Germany: Latest working life developments – Q4 2016

Continued slow growth in Germany’s gross domestic product, an increase in collectively agreed wages, a new  collective agreement in  the rail sector and the launch of a White Paper on digitalisation are the main topics of interest in this article. This country update reports on the latest developments in working life in Germany in the fourth quarter of 2016.

Labour market in good form

Although the growth in Germany’s gross domestic product (GDP) slowed for the third quarter in a row, its labour market was in fine shape, with the unemployment rate continuing to fall and reaching a low of 5.8% in December 2016. Due to Germany’s good economic situation, wages increased by 2.4% on average, in 2016. At the same time, the inflation rate was about 0.5%. The Federal Employment Agency (BA) announced that, between October 2015 and September 2016, 546,900 apprenticeship positions were registered with the local employment agencies. This figure represents an increase of 15,900 over the previous year. Moreover, initial figures indicate that nearly the same number of new vocational training contracts (474,700) was concluded by the end of September 2016.

Innovation and conflicts in collective bargaining round

In December 2016, the Railway and Transport Union (EVG) and the German railway company Deutsche Bahn reached a compromise on an innovative collective agreement, which includes a one-off payment of €550 between October 2016 and March 2017. Furthermore, there will be a pay rise of 2.5% in April 2017 and a second one of 2.62% in January 2018. However, the agreement also contains the ground-breaking provision that every employee may choose between a pay rise, working one hour less per week or an additional six days of holiday per year. Some 150,000 employees are covered by the new agreement.

While the negotiations between EVG, a member of the German Confederation of Trade Unions (DGB), and Deutsche Bahn proceeded without much conflict, collective bargaining in the last quarter in 2016 was also characterised by two big conflicts. The negotiations between Deutsche Bahn and the German Engine Drivers’ Union (GDL), a member of Civil Servants Association and Wage Union (dbb), failed in December. After six inconclusive rounds of negotiations, GDL called in an arbitration committee.

Also, negotiations faltered between the German pilots’ union Vereinigung Cockpit and airline Lufthansa, with both sides agreeing to meet a conciliator in December 2016.

Another independent professional trade union, the air traffic controllers union (GdF) concluded an agreement with the German Air Traffic Services (DFS) to increase wages by 8.2% in four steps by 2019. The social partners also ruled out direct dismissals within this period.

Digitalisation, working time and pensions publicly debated

In November 2016, the Federal Ministry for Labour and Social Affairs (BMAS) published its White Book Working 4.0 about digitalisation and industry 4.0. The white book is the result of a dialogue forum, set up in April 2015, made up of the social partners, academics and interested members of the public.

BMAS, as well as the social partners, agreed that digitalisation and technological changes required further training, with the result that school pupils, unemployed and employed people will be offered more training, so they are able to keep pace with the technical revolution throughout their working life.

Furthermore, the White Book proposes drafting a law that offers more options for employees to choose when and where to work. Backed by sectoral or company-level regulations, such a law seeks to combine the security and protection needs of employees with the employers’ need for more flexible working hours.

As digital and technological change will lead to new negotiation processes in establishments and at the sectoral level between social partners, BMAS seeks to strengthen collective bargaining. Most of all, it wishes to reverse the declining collective bargaining coverage and foster the creation of more works’ councils, as well as giving them ‘adequate rights’.

In November 2016, BMAS published details of a new pension concept, which includes the same pension levels for those living in eastern and western Germany, better protection in old age for self-employed people and a guaranteed minimum pension level of 46% of employees’ former wages. While unions welcomed the plans, they also criticised them for not going far enough. Employers warned against burdening contributors and taxpayers too much.

Commentary

The German labour market was shown to be in good condition at the close of 2016. Despite the Brexit vote and the outcome of the US election, associated with an uncertain economic and trade policy, German trade associations are expecting an overall moderate market growth. However, several reform projects divide unions and employers on their possible effects: a draft law to deal with (gender) pay inequalities is still underway. In addition, BMAS has proposed new regulations on part-time work that are heavily criticised by employers.

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