Germany: Continued decline in collective bargaining and works council coverage

An ongoing decline in coverage for both collective bargaining and works councils in Germany is driven by medium-sized establishments: coverage rates for large and small companies have remained relatively constant. In 2013, only 28% of private-sector workers in western Germany (15% in eastern Germany) were covered both by a collective agreement and a works council. 

About the study

The Institute for Employment Research (IAB) of Germany's Federal Employment Agency (BA) monitors trends in collective bargaining and works council coverage of establishments and employees on an annual basis.

New survey findings published by Peter Ellguth and Susanne Kohaut (IAB) in WSI Mitteilungen in April 2014 reveal that in 2013 both rates were at a historic low. The comparison of the 2013 data to 2009 data released by Ellguth and Kohaut in WSI Mitteilungen 4/2010 (in German) shows that the downward trend continued in times of economic growth, but differed depending on establishment size, sector and region. (See also the Eurofound article Assessing employee representation and collective bargaining coverage.)

The data source is the IAB Establishment Panel, which has been in existence in western Germany since 1993 and in eastern Germany since 1996. The IAB Establishment Panel is a representative employer survey covering some 16,000 businesses from all branches of the economy and of all sizes. The survey is carried out annually by TNS Infratest Sozialforschung Munich and is conducted orally by way of personal interviews. Data on collective bargaining coverage covers establishments with more than 20 employees (private and public sector) and data on works council coverage covers private-sector establishments with more than five employees (the minimum according to the Works Constitution). Staff councils in the public sector are not surveyed. The annual data reports are published in the journal of the Institute of Economic and Social Research WSI.

Background

The German industrial relations system rests on two pillars, which – under law – stand independent of each other. One is collective bargaining by the trade unions and employer organisations; the other is elected worker representation and co-determination at establishment level.

An establishment is covered by a collective agreement if the employer is a member of the collective bargaining partner and if the employer organisation binds its members to apply collective agreements. Since 1993, IAB longterm panel data reveal a decrease in collective bargaining coverage. This stems from a decrease in membership and a growing number of employer organisations with opt-out clauses. Responding to the trend in July 2014, the Parliament amended the order imposing the extension of collective agreements. The previous precondition for an extension was that employers bound by the collective agreement in question should together employ at least 50% of the workers in the sector covered by the agreement. Under the new Act for promoting collective bargaining autonomy (Tarifautonomiestärkungsgesetz (in German)) the extension can be imposed if the tripartite collective bargaining (Tarifausschuss) agrees that there is a ‘public interest’ in an extension of a sectoral agreement.

Coverage by works councils has its historical base in large manufacturing and mining companies with high proportions of organised workers and high collective bargaining coverage. Establishing works councils in eastern Germany, in small and medium-sized establishments (SMEs), in construction and in the private services sector is an on going challenge. In 2001, the Works Constitution was amended to promote the election of workplace representation in enterprises with at least five workers. In businesses with between 5 and 50 employees, the election procedure is simplified compared to the standard procedure in larger enterprises. In general, all blue- and white-collar workers hold voting rights; this includes trainees in vocational training, marginal part-time workers, temporary agency workers, mobile workers and fixed-term workers on a ‘regular’ (not short-term) contract. Managerial staff is excluded.

The 2001 reform mitigated, but did not stop, the decrease in works council coverage of employees. Currently, a policy debate on how to counteract the trend is underway.

Recent trends in collective bargaining coverage

The report by Ellguth and Kohaut shows a continued decline in collective bargaining coverage in both western and eastern Germany. In 2013, some 30% of the establishments in western Germany and 17% of those in eastern Germany were covered by a sectoral collective agreement. Single-employer agreements have not compensated for the downward trend. In western Germany, only 2% of establishments apply a company-level agreement (in eastern Germany, 3%).

By comparing the latest findings to 2009 data (WSI Mitteilungen 4/2010, in German) it shows that the proportion of establishments covered by either sectoral or company agreements decreased from 39% to 32% in western Germany and from 23% to 20% in eastern Germany. Coverage of employees has shrunk from 65% to 60% in the west and from 51% to 47% in the east. The decline has involved all establishment sizes apart from large establishments in western Germany and has been most marked in the health care and education sector, the hotel and restaurant sector, information/communication, construction and in commerce.

In 2013, public administration and social insurance was the sector with the most comprehensive bargaining coverage of employees; information/communication was the sector with the lowest coverage.

Table 1: Collective bargaining coverage in establishments and among employees, by sector, 2013 (%)

 

Establishments (employees) covered by sectoral collective agreements

Establishments (employees) covered by  company-level agreement

Establishments applying no collective agreement; (establishments taking sectoral collective agreement as reference point)

 

Western Germany

Eastern Germany

Western Germany

Eastern Germany

Western Germany

Eastern Germany

Agriculture

32 (50)

8 (14)

1 (2)

2 (5)

65 (45)

92 (47)

Energy, water supply, refuse, mining

62 (75)

29 (42)

6 (15)

9 (29)

32 (43)

62 (33)

Manufacturing

30 (55)

12 (20)

3 (12)

5 (14)

67 (54)

83 (48)

Construction

54 (69)

41 (51)

1 (2)

0 (6)

45 (55)

59 (59)

Wholesale, maintenance, repair

24 (37)

9 (17)

2 (7)

2 (12)

73 (48)

89 (43)

Retail

30 (41)

13 (27)

1 (2)

4 (6)

69 (51)

83 (43)

Transport and storage

27 (42)

8 (20)

4 (13)

6 (12)

70 (27)

86 (40)

Information/communciation

4 (15)

(1) (7)

(4) (19)

3 (16)

92 (26)

96 (20)

Finance and insurance

40 (81)

15 (57)

0 (2)

(0) (0)

60 (33)

85 (9)

Hotels, restaurants and other services

28 (40)

12 (26)

1 (3)

2 (6)

74 (37)

86 (35)

Healthcare and education

35 (54)

15 (30)

3 (10)

7 (23)

62 (58)

78 (53)

Business,scietific and other freelance services

16 (43)

13 (45)

1 (4)

1 (7)

82 (33)

86 (36)

Non-profit organisations

39 (53)

17 (28)

15 (12)

11 (13)

46 (59)

72 (44)

Public administration and social security

85 (89)

94 (83)

10 (9)

4 (16)

5 (61)

2 (96)

Total

30 (52)

17 (35)

2 (8)

3 (12)

67 (44)

80 (42)

Notes: Establishments with at least 20 employees; (X ) – poor validity of percentage share because of low figures.

Source: IAB Establishment Panel 2013.

Recent trends in works council coverage

The low works council coverage rate of establishments is due to the high number of small establishments without elected workplace representation; since the early 1990s, this has alternated between 9% and 12%. In 2013, some 9% of establishments in western Germany (2009: 10%) and 10% of those in eastern Germany (2009: 9%) had a works council. The authors found no long-term changes in the coverage of small establishments and only a slight decrease in the coverage of large establishments with more than 500 workers; however, they point out that there is a worrying downward trend in the coverage of establishments with between 51 and 500 workers. 

From 2009 to 2013, the proportion of employees having an elected workplace representation decreased from 45% to 43% in western Germany and from 38% to 35% in eastern Germany. The decline has been greatest in finance and insurance, in transport and logistics and in the construction sector in western Germany . In 2013, works council coverage of employees was most comprehensive in the energy, water, refuse and mining sector and lowest in construction and the information/communication.

Table 2: Works council coverage of establishments and employees, by sector, 2013 (%)

 

Establishments with works council

 

Employees with works council

 

Western Germany

Eastern Germany

Western Germany

Eastern Germany

Energy, water supply, refuse, mining

42

23

83

66

Manufacturing

16

11

69

48

Construction

3

3

16

19

Commerce 

9

8

29

23

Transport and storage

12

13

49

33

Information/communication

17

6

50

29

Financial services

27

19

70

62

Hotel and restaurant

3

8

14

17

Healthcare and education

11

14

44

51

Business, scientific and other freelance services

7

10

27

29

Total

9

10

43

35

Notes: Establishments with at least five employees.

Source: IAB Establishment Panel 2013.

Growing gaps in interest representation

Ellguth and Kohaut define establishments covered by both a collective agreement and a works council as the ‘core zone of the German industrial relations system’. In 2013, the core zone was formed out of some 28% of private-sector establishments in western Germany and only 15% of those in eastern Germany; the equivalent figures for 2009 were 30% and 18%, respectively. In the historical core of the German industrial relations system – the western German manufacturing sector – almost half (47%) of the establishments were covered both by a collective agreement and a works council. In contrast, in the western German services sector, only some 22% of establishments had both forms of interest representation. Interestingly, this discrepancy is not seen in eastern Germany. The authors attribute this to the regional differences in establishment size and to the lack of large manufacturing companies in eastern Germany. Some 35%  of establishments in western Germany and 46% in eastern Germany have neither a collective agreement nor a works council. (The equivalent figures for 2009 were 31% and 44%, respectively.) 

From 2009 to 2013, the proportion of private-sector employees covered by a collective agreement declined from 52% to 49% in western Germany, and from 34% to 30% in eastern Germany. In the same period, the proportion of employees having works council representation decreased from 45% to 43% in western Germany, and from 38% to 35% in eastern Germany.

Table 3: Coverage by collective agreement and works council by region and sector (private sector) 2013 (%)

 

Western Germany

Eastern Germany

 

TOTAL

Manufacturing

Construction

Services

total

Manufacturing

Construction

Services

Works council and sectoral collective agreement

28

47

14

22

15

16

10

15

Works council and company agreement

 7

12

 2

 5

10

12

 5

11

Works council but no collective agreement

 8

10

 1

 7

10

20

 4

10

Sectoral collective agreement but no works council

20

 8

59

25

15

 4

44

19

Company agreement but no works council

 1

 0

 1

 1

 3

 2

 2

 4

Neither collective agreement nor works council

35

22

24

41

46

46

36

41

Total

100

100

100

100

100

100

100

100

Employees with sectoral collective agreement

49

56

73

46

30

21

53

34

Employees in establishments with a works council

43

69

16

33

35

48

19

37

Note: Establishments with at least 20 employees.

Source: IAB Establishment Panel 2013.

 

Birgit Kraemer, Institute of Social and Economic Research, WSI

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