2002 Annual Review for Germany

This record reviews 2002's main developments in industrial relations in Germany.

Political developments

At the general election held in September 2002, the 'red-green' federal coalition government of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/the Greens (Bündnis 90/Die Grünen) successfully, if narrowly, defended its majority in the first chamber of parliament, the Bundestag, and remained in office (DE0211205F).

The majority of the governments of the federal states (Länder) are ruled by the major opposition parties – the Christian Democratic Party (Christlich Demokratische Partei, CDU) and the Free Democratic Party (Freie Demokratische Partei, FDP) - which means that these parties have a majority in the second chamber of parliament, the Bundesrat, which represents the federal states' governments. Since many legislative initiatives need a majority in both chambers of parliament, the red-Green federal government is currently forced to find political compromises with the conservative and liberal opposition parties. This includes many legislative plans in the field of industrial relations and employment.

Collective bargaining

At the end of 2002, 57,329 valid collective agreements were officially registered at the Ministry of Economics and Labour, of which 32,787 were 'association agreements' concluded between trade unions and employers' associations and 24,542 were company agreements concluded between trade unions and individual employers.

In recent years, the number of companies and employees covered by a collective agreement has declined steadily (DE0201299F). According to figures from the Institute for Employment Research (Institut for Arbeitsmarkt und Berufsforschung, IAB) establishment panel, in 2001 only 45% of west German and 22% of east German establishments were covered by a sectoral collective agreement. The proportion of employees covered by a sectoral agreement was 63% in west Germany and 44% in east Germany. A relatively large number of companies with no collective agreement, however, use existing sectoral agreements as a point of reference for determining pay and working conditions.

Pay

In 2002, trade unions affiliated to the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) concluded new collective pay agreements for some 16.7 million employees, or about 80% of all employees covered by a collective agreement.

According to the Institute for Economics and Social Science (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) collective agreement archive, in 2002 the average annual increase in collectively agreed pay was 2.7%, although sectoral increases varied between 3.2% and 1.8% - see table 1 below. In most sectors, collectively agreed pay increases were somewhat higher in 2002 than in the previous two years, when the average increase was 2.1% in 2001 and 2.4% in 2000.

According to the Federal Statistical Office (Statistisches Bundesamt, Destais), gross wages and salaries per employee rose by 1.7% in 2002, compared with a 1.3% increase in consumer prices. This meant that German employees experienced a small increase, of 0.4%, in real pay. However, net wages and salaries grew only by about 1.0%, mainly due to an increase in social security contributions. When collectively agreed and actual pay increases are compared, Germany showed a significant 'negative wage drift' during 2002.

Table 1. Annual increases in collectively agreed pay, by sector, 2000-2*
Sector 2002 2001 2000
Investment goods industry 3.2% 1.8% 2.6%
Raw material and production industries 3.2% 1.8% 2.5%
Consumption goods industry 2.8% 2.4% 2.5%
Commerce 2.7% 2.8% 3.0%
Food industry 2.6% 2.7% 2.8%
Banking, insurance 2.4% 3.2% 2.0%
Energy, water, mining 2.4% 1.3% 1.9%
Private services 2.4% 2.1% 2.3%
Trade and transport 2.4% 1.7% 2.3%
Horticulture, agriculture, forestry 2.3% 1.8% 2.3%
Public services 2.1% 1.8% 1.9%
Construction 1.8% 1.6% 1.6%
All sectors 2.7% 2.1% 2.4%

* Increases against the previous year;

Source: WSI Collective Agreement Archive 2003

Performance-related variable pay

The issue of performance-related pay became increasingly important during the 2002 collective bargaining round. Germany's first major sectoral 'agreement on performance-related variable pay' was signed in banking. According to this agreement, companies can use up to 4% of collectively agreed annual basic pay for distribution as variable pay related to individual and/or company performance (DE0301202N). The introduction of performance-related variable pay must be regulated on the basis of a works agreement concluded by management and works council. In addition, some sectoral agreements, eg in chemicals or banking, introduced a new performance-related pay component into collectively agreed annual bonus schemes.

Modernisation of pay framework

After several years of negotiations, the collective bargaining parties in metalworking agreed a major modernisation of their pay framework agreement (DE0205206F). The introduction of a new pay framework agreement (Entgeltrahmen-Tarifvertrag, ERA) will lead to the abolition of the traditional distinction between blue- and white-collar workers in metalworking. Companies must introduce the new grading system by the end of 2007. The adjustment costs will be covered by the annual pay increases.

Working time

Although some unions demanded further working time reductions during the 2002 collective bargaining round, due to employers’ resistance there were almost no changes in weekly or annual working time.

In 2002, collectively agreed average working time was 37.7 hours per week. There was, however still a significant difference between working time in west Germany (37.4 hours per week) and in east Germany (39.0 hours per week). Nearly 35% of west German employees but only 6% of their eastern colleagues had an agreed week of 37 hours or less – for details see table 2 below. Average annual working time was 1,642.6 hours in west Germany and 1,722.7 hours in east Germany.

Table 2. Collectively agreed working time, 2002
. Germany (total) West Germany East Germany
Average weekly working hours 37.7 37.4 39.0
% of employees working: . . .
35 hours 18.6 22.3 0.3
36-37 hours 10.5. 11.4 5.4
37.5-38.5 hours 45.6 47.8 31.6
39-40 hours and over 24.8 17.6 62.7
Average annual leave (days) 29.1 29.2 28.4
Average annual working hours 1,656.0 1,642.6 1,722.7

Source: WSI Collective Agreement Archive 2003

Job security

In many sectors, existing collectively agreed provisions on job security were extended. However, no new innovative agreements on job security were concluded during the 2002 bargaining round.

Equal opportunities and diversity issues

There were no initiatives on equal opportunities or on reducing the gender pay gap in the 2002 collective bargaining round.

Legislative developments

Prior to the elections to the federal parliament in September 2002, the government proposed a number of legislative initiatives. However, many of them failed to gain the support of the Bundesrat. In July, the Bundesrat rejected the government’s bill for a 'law on collectively agreed pay in public procurement' (Gesetz zur tariflichen Entlohnung bei öffentlichen Aufträgen) (DE0208201N), which was intended to apply in the construction industry and in local public transport. The bill provided that public contracts should be awarded only to those companies which declare that they pay wages in line with the collective agreements which are applicable at local level. While state-level laws on public procurement exist in several states, some of them governed by a CDU-led conservative government, the bill was rejected at the federal level (DE0201202F).

A comprehensive set of changes in the legal framework resulted from the work of the so-called Hartz Commission (Kommission für moderne Dienstleistungen am Arbeitsmarkt), led by Peter Hartz, head of the personnel executive committee at Volkswagen. The commission was appointed by the German government to make proposals for a comprehensive solution to the country’s persistent problem of high levels of unemployment (DE0209205F). Once the commission’s final report was presented to the public in August 2002, the government defined 15 different objectives to implement the commission's strategy. These objectives targeted three different levels of action:

  • the creation of new jobs;
  • bringing together unemployed people and available jobs; and
  • creating service-oriented and efficient structures in the Federal Employment Service (Bundesanstalt für Arbeit, BA)

Some of the commission’s major proposals were transferred into law shortly after the red-Green coalition government took office again. As part of the 'First and second law on modern services on the labour market' (Erstes und zweites Gesetz für moderne Dienstleistungen am Arbeitsmarkt), the BA was commissioned to create de facto temporary employment agencies known as personnel service agencies (Personal Service Agenturen, PSAs) (DE0212203N). In addition, new provisions for furthering so-called 'mini-jobs' seek to create additional employment in the 'low-wage sector' and thus restrict incentives to work on the basis of undeclared wages (DE0302105F). Other changes, such as more closely integrating the systems of unemployment insurance and the system of supplementary welfare benefits (Sozialhilfe) to create so-called 'job centres' were prepared by the law, but still need to be finalised by way of further changes in the legal framework.

Several developments occurred in the field of labour migration. On 1 January 2002, a new law came into force, offering limited employment permits to domestic staff from several central and eastern European countries (DE0201226N). Later in the year, however, a major government major bill in the field of labour migration (Zuwanderungsgesetz) (DE0210204F) was successfully challenged in the Federal Constitutional Court (Bundesverfassungsgericht).

The organisation and role of the social partners

In May 2002, Michael Sommer, the former vice-president of the Unified Service Sector Union (Vereinte Dienstleistungsgewerkschaft, ver.di), was elected as the new chair of the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) to replace Dieter Schulte, who retired after eight years in office (DE0206201N). With most of DGB’s eight affiliated unions continuing to lose members, the debate intensified within the ranks of organised labour on how to deal with social change and membership loss. Most prominently, the IG Metall metalworkers’ union initiated such a debate by suggesting a 'manifesto for the future' (DE0206205F), which received much public attention.

Employers’ associations share some of the unions' problems of membership decline and in particular Gesamtmetall, the employers’ association for the metalworking industry, has been struggling with a drop in members since the 1970s. In reaction to some member companies’ dissatisfaction with the results of collective bargaining, some employers' associations are starting to offer a so-called 'OT membership', under which companies are not covered by the industry-wide collective agreements concluded by the associations but still receive a full range of other membership services (DE0212202F).

The Alliance for Jobs (Bündnis für Arbeit), which was established as a permanent tripartite arrangement at national level in December 1998, continued its work with a top-level meeting in late January 2002 (DE0202205N). The meeting, however, was overshadowed by conflicting views between trade unions and employers on pay policy and did not produce any results in this area. No further top-level meetings were held during 2002, and the government was considering revitalising the Alliance at the end of the year (DE0212205F).

Industrial action

The 2002 collective bargaining round was accompanied by a relatively high level of industrial action. Apart from several warning strikes in various sectors, there were three major strikes - in metalworking (DE0205206F), construction (DE0206204F) and banking (DE0210203F).

In May 2002, the IG Metall metalworkers’ union organised a strike in the bargaining district of Baden-Württemberg and Berlin/Brandenburg. A strike ballot showed overwhelming support for industrial action from around 90% of IG Metall members. During 10 days of strikes, nearly 200,000 employees in more than 100 establishments participated in industrial action in Baden-Württemberg alone.

In June 2002, after the failure of negotiations on a new pay agreement in construction, the Building, Agricultural and Environmental Union (IG Bauen-Agrar-Umwelt, IG BAU) called a strike ballot of its members, which resulted in 98.63% support for a strike. The following seven days of strikes comprised the first nationwide action in the construction industry in Germany's post-war history. On the seventh day of the action, there were 32,600 workers on strike at 2,837 construction sites.

According to ver.di, more than 70,000 employees participated in a strike in banking, where negotiations on new collective agreements were rather controversial and took more than half a year.

Employee participation

Between March and May 2002, works council elections took place in German establishments, the first to be held under the terms of the new Works Constitution Act (Betriebsverfassungsgesetz, BetrVG) which was passed in 2001 (DE0107234F). The reform of the BetrVG, which had remained almost unchanged for 30 years, included new and streamlined election procedures and a 'gender equality quota' which was intended to promote women’s representation in works councils. In particular, the unions had high hopes that the new law would help them to motivate employees to elect works councils in companies where there had previously been no such employee representation (DE0204205F).

So far, these hopes have not been disappointed. A first preliminary analysis of the 2002 works council elections - mostly drawing on records from the metalworking industry - found that the number of works councillors increased by 11% compared with the last election in 1998, thus bringing an additional 5,500 employee representatives to office (DE0212204F). While the proportion of works councillors who are members of a trade union declined slightly, the new law seems to have boosted the number of elected works councillors who are released from work to perform their duties. Furthermore, mostly as the result of the gender equality quota, the share of female works council members increased by 5%.

In July 2002, management and employee representatives at DaimlerChrysler, the German/US motor manufacturing multinational, agreed to establish a World Employee Committee as a formal representative body for employees and trade unions across the company’s global operations (DE0209204N). The agreement aims to improve the exchange of information between employee representatives in different countries, and between employee representatives and management. A similar representative body already exists at Volkswagen (DE9806271N).

Telework

While there were no major legislative initiatives or collective agreements concerning telework in 2002, there seems to be a general consensus that more attention needs to be devoted to this subject. Shortly after the EU-level social partners signed an agreement on telework in July 2002 (EU0207204F) - which is to be implemented by the national social partners in the Member States (by July 2005) - Michael Sommer, the chair of DGB, and Dieter Hundt, the president of the Confederation of German Employers’ Associations (Bundesvereinigung der deutschen Arbeitgeberverbände, BDA), issued a joint declaration which welcomes the European agreement and invites collective bargaining partners and company-level parties to conclude new regulations on this subject. While a first collective agreement regulating telework was concluded as early as 1996, covering the employees of the Deutsche Telekom (DE9810181N), this was not followed by significant numbers of new agreements on this subject. In 2002, new provisions on telework were, however, included in the agreement covering the railway industry. Furthermore, according to an analysis by the Hans Böckler Foundation, there are a number of works agreements between works council and management regulating this type of work.

Vocational training

There was no specific response in 2002 by the German social partners to the 'joint framework of actions for the lifelong development of competencies and qualifications ' agreed by the EU-level social partners in March 2002 (EU0204210F). However, collectively agreed provisions aimed at encouraging vocational training exist in agreements which, according to a recent survey by WSI, cover industries with a total of more than 10 million employees. Thus, even before the EU-level framework of actions was agreed, the subject of training and education played an important role in collective bargaining. Provisions relate to aspects such as the creation of new vocational training places, apprenticeship allowances and transfer into regular employment after graduation from the training programme.

During 2002, major concerns, particularly put forward by the trade unions, related to the declining number of vocational training places which are offered by employers (DE0209203F). Compared with the previous year, the number of such training places declined by 7.3% to 557,425 in 2002. While the Hartz commission (see above under 'Legislative developments') suggested creating more vocational training places within firms through financing via a so-called 'training time voucher' (AusbildungsZeit-Wertpapier, AZWP), this proposal has not been acted upon so far. As part of the coalition agreement which was concluded in October 2002 by the new red-Green government, and which sets out its programme for the next four years (DE0211205F), a reform of the Vocational Training Act (Berufsbildungsgesetz) is planned. The reform mainly intends to build closer links between vocational and advanced training, as well as to certify each segment of education.

New forms of work

With the advent of the new laws following the recommendation of the Hartz commission (see above under 'Legislative developments'), new regulations on temporary agency work have been introduced which will cover the employees of private agencies as well as the newly-created public PSAs. Under the new legislation, which will replace the provisions of the former Act on Hiring Out Workers (Arbeitnehmerüberlassungsgesetz, AÜG), temporary agency workers must be paid the same wages as 'permanent' employees. Deviations from equal pay are possible only through the provisions of collective agreements (DE0212203N). At present, the remuneration of workers hired out by commercial temporary work agencies in Germany is on average 30% below the level paid in the user company. At the end of 2001, some 341,000 people were employed at one of the country’s 3,645 temporary work agencies, amounting to 0.9% of all employees.

The Act on Part-time Work and Fixed-term Employment Relationships (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge), which came into force on 1 January 2001, (DE0011293F), is proving to be fairly effective in encouraging part-time work. According to a recent study by IAB, published in November 2002, the share of part-time work in total employment has increased continuously, reaching 25.6% in 2001. By the autumn of 2001, 85,000 workers had taken advantage of the new law by applying for a reduction in their weekly working time, and 80% of these applications were filed by women. Only 3.5% of these applications in west Germany, and 1.4% in the east, were not approved by the employer. According to the same survey, approximately 50% of cases where employees shifted to part-time work had a positive impact on the level of employment in the company concerned, either by leading to additional recruitment of employees, or by avoiding dismissals.

Outlook

The German economy came close to a recession in 2002, with a GDP growth rate of only 0.2%. For 2003, most economic forecasts expect moderate growth only, of somewhat more than 1%. Against this background, it is rather likely that German unemployment figures will remain high – the current level is more than 4 million.

Mass unemployment will therefore continue to be the issue which will overshadow all major debates in German industrial relations. The red-Green federal government had declared that it wants to re-establish the Alliance for Jobs as a national tripartite forum, although it has shown only limited results in the past and was almost inactive in 2002 (DE0212205F). Employers and trade unions, however, have not only rather different opinions on the reasons for Germany’s economic malaise, they also often devise rather conflicting proposals for economic recovery. An obvious example of the latter is a dispute on the meaning of pay policy and a debate on the future structures of the German collective bargaining system. Both will continue to be a major source of conflict, although there will be no large-scale collective bargaining round in 2003, since many major sectoral agreements signed in 2002 have a duration of more than one year.

Apart from collective bargaining, the reform of labour market policy and the introduction and extension of more precarious forms of employment, as well as its social regulation, will be major topics in German industrial relations in 2003. (Martin Behrens and Thorsten Schulten, Institute for Economic and Social Research, WSI)

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