Economic downturn worsens climate of spring bargaining round

The economic crisis has challenged Austria’s 2009 spring bargaining process, leading to a standstill in negotiations in several economic sectors. While employers wish to temporarily suspend the standard wage-setting pattern for economic reasons, the trade unions demand decent wage increases even in periods of economic downturn. To force the employers to return to the negotiating table, the trade unions organised a demonstration involving 25,000 participants in May 2009.

With some delay, compared to most other highly industrialised European countries, the global recession has also spread to Austria since the beginning of 2009. According to the country’s most recognised research institutes in economics, Austria’s economic slowdown is expected to fall between minus 2.2% and minus 2.7% in 2009, and the year’s overall inflation rate is estimated to be between 0.6% and 0.9%. The business segment most affected by the current crisis is the exposed industry sector.

Employers urge wage restraints

However, many businesses, along with the Federation of Austrian Industry (Industriellenvereinigung, IV), which is a voluntary employer organisation representing the manufacturing industry, consider this outlook too optimistic. They think a decline of Austria’s gross domestic product (GDP) by three or four percentage points to be realistic. According to IV data, overall production in the country’s manufacturing industry fell by 25 percentage points within three months, while the export volume as well as investments fell by 30 percentage points. The trough will most likely not be reached prior to the autumn of 2009, while unemployment is expected to grow until the spring of 2010, the IV emphasised. Therefore, the manufacturing industry and some representatives of the Austrian Federal Economic Chamber (Wirtschaftskammer Österreich, WKÖ), which obtains a quasi-monopoly in bargaining on behalf of the country’s private sector companies, demanded either the conclusion of zero-increase wage accords in the 2009 spring bargaining round or to postpone any wage settlements to a later date.

Individual IV representatives also called for replacing multi-employer agreements by company-level settlements. The argument is that wage increases at sectoral level would substantively threaten those enterprises that are currently operating at a loss due to the economic downturn. However, these suggestions would signify a breach of Austria’s traditional system of annual sectoral collective bargaining, which starts each year with the autumn negotiation round in the trendsetting metalworking industry (AT0810029I). In 2008, wage increases of 3.8% plus some one-off payments were concluded in metalworking, with the initial goal of setting the tone for the subsequent bargaining rounds of all other sectors of the economy during 2008–2009.

Trade unions demand decent wages

The employer demands for temporarily freezing current wages and decentralising collective bargaining has indignantly been rejected by the trade unions. The latter rather call for decent wage increases, which are deemed significant to the national economy. Pressure on wages would directly stifle the purchasing power, which is –particularly in times of declining exports and investments – the most important pillar of the economy, it is argued. This position has been supported by Alois Guger of the Austrian Institute of Economic Research (Österreichisches Institut für Wirtschaftsforschung, WIFO). Mr Guger warned of the risks of deflation – that is, falling product prices – resulting from wage restraints, which would by far outweigh the advantages for the exposed industry sector.

Trade union action

After a series of unsuccessful negotiation rounds in several sectors of the economy during April and May 2009, the trade unions have blamed the employers for apparently having initiated a concerted strategy of obstructing wage negotiations in the spring bargaining round. As of mid May, talks in about 10 sectors employing some 400,000 workers were in deadlock, among which the most important industries were electrics and electronics, textiles, road haulage, paper, chemicals, information technologies (IT) and graphic design. Therefore, five of the strongest trade unions organised a demonstration on 13 May, involving some 25,000 participants. The action aimed to force the employer side to return to the negotiating table of the ongoing spring bargaining round.

Commentary

The current economic downturn has seriously challenged Austria’s system of annual collective bargaining, primarily based on the trendsetting role of the metalworking sector. This is due to the fact that, when the wage accounts of the metalworking industry were agreed in the autumn of 2008, the actual extent of the impending recession was not foreseeable. While the trade unions have insisted on largely following the metalworking wage agreements in the subsequent 2008–2009 bargaining rounds for reasons of consistency, the employer side wishes to suspend the principle of a trendsetting pattern in bargaining during the time of crisis. Meanwhile, a settlement finally concluded on 5 June 2009 for the electrical and electronics sector may show the direction of how to resolve the conflict for other economic sectors: the agreement provides for wage increases of 2.2% and of 1.4% for those companies that have suffered reductions in turnover of at least 15% during the first quarter of 2009.

Georg Adam, Department of Industrial Sociology, University of Vienna

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