New proposals to modernise German industrial relations

In August 1997, the German Machinery and Plant Manufacturers' Association and the IG Metall metalworkers' union presented a joint paper, For competitiveness and employment, which includes various proposals for a modernisation of the structure and content of German collective agreements.

On 1 August 1997 the German Machinery and Plant Manufacturers' Association (Verband Deutscher Maschinen- und Anlagebau, VDMA) and the Bavarian regional organisation of the German metalworkers' union, IG Metall, presented a jointly elaborated paper entitled For competitiveness and employment (Für mehr Wettbewerbsfähigkeit und Beschäftigung) which includes several proposals to modernise German industrial relations at sectoral and company level. The paper is primarily a result of the so-called "branch-level industrial dialogue" (Branchendialog) in the German mechanical engineering industry, which started at national level following an initiative by the German Minister for Economics, Günter Rexrodt, in December 1995, and has been continued afterwards at various regional levels. The recent paper was drawn up in Bavaria by a working group of representatives from VDMA and IG Metall, in cooperation with managers and works council members from four Bavarian medium-sized mechanical engineering companies (FAUN GmbH, Riedhammer GmbH, Rieter Spinnereimaschinenbau AG and Deckel-Maho GmbH) as well as some external scientific experts.

The central aim of the joint paper is to argue for a new "constructive productivity- and innovation-oriented policy" which is able to combine further improvements in competitiveness and employment. As one crucial element in this new policy approach, the paper sets out the need for some major reforms in German collective bargaining as well as in the organisation of work. The paper includes analysis and proposals concerning four main areas:

  1. reforms in payment, grading systems and branch-level collective agreements;
  2. flexibility in working time;
  3. a new industry and enterprise culture; and
  4. measures to secure and create employment

However, the machinery and plant manufacturing industries fall under the sectoral collective agreements for the metalworking industry, where VDMA - which itself is only a trade association - is represented by the employers' association, Gesamtmetall. Therefore, VDMA and IG Metall have declared that with the recent document they do not want to start separate collective bargaining but only to make proposals to the collective bargaining parties.

Reform in payment, grading systems and branch-level collective agreements

VDMA and IG Metall support the German system of collective bargaining in principle but, nevertheless, see a number of deficits in recent collective agreements. In particular, the system of collective framework agreements (Manteltarifverträge) is criticised as being too complicated, too complex, and covering too many subjects at the same time. The paper demands a more flexible bargaining system and proposes replacing the framework agreements with a new structure of mainly single-issue agreements with shorter durations. With this new agreement structure, both parties hope that necessary changes could be concluded much faster than in the present system.

VDMA and IG Metall further agree that the current payment structures and grading systems are out of date and still reflect the old structure of "taylorist" work organisation. In particular, the system of separate agreements for blue- and white-collar workers is no longer suited to modern work organisation and its much more integrated labour process. Therefore, there is a growing need for new payments structures and grading systems which correspond to the companies' new demands in terms of qualification and working capacities.

Finally, VDMA and IG Metall recognise that even under recent collective agreements there exist a considerable number of options for differentiated company arrangements, which in practice are very often simply not used by the companies. Considering this, both parties are against one-sided criticism of the recent collective bargaining system.

Flexibility in working time

VDMA and IG Metall's joint paper points out that flexibility has become a crucial factor for competitiveness in the machinery and plant manufacturing industries, because of:

  • the need for customer-oriented production;
  • the necessity to reduce costs;
  • the reduction of time for production and supply, reflecting even shorter product cycles; and
  • the necessary adaptation of capacities to meet the needs of the market.

On the other hand, flexibility is also in the interests of the employees, who can participate even more in determining their individual working time and will gain much more personal "sovereignty over time" (Zeitsouveränität).

All in all, VDMA and IG Metall believe that more flexibility in working time could improve the situation for both the company and the employees. Therefore, creative working time arrangements are necessary, in particular through the introduction of individual working time accounts (Arbeitszeitkonten), which could help to:

  • make companies more competitive;
  • adjust production to fluctuations in orders and seasons;
  • avoid overtime and short-time working; and
  • avoid redundancies and secure jobs.

VDMA and IG Metall consider that flexible working time arrangements are largely possible on the basis of recent collective agreements. Nevertheless, they demand better collective provisions for the use of individual working time accounts.

A new industry and enterprise culture

The German machinery and plant manufacturing industry is traditionally one of the backbones of Germany's export-led growth model. However, VDMA and IG Metall consider that under the conditions of globalisation there is increasing international competition, because engineering companies from other parts of the world have substantially improved their production capacities. According to VDMA and IG Metall, Germany will hold its leading positions in world markets only if it is able to develop a new innovation-oriented industry and enterprise culture which promotes innovation in both products and the production process. The paper emphasises the internal relationship between an innovative company and an innovative society, and pleads for new forms of cooperation between firms at all levels of the "value chain", between firms and science, and between firms and the political sphere.

In the meantime, it is widely accepted that human resources are the most important factor in creating an innovative enterprise culture. Therefore the VDMA and IG Metall joint paper demands:

  • an offensive in the qualification of the employees (both at company level as well as at the level of general training institutions);
  • a better use of employees' creativity through the improvement of quality circles and group working; and
  • better participation of the employees in the development of new products.

Measures to secure and create employment

VDMA and IG Metall agree that the development of an innovation-oriented industry and enterprise culture is an essential precondition to secure and create employment. However, both parties also agree that innovation policy on its own is not sufficient and needs to be supplemented by an explicit employment policy.

The VDMA-IG Metall paper points out that one important approach to preserving employment lies in a better distribution of the volume of work through more flexible and shorter working time arrangements. As a result of permanent growth in productivity, there has been a continuing decrease in the volume of work in the German engineering industry since 1980. Therefore, VDMA and IG Metall, in particular, propose

  1. using partial retirement schemes; and
  2. extending part-time work through socially acceptable conditions such as guaranteed social security and the right to return to a full-time job.


The economic strength of German post-war capitalism has always been founded on its innovation- and productivity-oriented production model, which was socially embedded in a certain set of socio-economic institutions such as the German system of industrial relations. Today, there seems to be a broad consensus that the traditional "German model" must be renewed to be successful under the new conditions of German unification and economic globalisation.

In the fields of industrial relations there currently exists a broad debate, in particular on the future of centralised branch-level collective bargaining. However, these discussions are often very superficial because there is a tendency either to reduce complex problems to the question of labour costs, or only to discuss bargaining levels without discussing how to modernise the content of collective bargaining. In these discussions, the recent paper from VDMA and IG Metall on "competitiveness and employment" is a remarkable exception. The document includes a broad range of interesting proposals on how to modernise German industrial relations while at the same time renewing its traditional strength. The VDMA-IG Metall paper makes implicitly clear that even the future of German industry lies not in competition on labour costs, but in the further improvement of an innovation-oriented production model. (Thorsten Schulten, Institute for Economics and Social Science (WSI))

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