Social dialogue under pressure

Luxembourg Prime Minister Jean-Claude Juncker is encouraging unions and employers to get together again with the government for talks, after the failure of the 2010 tripartite spring negotiations. This failure to achieve consensus led to tensions within the government and huge demonstrations. The automatic indexation of salaries was the most contentious issue, and led to bipartite agreements with unions and employers which have, in turn, created further tensions.

Background

Prime Minister Jean-Claude Juncker said in an interview (in French) with newspaper La Voix, published by the Luxembourg government, that Luxembourg politics and social dialogue have been the source of unusual tension in 2010. This has been evident even within the coalition government as when, for example, the Minister of Labour officially disagreed with reforms proposed by the Minister of Finance. The failure of tripartite coordination committee talks were followed by huge national demonstrations in September 2010 and two complaints (in French) were lodged with the European Commission by worker representatives.

In spite of this, however, the Prime Minister said that, from a political standpoint, the compromises found on both sides were a satisfactory outcome. Although stakeholders did not embrace the traditional framework of discussions, they finally managed to overcome some of the barriers they faced in the spring talks.

Agreement on the indexation of salaries for 2011

Even though there were disagreements on several social issues, the automatic indexation of salaries was the most divisive. A bipartite agreement on this was reached on 29 September between the government and the most representative national trade unions:

  • the Luxembourg Confederation of Independent Trade Unions (OGB-L);
  • the Luxembourg Christian Trade Union Confederation (LCGB);
  • the General Confederation of Civil Servants (CGFP).

This agreement meant the government agreed, in principle, to the indexation of salaries for 2011, while trade unions agreed to the postponement of the pay rise to the third quarter of the year, so as to soften the impact of a predicted rise in oil prices. The parties also agreed to increase the minimum wage by 1.9%, which annoyed employers.

Reaction of unions

This unexpected compromise on wage indexation seems to have jeopardised the unity between Luxembourg’s trade unions. It was criticised, for example, by the Luxembourg Association of Bank and Insurance Employees (ALEBA). This criticism, summarised in a article (in French) by magazine paperJam, was that the trade unions had betrayed workers’ interests by agreeing to the change in the automatic indexation of salaries (LU1007021I).

Reaction of employers

Pierre Bley, General Secretary of the Union of Luxembourg Enterprises (UEL) claimed in a statement (in French) on 29 October that indexation will kill employment in Luxembourg. The organisation commissioned a survey (in French, 150Kb PDF) among 291 Luxembourg employers in which 73% of employers said an increase in the indexation in October 2011 would prevent them from taking on new staff.

Second bipartite agreement

UEL then asked the government, in the second bipartite talks, to compensate them for the cost of automatic indexation and its effects on labour costs.

As a result, UEL and the government concluded a second bipartite agreement (in French) on 15 December. The government agreed a €20 million increase in state funding towards vocational training, from 14.5% of the contributive base to 25%.

Employers’ contributions to the minimum wage will also be reduced by 0.1 percentage point, and the single rate contribution for work accidents will be set at 1.15% of the contributive base, instead of the 1.25% initially agreed by parliament (LU1011011I). Employers’ contributions to the sickness insurance fund have also been frozen until 2014.

Employers regard this second bipartite agreement as necessary to preserve employment in Luxembourg. However, OGB-L has criticised the ‘imbalance’ between the concessions made by workers and the lack of concessions made by the employers.

End of the traditional social dialogue model?

All social partners acknowledge that the bipartite talks defused the tension which froze the traditional tripartite style of debate in April 2010.

Such talks may be a sign of deeper change in Luxembourg’s method of conducting social dialogue. However, none of the parties so far want to commit to a framework for bipartite discussions.

UEL views the bipartite agreement of 15 December as necessary, but not sufficient, and also as an opportunity to re-start tripartite talks. This opinion is shared by the Prime Minister, although he thinks there should be a pre-set common framework for any such talks.

UEL has already suggested changes to the tripartite framework in a closed session with Prime Minister Juncker, after the breakdown of tripartite talks in April 2010 (LU1007021I) and in a presentation (in French, 658Kb PDF) on the 15 December agreement.

LCGB, in a press release (in French) has urged the government to provide feedback on what was discussed with employers.

Commentary

Even though the two bipartite agreements broke the deadlock between the employers and trade unions, finding a consensus on the future framework of tripartite talks is the next challenge that faces the social partners. They will have to overcome this in order to ensure that what happened in April 2010 never happens again.

Guy Castegnaro and Ariane Claverie, Castegnaro Cabinet d'Avocats

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