-term employment.

Response from the trade unions

According to Michael Sommer, chair of the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB), the new government is steering a course of 'socially just modernisation'. Despite trade union criticisms of many of the details, the proposals of the Hartz Commission and the intended support for growth are seen as going in the right direction. With regard to the Alliance for Jobs, Mr Sommer sees disillusionment but there are still areas of consensus in the fields of vocational training and gender mainstreaming, which are grounds for hope that the Alliance may continue.

The Metalworkers' Union (Industriegewerkschaft Metall, IG Metall) sees the coalition agreement as an important step towards more employment and social justice. Positive elements are: the change in budget consolidation policy; more public investment; better childcare; the intended gender equality legislation; and the strengthening of collective bargaining autonomy. From IG Metall's viewpoint, it is important to integrate the new PSAs into the system of collective agreements and to maintain the current level of payments in a new combined social and unemployment assistance scheme. IG Metall criticises the planed changes to vocational training because it believes that they would lead to a creeping privatisation and destruction of the German dual system of company vocational training combined with statutory vocational training.

The Unified Service Sector Union (Vereinte Dienstleistungsgewerkschaft, ver.di) welcomes the government's commitment to collective bargaining autonomy and the new central focus on unemployment. Moreover, 'full-day' schools, the changed budget consolidation policy and the planned gender equality legislation are regarded as important elements of the government’s programme. Ver.di, however. criticises some details: combining unemployment and social assistance at a lowered level is seen as the wrong way to fight unemployment.


If the proposals of the Hartz Commission can be implemented, this would have a deep impact on labour market regulation: notably, the introduction of personnel service agencies and combined unemployment and social assistance benefits would affect most unemployed people. At the moment the concrete form in which the proposals will be implemented is not clear, and many controversies remain and will have to be discussed in the future. The legislative measures planned by the red-Green government indicate that it intends to maintain, and strengthen, collective bargaining autonomy. Furthermore, a change can be seen in fiscal policy towards more public investment and a flexible interpretation of consolidation, and this could lead Germany out of the impending situation of economic recession. Concerning gender policy the most important and probably the most difficult point is the enforcement of a new legislative regulation of gender equality in the private sector. (Torsten Niechoj, Institute for Economic and Social Research, WSI)

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