Austria: Changes to wage-setting mechanisms in the context of the crisis and the EU’s new economic governance regime

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Austria was exempt from any commitments and recommendations by the EU with regard to its wage-setting system. Due to this fact, no radical changes have occurred since the onset of the crisis. However, in the pattern-setting metalworking sector, a decentralisation process has come about with the annual bargaining round in 2012. The longstanding voluntary cooperation between six sub-sectoral employer associations was abandoned, so that instead of one communal bargaining round, six separate ones were taking place. This trend continued in 2013. However, the wage agreements reached were almost identical for all six groups.

Section 1: Mapping changes in wage setting mechanisms in the private sector

For each aspect of wage setting mechanisms indicated below, please indicate:

1.1. whether there has been any recent change (since mid-2008). If there have been changes in many sectors, report the most prominent examples. 1.2. in which year any such change(s) occurred. Report for the most prominent examples if there have been changes in many sectors. 1.3. If any changes, briefly summarise the change(s) which have taken place and illustrate with prominent examples.

a) main level(s) of collective bargaining over wages (collective wage setting), where a main level under single-tier bargaining is one that accounts for at least one-fifth of employees covered by collective bargaining or under multi-tier bargaining is a level that accounts for a non-trivial element of collectively agreed pay

No change.

b) mechanisms governing coordination between different levels of collective wage setting, under 2- or multi-tier arrangements (for example, rules implementing the ‘favourability principle’ under which lower levels can only improve on wage standards agreed at higher levels, or rules governing the respective of competence of levels on different aspects of wage setting)

No change.

c) formal and informal practices of coordination across bargaining units at the same level, such as pattern setting arrangements and/or which settlement sets the pattern, either between sectors (under multi-employer bargaining) or between companies (under single-employer bargaining)

Change has occurred. See below for details.

d) the relationship between wage setting in the private and public sectors, for example over which (if any) sector establishes a pattern or benchmark for the other

No change.

e) extension mechanisms

No change.

f) number and nature of opening clauses in sector and multi-sector agreements

No change.

g) opt-out clauses in sector and multi-sector agreements

No change.

h) duration of agreements

No change.

i) number of agreements

No change.

j) continuation of collective agreements beyond expiry

No change.

k) extending bargaining competence beyond trade unions to other types of workforce representative

No change.

l) indexation mechanisms

No change.

m) minimum pay setting arrangements, including the relationship between, and respective roles of, collective bargaining and statutory mechanisms in setting minimum wages

No change.

n) reconfiguration of existing sector agreements, establishment of new sector agreements, termination of existing sector agreements

No change.

o) other aspects of wage setting, for example integration of agreements covering blue- and white-collar workers in the same sector

No change.

There has been only very little change in wage-setting mechanisms in the private sector in Austria during the last few years. The most remarkable change came about in the metalworking sector in which a decentralisation took place. This best corresponds to c) above:

In the metalworking industry, encompassing 180,000 workers and six different subsectors, a decentralisation process came about with the 2012 autumn bargaining round. The sector’s largest (mandatory) employer organisation and sub-sectoral organisation of the Federal Economic Chamber WKO, the Association of Austrian Machinery and Metalware Industries FMMI, opted out from the longstanding communal bargaining process, with the remaining five employer associations following suit. For forty years, a (voluntary) collective bargaining community on the employer side had taken part in the sectoral collective bargaining process, consisting of six different employer organisations, which are all subsectoral units of the WKO, including the FMMI. Instead, in 2012, the specific WKO subsectoral employer organisations all conducted separate negotiations with the respective trade unions (the white-collar Union of Salaried Employees, Graphical Workers and Journalists GPA-djp and the blue-collar Manufacturing Union PRO-GE). Six different agreements were then negotiated; however, they all resembled each other and the wage increases agreed upon were in the same range in all six subsectors (increase of minimum wages of 3.3 to 3.4% and of actual wages of between 3 and 3.3%). The WKO’s line of argument was that with separate wage negotiations, the employer organisations would be in position to better react to the individual economic developments in the subsectors which had shown some divergence. The labour side had stated that this was an effort to ‘divide and rule’ and thinks that this move was part of a strategy to punish the employees for the relatively labour friendly outcomes of the 2011 bargaining round, which only came about after the first strikes in the metalworking industry since 1986 had taken place due to conflicts on wage increases. In the following annual bargaining round in autumn 2013, the decentralised wage bargaining was continued, even though the unions had protested against it beforehand: In September, some 2,500 works council representatives of sectoral companies held a conference in which they adopted a resolution stating that a communal collective agreement had to be maintained and condemning the employers’ aspirations towards decentralising important decisions from the collective to the company level. The annual bargaining procedure commenced – following a long-standing tradition – with the unions handing over their demands to the largest subsectoral employer organisation, the FMMI. Initially, the offers from both sides lay far apart from each other, with the unions demanding an increase of 3.4% and the employer organisation offering 2.3%. After five rounds of negotiations, and the unions’ threat of strikes, an agreement was finally concluded on 29 October 2013 between the FMMI and the GPA-djp and PRO-GE unions. The wage increases ranged from 2.5% to 3.2% (with higher increases for lower wage groups), averaging at 2.8%. In the following weeks, the other five subsectoral employer organisations concluded identical wage agreements and increases with the unions once more (after 2012).

If there have been relatively few changes (less than four), please explain why there has been relative stability in wage setting mechanisms in the private sector since mid-2008.

With the exception of this change in the pattern-setting metalworking industry, in which decentralisation processes have occurred, no other changes have come about on the wage setting system in Austria. Generally speaking, Austria managed to get through the crisis relatively well compared to other European nations. One reason for this was the anti-cyclical wage policy which was adopted during the crisis: In 2009, average real wages grew by 2.9% - this rise was brought about by a significantly higher rise of nominal wages combined with a fall in inflation. The result was a major anti-cyclical effect by sustaining the consumer demand during the crisis (cf. Hermann 2011). This was due to relatively high wage agreements which were negotiated by the social partners.

Also, the duration of the crisis in Austria was relatively short and the country was not concerned by regulations, initiatives, support measures or the like taken at the European level, including recommendations from the new economic governance at the EU level resulting from the crisis. Thus, there was no exterior pressure on implementing changes to the country’s wage setting system.

Traditionally, the social partners and, more specifically, the Austrian social partnership have had an important standing in the country. The government has high trust in this institution, which is shown by the fact that the social partners are regularly asked to work out proposals for certain policy programmes which then often form the basis for draft bills. Social partners’ suggestions are therefore often integrated in policy measures. Thus, the social partners have a significant degree of autonomy and are largely exempt from government interference. However, one must acknowledge, there are also – to a certain degree – personnel overlaps between functionaries of social partner organisations and members of parliament. They obviously represent the interests of their respective social partner organisations in parliament. The responsibility for issues which have traditionally lain within the social partners’ competencies is not challenged by the government. This first and foremost concerns collective bargaining and wage setting. This has recently been exemplified by the Federal Ministry of Labour, Social Affairs and Consumer Protection (BMASK)’s support of a long-standing demand of the Austrian Trade Union Federation (ÖGB) of the introduction of a collectively agreed monthly minimum wage of €1,500 (gross). The BMASK has encouraged the social partners to negotiate such a minimum wage; however, as it wage-setting does not lie within the ministry’s competencies, it refrains from further interference. This, combined with the fact that Austria has managed to get through the crisis comparatively well, has led to a general preservation of the wage setting system. However, as shown by the recent developments in the metalworking sector, some tendencies to deviate from the traditional, if informal, collective bargaining practices have occurred. Thus, signs of divergence of the social partners in a sector that was particularly strongly hit by the crisis can thus be observed. It remains to be seen in the future how this will develop further.

Section 2: Sources of change to wage setting mechanisms

For each type of change that has occurred (except c) d) i) o)), please indicate the main source(s) of the change. Note that more than one of the following sources may have been influential to a change. Please provide brief details in the relevant rows in the table below.

2.1. externally imposed or required (e.g. by the European Commission, ECB and/or IMF)2.2. externally influenced (e.g. via Country Specific Recommendations under the EU’s new Economic Semester governance arrangement) 2.3. imposed by national government 2.4. negotiated/concerted between cross-sector social partners, with or without government involvement2.5. negotiated between social partners at sector level 2.6. other (please specify)

Not applicable as the only type of change that has occurred relates to c) formal/informal coordination between levels which is not to be considered in the table below.

Section 3: Factors influencing changes in wage setting mechanisms

For each type of change identified in Section 1 (except i) and o)), please indicate the main factors or rationales which have been influential. Please provide brief details in the relevant rows in the table below.

3.1. Macro-economic, e.g. wage moderation, uncertain economic outlook 3.2. Micro-economic, e.g. increased variability in competitive circumstances of companies, financial hardship, business restructuring 3.3. Economic organization, e.g. emergence of new business activities which increase diversity within existing sectors and/or blur boundaries between sectors and/or create new sectors; and/or growing recourse to outsourcing, which blurs boundaries between sectors and creates structural tensions according to position in the supply chain within sectors 3.4 state policies and/or requirements from the European Commission, ECB and/or IMF involving weakening or strengthening of state supports for collective bargaining, e.g. changes to extension mechanisms, changes to indexation mechanisms, changes to the favourability principle, authorising workforce representatives other than trade unions to conclude agreements, changes to the boundary between statutory determination and collective bargaining

Section 4: Influence of the EU’s new economic governance regime

Have any aspects of a) wage setting arrangements b) other features of industrial relations been the subject of country specific recommendations under the European Semester system which took effect as from 2011 i.e. in 2011, 2012 or 2013?

4.1 Please check the Table summarising country specific recommendations attached to the questionnaire, and indicate any changes or amendments that are needed. 4.2. If Yes, specify any changes to a) wage setting arrangements b) other feature of industrial relations that have been implemented following the recommendation(s) 4.3. If Yes and changes, were these required by the European authorities, required by the IMF or recommended but not required?

4.4. Have there been changes in any formal or informal mechanisms aimed at cross-border coordination of wage setting, for instance in response to the new economic governance regime?

Not applicable as no country specific recommendations for Austria have been issued with regards to wage setting arrangements and other features of industrial relations.

Section 5: Perspectives of the social partners

What are the views of employers’ organizations and trade unions on:

5.1 The desirability of the changes to wage setting arrangements introduced

There is, naturally, a strong divide between the perspectives of organised labour and organised business on this topic. While the employer side in the metalworking sector has pushed the decentralisation process by quitting the long-standing bargaining community, the employee side is strongly opposed to this development. After the first separate wage negotiations in 2012, the unions once more protested against it before the 2013 bargaining round and issued a resolution against separate wage negotiations (see above), but the decentralised bargaining was resumed in 2013. Thus far, it seems that the employers are content with the situation and are not willing to form a bargaining community between all six sub-sectoral employer organisations again.

5.2 The effects / impact of the changes to wage setting arrangements introduced

So far, no severe impact of the decentralised wage bargaining processes could be observed in practice due to the fact that in both 2012 and 2013, all sub-sectoral associations agreed upon the same wage increases. The business side is content with the increased flexibility the separate wage negotiations have – so far only in theory – brought about as there is more room for individual employer organisations to deviate from wage agreements their sub-sectoral counter parts have negotiated. The unions interpret the cancellation of the bargaining community of the six sub-sectoral employer associations as an attack on the social partnership in the sector and complain about a reduction of solidarity and equality between the different subsectors (see unions’ resolution, above). Furthermore, they fear an attack on the quality of their co-determination and on collectively agreed employees’ claims.

5.3 The main factors or rationales influencing changes to wage setting arrangements

According to the WKO, the developments in the metalworking sector within the last few years have shown that due to the increased international competitiveness, the production conditions in the subsectors of the former bargaining community have shown divergence. Thus, the WKO had hoped to be able to respond better to the individual conditions in the sector in separate wage negotiations.

According to the unions, the employers decided on a change in the wage setting system or tradition in the metalworking industry due to the fact that comparatively high wage agreements were reached in 2011, following the first strikes in the sector since 1986. Furthermore, the topic of an increased flexibilisation of working time (the employers’ demand) has been an issue between the negotiating partners for several years and thus far, no conclusion has been reached. This might have also influenced the decision of quitting the bargaining community in the sector after 40 years.

Sources: Euro plus Pact Commitments in 2011 - Background on the Euro Plus Pact, European Commission; European Semester recommendations – European Commission, 2011a, 2012, 2013.

Bernadette Allinger, FORBA (Working Life Research Centre)