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«German Collective Bargaining in a European Perspective Continuous Erosion or Re-Stabilisation of MultiEmployer Agreements? Reinhard Bispinck, Heiner ...»

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German Collective Bargaining

in a European Perspective

Continuous Erosion or Re-Stabilisation of MultiEmployer Agreements?

Reinhard Bispinck, Heiner Dribbusch

and Thorsten Schulten

WSI Discussion Paper No. 171

August 2010

Wirtschafts- und Sozialwissenschaftliches Institut in der

Hans Böckler Stiftung, Hans-Böckler-Str. 39, 40476 Düsseldorf

In der Reihe „WSI-Diskussionspapiere“ erscheinen in unregelmäßiger Folge Arbeiten

aus dem WSI zu aktuellen Vorgängen auf wirtschafts-, sozial- und gesellschaftspolitischem Gebiet. Sie basieren u.a. auf Vorträgen, die Mitglieder des Instituts gehalten haben oder auf gutachterlichen Stellungnahmen, können aber auch Diskussionsbeiträge zu ausgesuchten Einzelthemen sein. Für den Inhalt sind die Autorinnen und Autoren selbst verantwortlich.

Dieses und andere WSI-Diskussionspapiere finden sie als pdf-Datei unter:

www.wsi.de Dr. Reinhard Bispinck Reinhard-Bispinck@boeckler.de Dr. Heiner Dribbusch Heiner-Dribbusch@boeckler.de Dr. Thorsten Schulten Thorsten-Schulten@boeckler.de WSI in der Hans-Böckler-Stiftung Hans-Böckler-Straße 39 40476 Düsseldorf WSI-Diskussionspapiere (Print) ISSN 1861-0625 WSI-Diskussionspapiere (Internet) ISSN 1861-0633 WSI-Diskussionspapier 171 Seite 1 German Collective Bargaining in a European Perspective Continuous Erosion or Re-Stabilisation of Multi-Employer Agreements? 1 Reinhard Bispinck, Heiner Dribbusch and Thorsten Schulten

1. Introduction Since the mid-1990s the German system of collective bargaining with its traditional dominance of sector-level agreements has been faced by a process of creeping erosion. While the bargaining coverage has shown a steady decline, a far-reaching decentralisation has increasingly undermined the system of multi-employer bargaining.

In the following we will discuss the changes in German collective bargaining from a perspective of trade union power resources. Drawing on concepts developed by

Wright (2000) and Silver (2003) we identify two basic sources of trade union power:

One is structural power derived from workers’ location in the economic system. This can further be subdivided into marketplace bargaining power depending from workers’ position in the labour market and workplace power based on the location of workers in the production process. Secondly, there is associational power derived from workers’ collective organisation which translates into organisational power of unions. To this is can be added the dimension of institutional power (Brinkmann et.al.

2008, Brinkmann and Nachtwey 2010). This is defined by the position of unions within institutional arrangements which are the product of specific historical constellations and power relationships. With regard to collective bargaining institutional power of unions is based on the combination of a statutory monopoly to conclude collective agreements on behalf of employees and a voluntary comprehensive system of sectoral bargaining as part of a post-war arrangement between employers’ associations and trade unions which developed since the 1950s.

The erosion collective bargaining hits German trade unions in a core area of their activities. It is an indicator for a partly revision of the post-war class compromise by employers since the early 1990s. It goes along with a significant weakening of organPaper presented at the 9th European Congress of the International Industrial Relations Association (IIRA) on 28 June-1 July 2010 in Copenhagen.

WSI-Diskussionspapier 171 Seite 2 isational and structural power of unions due to a sharp decline in membership and a change in the social and economic framework conditions. Compared with other European countries, however, the development in Germany seems to be rather exceptional, as many countries were able to continue with a rather stable collective bargaining system and a relatively high bargaining coverage. This holds true also for countries where – as in Germany – the unions were faced by a significant decline of organisational power. The latter indicates that there are other political factors which seem to compensate for the decline of unions’ organisational power and keep their institutional power basis relatively stable.

In discussing German collective bargaining in a European perspective it is the aim of this paper to identify the factors which support a stable and encompassing collective bargaining system. Our arguments are developed in three steps: First, we describe the recent developments in German collective bargaining and the accompanying changes in the organisational and structural power of German trade unions. Secondly, we compare the German situation with the development in other European countries and analyses the factors which are conducive for a stable bargaining system. Considering the different experiences in Europe, we thirdly discuss the possibilities for a re-stabilisation of German collective bargaining.

2. Erosion of German collective bargaining

2.1 Erosion of institutional power Decline of collective bargaining coverage Over the past two decades German collective bargaining has undergone a number of profound changes which have significantly weakened the institutional power of trade unions (Bispinck and Schulten 2010a, 2010b). Firstly, there has been a significant decline in bargaining coverage (Figure 1). In west Germany, the total proportion of employees covered by collective agreements sank from 76% in 1998 to 65% in 2009.

In east Germany, the figures for the same period show a decline from 63% to 51%.

Coverage of sectoral agreements fell from 68% to 56% in west Germany and from 52% to 38% in east Germany.

–  –  –

85%. The manufacturing industry has coverage of almost two thirds, which is a little above average. Much lower figures exist in trade and in some service sectors, with information and communication representing only one third.

According to data of the WSI-Lohnspiegel database the collective bargaining coverage differs strongly depending of the income level. In the lowest quintile the coverage is 34 % only in comparison to 68 % in the highest quintile (Figure 3). The erosion of collective bargaining is particularly strong in the low age sectors.

–  –  –

ments to all companies within a specific sector. The precondition is that the agreement already covers 50% of the employees in the respective sector and that the extension is in the public interest. Finally, a majority of the Collective Bargaining Committee at the Ministry of Labour, which is composed of representatives of the peak trade union and employers’ organisation, has to confirm the extension.

In the past, only a limited use was made of the extension of collective agreements.

An increasingly restrictive attitude on the part of employers’ associations in the Collective Bargaining Committee has resulted in a steady decline in the number of such extensions. By the start of 2009 only some 1.5 % of original agreements were affected. At present only a few sectors (and even in these cases not the entire sector) are subject to extensions of wages and salary tables. These include hairdressers, building cleaners, private security personnel and construction workers. In other sectors, such as the retail trade, in which collectively agreed pay rates have traditionally been extended to the entire sector, attempts to revitalize the extension have failed as a result of employer resistance.

–  –  –

2.9 245 2.6 232 2.5 2.2 2.0 1.8 1.5 1.5 1.5 1.5 Source: Ministry of Labour, own calculations Since 1996 the German Posted Workers Act allows for the possibility to extend collectively agreed minimum standards to workers who are working in Germany and posted from foreign companies. At the beginning the scope of the law was restricted WSI-Diskussionspapier 171 Seite 6 to the construction industry and related sectors. In recent years it has been extended and now covers 10 branches including waste disposal, industrial cleaning, industrial laundries, security services, nursing care services and postal services. The minimum wages vary according to sector, region and skill and are between 6.50 € and 12.90 €.

Decentralisation and fragmentation of collective bargaining

Thirdly, there has been a marked trend towards the differentiation and decentralisation of collective bargaining through the widespread use of opening clauses in sectoral agreements (Bispinck and Schulten 2010; Bahnmüller 2010). Since the mids more and more sectoral agreements have allowed companies – under certain

circumstances – to go below collectively agreed standards. The following agreements have marked important steps in the spread of opening clauses:

A key step was taken in the mid-1980s in the metalworking industry when the em ployers succeeded in instituting far-reaching flexibility on working time arrangements at company level in exchange for the first step in what became a progressive lowering of the average working week to 35 hours.

Following German unification in 1990 and the transfer of the west German collec tive bargaining system to the east, trade unions have had to accept so-called “hardship-clauses” that allow firms in economic difficulties to deviate from sectorallyagreed provisions. Such hardship clauses were subsequently introduced in west Germany.

In the mid-1990s, as a consequence of the 1992/93 recession, many agreements  introduced the option of temporary cuts in working time and pay in order to safeguard jobs.

After 2000, regulations on variable profit-related pay have been introduced in  some sectors, transforming some elements of what was formerly guaranteed remuneration into a sum dependent on the company’s profit and loss account.

Since the middle of the last decade an increasing number of opening clauses have  been concluded that apply not only in the event of serious economic difficulties but also to improve competitiveness, safeguard employment, and facilitate fresh investment. The most important agreement here has been the so-called “Pforzheim Accord”, concluded in 2004 in the metalworking sector.

WSI-Diskussionspapier 171 Seite 7 In recent years, there has been an increase in the numbers of wage agreements  that have allowed employers to postpone or cancel the payment of sectorally-agreed pay increases at company level.

Against the background of the current crisis, the focus of the 2010 bargaining  round has once again been that of safeguarding jobs. In exchange for rather low wage increases, agreements have featured a range of provisions for short-time work and other forms of working time reduction at company level (Bispinck and WSI Tarifarchiv 2009).

The use of opening clauses has been the subject of a number of empirical studies that have arrived at somewhat divergent results. Based on data from the IAB Establishment Panel, a regular survey of human resource managers in 16,000 establishments conducted by the Institute for Employment Research (IAB), Kohaut and Schnabel (2006) concluded that in 2005 13% of establishments and 29% of employees were covered by a collective agreement with scope for an opening clause. More than half of the affected establishments (53%) had actually made use of these opening clauses. And of these, 71% of companies in west Germany had adopted opening clauses on working time, but only 31% on basic pay or annual bonuses. In east Germany the figures were somewhat lower.

Data on the use of opening clauses is also regularly provided by the WSI Works Council Survey, which is a representative survey of all establishments with at least 20 employees and where a works council has been elected (Bispinck and Schulten 2003, Bispinck 2005). The data show that in 2005 75% of all establishments made use of an opening clause, while in 2007 the proportion decreased to as much as 53%.

The majority of companies have used opening clauses on the regulation of working time (Figure 5). In 2010 33% of the establishments that used opening-clauses introduced variable working time arrangements, 18% extended the agreed working time and 7% have temporarily reduced it. By contrast, the use of pay-related opening clauses was less widespread. In 2010 16% of establishments provided lower pay rates for job starters, 14% reduced or suspended annual bonus payments, and 13% deferred agreed pay increases. Moreover, 9% of establishments introduced a cut in basic pay.

WSI-Diskussionspapier 171 Seite 8

–  –  –

The driving forces behind this far-reaching decentralisation of German collective bargaining have been the employers. Since the early 1990s German employers’ associations pressed the case for an across-the-board policy of collective bargaining decentralisation, arguing that greater flexibility in sectoral agreements was needed to respond to the greater diversity of individual company circumstances. They also attacked the principle that works council have no right to bargain on issues which are subject to collective agreements except in cases where such agreements explicitly allow it and proposed legal changes to give works agreements concluded between works councils and management precedence over collective agreements. This received strong support from the major political parties and the German government (Bispinck and Schulten 2005). In 2003, for example, the former German Chancellor, the Social Democrat Gerhard Schröder, threatened the unions with the possible introduction of a statutory opening clause that would apply to all collective agreements.

Other political parties went even further: for example, one demand was that the ban on works councils concluding collective agreements proper should be lifted without, however, consequently granting works councils the right to call industrial action. More recently, the president of the Confederation of German Employers’ Associations WSI-Diskussionspapier 171 Seite 9 (BDA), Dieter Hundt, has acknowledged that the German bargaining system has now become so flexible using the existing legal framework that such legal changes are no longer necessary (Hundt 2009).

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