2003 Annual Review for Germany

This record reviews 2003's main developments in industrial relations in Germany.

Political developments

The current German federal government is a 'red-green' coalition of the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and the Alliance 90/The Greens (Bündnis 90/Die Grünen), which was re-elected in September 2002. In 2003, there were four major regional elections at the level of the federal states (Länder), which brought mixed results. In the city state of Bremen, the coalition government of the SPD and the Christian Democratic Party (Christlich Demokratische Union, CDU) defended its majority, as did the conservative Christian Social Union (Christlich Soziale Union, CSU) in Bavaria. In Hessia, the ruling coalition government of the CDU and the Free Democratic Party (Freie Demokratische Partei, FDP) was replaced by a CDU-only government, while the SPD government in Lower Saxony was voted out of office and replaced by a CDU/FDP coalition. As a result of these elections, the federal opposition parties, CDU/CSU and FDP, successfully defended their majority in the Bundesrat, the second chamber of parliament. Because many legislative initiatives in the field of industrial relations and employment require a majority in both chambers of parliament, the red-green federal government is forced to find political compromises with the conservative and liberal opposition parties.

Collective bargaining

At the end of 2003, 59,636 valid collective agreements were officially registered at the Federal Ministry of Economics and Labour (Bundesministerium für Wirtschaft und Arbeit, BMWA) (the 2002 figure was 57,329). Of these, 33,159 were 'association agreements' (Verbandstarifverträge), ie collective agreements concluded between trade unions and employers' associations, and 26,477 were company agreements (Firmentarifverträge), ie collective 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 (DE0401106F). According to figures from the Institute for Employment Research (Institut für Arbeitsmarkt und Berufsforschung, IAB) establishment panel, in 2002 only 44% of west German and 20% 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 43% in east Germany. A relatively large number of companies with a company agreement or with no collective agreement, however, use sectoral agreements as a point of reference for determining pay and working conditions.

In 2003, debate on the future of the collective bargaining system became a central issue in German politics (DE0312202F). Eventually, in December 2003, the mediation committee of the two chambers of parliament adopted a joint declaration which asks the bargaining parties to agree to more 'opening clauses' within sectoral collective agreements (such clauses allow companies to diverge from sectoral collectively agreed standards under certain conditions).

Pay

In 2003, trade unions affiliated to the Confederation of German Trade Unions ( Deutscher Gewerkschaftsbund , DGB) concluded new collective pay agreements for some 8.9 million employees, or about 44% of all employees covered by a collective agreement. Another 9 million employees received pay increases in 2003 that had already been agreed in 2002.

According to the Institute for Economic and Social Research ( Wirtschafts- und Sozialwissenschaftliches Institut , WSI) collective agreement archive, in 2003 the average annual increase in collectively agreed pay was 2.5%, although sectoral increases varied between 3.0% and 2.1% - see table 1 below.

According to the Federal Statistical Office ( Statistisches Bundesamt ), gross wages and salaries per employee rose by only 1.2% in 2003, compared with a 1.1% increase in consumer prices. This meant that German employees maintained their level of real pay. When collectively agreed and actual pay increases are compared, there was again a significant 'negative wage drift' of more than 50% during 2003.

Table 1. Annual increases in collectively agreed pay, by sector, 2000-3*
Sector 2003 2002 2001 2000
Public services 3.0% 2.1% 1.8% 1.9%
Construction 3.0% 1.8% 1.6% 1.6%
Food industry 2.7% 2.6% 2.7% 2.8%
Trade and transport 2.6% 2.4% 1.7% 2.3%
Raw material and production industries 2.5% 3.2% 1.8% 2.5%
Horticulture, agriculture, forestry 2.5% 2.3% 1.8% 2.3%
Investment goods industry 2.4% 3.2% 1.8% 2.6%
Consumption goods industry 2.3% 2.8% 2.4% 2.5%
Commerce 2.2% 2.7% 2.8% 3.0%
Energy, water, mining 2.2% 2.4% 1.3% 1.9%
Private services 2.2% 2.4% 2.1% 2.3%
Banking, insurance 2.1% 2.4% 3.2% 2.0%
All sectors 2.5% 2.7% 2.1% 2.4%

* Increases against the previous year.

Source: WSI Collective Agreement Archive 2004.

Working time

Collectively agreed average working time remained almost unchanged at 37.7 hours per week in 2003. There is still a significant difference between working time in western Germany and in eastern Germany - see table 2 below.

Table 2. Collectively agreed working time, 2003
. Germany Eastern Germany Western Germany
Average weekly working hours 37.7 39.0 37.4
% of employees working: . . .
35 hours 19.1 1.6 22.6
36-37 hours 10.2 5.4 10.9
37.5-38.5 hours 45.8 31.6 48.6
39-40 hours and over 24.6 61.0 17.5
Average annual leave (days) 29.1 28.3 29.2
Average annual working hours 1,656.3 1,721.9 1,643.5

Source: WSI Collective Agreement Archive 2004.

Although collectively agreed working time remained almost unchanged in 2003, there was a controversial political debate on existing working time arrangements ( DE0306109F ). While the unions demanded more working time reductions as an important measure to reduce unemployment, many employers' associations demanded not only more flexibility but also an extension of working time ( DE0312103F ). While the German Metalworkers’ Union ( Industriegewerkschaft Metall , IG Metall) succeeded in concluding a new collective agreement on the staged introduction of a 35-hour working week in the eastern German steel industry ( DE0307201N ), it suffered a defeat on this issue in eastern German metalworking ( DE0307204F ) (see below under 'Industrial action' ).

Job security

In many sectors, existing collectively agreed provisions on job security were extended. However, no new innovative agreements on this issue were concluded during the 2003 bargaining round.

Equal opportunities and diversity issues

There were no initiatives on equal opportunities or on reducing the gender pay gap in the 2003 collective bargaining round.

Training and skills development

New collective agreements on further training were signed in chemicals ( DE0307205F ). They provide a framework for voluntary works agreements on further training and recommend the systematic planning of a wide range of training activities at company level, including special initiatives for different groups of employees, such as older employees, shiftworkers or parents.

Other issues

Following new legislation on temporary agency work, which was introduced in 2002, trade unions have concluded several collective agreements with employers' associations to cover the more than 300,000 employees of such agencies ( DE0308203F ).

Legislative developments

On 19 December, parliament passed a package of labour market laws, including a considerable change to the statutory protection against dismissal and a restructuring of the unemployment benefit system (DE0401205F).

With effect from 1 January 2004, statutory protection against dismissal- a system of restrictions on the lawfulness of termination of employment by the employer, laying down for example the valid grounds for dismissal (DE0304204F and DE0306108F) - applies only to employees who are employed in companies or enterprises that employ more than 10 employees on a regular basis (apprentices are not counted and part-time employees are only counted proportionally). Previously, the statutory protection against dismissal covered employees in all companies with more than five employees. Employees in companies with more than five but not more than 10 employees will keep their statutory protection if employed before 1 January 2004.

With effect from 1 January 2004, various changes concerning unemployment benefit have come into force, as follows.

  • To be entitled to unemployment benefit, all unemployed people are required to have paid unemployment insurance for a minimum of 12 months within the last two years prior to unemployment.
  • The eligibilty periods for unemployment benefit are reduced. The maximum eligibility period for unemployed people is now 12 months for those under the age of 55. For those over the age of 55, the maximum eligibility period is 18 months.
  • The current unemployment benefit will be renamed 'unemployment benefit I' (Arbeitslosengeld I) as opposed to a new 'unemployment benefit II' (Arbeitslosengeld II) which results from the merger of the current unemployment assistance and social assistance allowances. This merger will come into force on 1 January 2005. All those currently entitled to unemployment assistance will then become recipients of the new unemployment benefit II, as will all recipients of social assistance who are considered fit to work. Whereas current unemployment assistance amounts to 53% of recent net income or, if the recipient has a child, to 57%, the new unemployment benefit II will be fixed at EUR 345 a month for western Germany and EUR 331 for eastern Germany. To this will be added payments for housing and heating. Children in the household of the recipient and partners in need of financial assistance will receive additional payments.

The organisation and role of the social partners

In August, the delegates at the 20th national IG Metall congress elected Jürgen Peters as their new chair and Berthold Huber as vice-chair (DE0309202N). The election of the new leadership ended an internal struggle over who should succeed the outgoing chair, Klaus Zwickel.

The Alliance for Jobs (Bündnis für Arbeit), which was established as a permanent tripartite arrangement at the national level in December 1998, discontinued its work in February 2003 (DE0302104N). The Alliance ended its work after the unions withdrew their support in a conflict with the employers, which had proposed a six-point plan including moderate wage demands on the part of the unions as well as the extension of opening clauses in collective agreements.

Industrial action

Strikes and lock-outs have to be reported to the Federal Employment Agency (Bundesagentur für Arbeit, BA - formerly the Federal Employment Service), which publishes an annual overview.

The latest statistics available are those for 2002. In 2002, 938 establishments were affected by strikes involving a total number of 428,303 employees. This led to the loss of 310,149 working days. Only about 1,600 employees, however, were involved in strikes of more than seven days. No strike lasted longer than 24 days and no lock-outs were reported.

In 2003, the most prominent dispute took place in the steel and metalworking industries in eastern Germany, over the introduction of the 35-hour week. On 7 June, after four days of strike action, a 35-hour week deal was reached in the eastern German steel industry (DE0307201N). On 28 June, however, IG Metall finally called off a four-week strike in eastern German metalworking after negotiations with the employers' associations had finally broken down without any agreement being reached (DE0307204F). IG Metall last lost a major strike in the mid-1950s.

The lengthy bargaining round in retail, which finally ended with the last regional settlement reached in December 2003 (DE0401201N), was accompanied by a considerable number of short local and regional strikes in various bargaining areas.

Employee participation

There were no legislative initiatives in the field of employee information and consultation during 2003.

Implementation of the EU Directive (2002/14/EC) on national information and consultation rights (EU0204207F) was not an issue, as its provisions are thought to be covered by the existing German system of co-determination. Legislative initiatives to implement the European Company Statute and its accompanying employee involvement Directive (2001/86/EC) (EU0206202F) are under review but had not resulted in any draft bills by the end of the year.

In terms of new European Works Councils (EWCs), the year's most high-profile agreement was concluded on 23 July at the German mail and logistics multinational, Deutsche Post AG (DE0309204F). The deal, signed by management and a special negotiating body of employee representatives from 17 countries, creates a Deutsche Post World Net Forum, composed of an employee-side European Works Council Forum with 50 members and a 25-member European Management Forum.

Stress at work

Issues of quality of work in general and of stress and safety at work in particular are being dealt with by the Initiative for the Improvement of the Quality of Work (Initiative Neue Qualität der Arbeit, INQA). INQA is a broad platform (founded in 2001) which brings together the federal state, state-level governments, the social security administration, several companies and the social partners in an attempt to contribute to debate on the future of work. While there has not been major new legislation within this field recently, through this initiative major stakeholders seek to develop and disseminate examples of best practices and thus intend to contribute to the modernisation of work.

Similar initiatives for the improvement of the quality of work have been pursued by IG Metall for some time. In the spring of 2003, the union decided to launch a campaign called 'good work' (Gute Arbeit), which particularly aims at reducing stress at work. By way of limiting stress at work the union also seeks to improve the health and employment prospects of older workers and thus intends to adjust the workplace to the process of the ageing of the workforce. IG Metall also hopes to gain more powers to reduce stress at work through a collective agreement (Entgeltrahmentarifvertrag) on a new pay framework for the metalworking industry, which was concluded in June 2003 with the Gesamtmetall employers' association.

Undeclared work

There are no reliable figures available on the extent of undeclared work. According to a statement issued by the federal government in March 2003, it is not even possible to make serious estimates because of the very nature of undeclared work. The government, however, regards the extent of undeclared work as alarming and points in particular to the loss of tax income for the state. It has therefore prepared a draft bill to introduce tighter controls and more severe sanctions.

At a parliamentary hearing in 2001, DGB stated that undeclared work was a major problem, in particular in the construction industry, and that it considered tighter controls to be the most effective means to tackle it.

The Confederation of German Employers' Associations (Bundesvereinigung der deutschen Arbeitgeberverbände, BDA) has also stated that the extent of undeclared work is growing, but does not believe tighter controls and more severe sanctions would help. It regards high taxes and social security contributions, together with existing labour market regulations, to be the main cause for the growth of undeclared work.

New forms of work

With the continuing reform of the German labour market following the recommendations of the Hartz Commission (DE0211205F; and DE0209205F), new regulations have been introduced in the field of temporary agency work and employment in the 'low-wage sector'. Seeking to increase employment and to enhance flexibility in the low-wage sector, a new law has introduced so-called 'Minijobs' (DE0302105F). Under this scheme, the government has raised the monthly pay threshold below which workers do not have to pay social security contributions from EUR 325 to EUR 400 per month, as well as cutting contributions on pay between EUR 400 and EUR 800. According to information provided by the Federal Employment Agency, the number of such jobs increased by 1.7 million in 2003.

In a move to increase companies' flexibility, in November 2003 several firms in the metalworking industry and IG Metall negotiated a new type of collective agreement that allows for the temporary exchange of employees among companies (DE0312201N).

Other relevant developments

In March 2003, parliament adopted legislation on the extension of shop opening hours on Saturdays. The new law allows shops to open until 20.00 on Saturdays (previously 16.00) (DE0303203F). Whereas the two major employers' associations in retail, the Federal Association of Medium and Large-scale Retail Enterprises (Bundesarbeitsgemeinschaft der Mittel- und Großbetriebe des Einzelhandels, BAG) and the German Retail Federation (Hauptverband des Deutschen Einzelhandels, HDE), welcomed the new law, the United Service Union (Vereinte Dienstleisungsgewerkschaft, ver.di) opposed any extension of shop opening hours, which it sees as having a damaging effect on the working conditions of retail employees.

Outlook

As far as collective bargaining is concerned, the beginning of the 2004 bargaining round in the metalworking industry (DE0403203F) signals that the debate between employers' associations and trade unions on the extent of further flexibilisation will go on. The focus is likely to be on working time flexibilisation, ie longer working hours without wage compensation. It cannot be excluded that the debate on decentralisation of collective bargaining which came to a preliminary end in December 2003 will then restart.

Apart from collective bargaining, the development of the labour market is likely to remain on the political agenda in 2004. It remains to be seen how the new legislation to restructure the unemployment benefit system will be implemented.

The restructuring of the current tax system is likely to be another major issue in 2004. In conjunction with this, further cuts in the social benefit system cannot not be excluded. (Martin Behrens, Heiner Dribbusch and Thorsten Schulten, Institute for Economic and Social Research, WSI)

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