2001 Annual Review for Germany

This record reviews 2001's main developments in industrial relations in Germany.

Political developments

The current German federal government is a'red-Green' coalition comprising the Social Democratic Party (Sozialdemokratische Partei Deutschlands, SPD) and Alliance 90/The Greens (Bündnis 90/Die Grünen), which came to power after the last general election in September 1998. In 2001, there were four major regional elections at the level of the federal states which brought mixed results. Baden-Württemberg's ruling coalition government of the Christian Democratic Party (Christlich Demokratische Union, CDU) and Free Democratic Party (Freie Demokratische Partei, FDP) successfully defended its majority. The same was true for the SPD/FDP coalition government in Rhineland Palatinate. In Hamburg and Berlin however, the ruling governments lost their majorities, leading to the creation of new - and rather unusual - coalitions. In Hamburg, a new government was formed by the CDU, FDP and the new Party of Constitutional Offensive (Partei Rechtsstaatliche Offensive), which drew mainly on'law and order' issues and gained more than 19% of the vote. In Berlin, a new government was formed by the SPD and the Party of Democratic Socialism (Partei des Demokratischen Sozialismus, PDS).

Although the regional elections in 2001 did not demonstrate a uniform trend, the current federal government might have some problems defending its majority at the next general election, due in autumn 2002. Its political difficulties resulted in particular from the sharp economic downturn, which led to a GDP growth rate of only 0.6% in 2001, one of the lowest in the European Union. As a result, the number of officially registered unemployed people increased to more than 4 million by the beginning of 2002.

Collective bargaining

At the end of 2001, 57,595 valid collective agreements were officially registered by theMinistry of Labour, of which 34,437 were'association agreements' concluded between trade unions and employers' associations and 23,158 were company agreements concluded between trade unions and individual employers.

In recent years, the number of companies and employees covered by a collective agreement has shown a steady decline. According to figures from the Institute for Employment Research (Institut for Arbeitsmarkt und Berufsforschung, IAB) establishment panel, in 2000 only 45% of west German and 23% of east German establishments were covered by a sectoral collective agreement (DE0201299F). The proportion of employees covered by a sectoral agreement was 63% in west Germany and 46% in east Germany. A relatively high number of companies with no collective agreement, however, use existing sectoral agreements as a point of reference for determining pay and working conditions.

Pay

For the majority of employees, pay increases for 2001 were determined by the 2000 collective bargaining round, in which many two-year sectoral pay agreements were concluded (DE0012202F). In 2001, therefore, trade unions affiliated to the German Federation of Trade Unions (Deutscher Gewerkschaftsbund, DGB) concluded new collective pay agreements only for some 5.6 million employees, or about one quarter of all employees covered by a collective agreement.

According to the Institute for Economics and Social Science (Wirtschafts- und Sozialwissenschaftliches Institut, WSI) collective agreement archive, in 2001 the average annual increase in collectively agreed pay was 2.1%, although sectoral increases varied between 1.3% and 3.2% - see table 1 below (DE0201201F). In most sectors, collectively agreed pay increases were significantly lower in 2001 than in the previous two years, when the average increase was 2.4% in 2000 and 3.0% in 1999.

* Increases against the previous year.

Source: WSI collective agreement archive 2002.

According to the Federal Statistical Office (Statistisches Bundesamt, Destais), gross wages and salaries rose by 2.0% in 2001, compared with a 2.5% increase in consumer prices. This meant that German employees suffered a 0.5% decrease in real pay. However, net wages and salaries grew by about 3.4% due to a reduction in income tax and employees' social security contributions.

One notable exception to the overall pay moderation was a pay agreement for the pilots employed by theLufthansa airline (DE0106226F). The German Airlines Pilots' Association (Vereinigung Cockpit, VC) - which is not an affiliate of DGB - originally called for pay increases of up to 35% and justified its pay claims with international wage comparisons, according to which the pilots of most other airlines earn much more than the pilots at Lufthansa. According to VC's figures, the final agreement, which was reached within an arbitration committee after a number of 24-hour strikes by pilots, includes a 26% increase in basic pay and an additional 33.2% increase in variable pay for a term of three years.

Working time

There were almost no changes in weekly or annual working time as a result of the 2001 collective bargaining round. With the exception of a very few agreements - for example atDeutsche Telekom or in the cinema sector (DE0109243N) - which provided for a slight working time reduction, working time did not feature prominently on the bargaining agenda in 2001.

Collectively-agreed average normal working time was 37.7 hours per week in 2001. There was, however, still a significant difference between west Germany (37.4 hours per week) and east Germany (39.1 hours per week). Nearly 35% of west German employees but only 6% of their eastern colleagues worked 37 hours per week or less - for details see table 2 below. Average agreed annual working time was 1,641.9 hours in west Germany and 1,724.2 hours in east Germany.

Source: WSI collective agreement archive 2002.

In the area of working time flexibility, the most outstanding development in 2001 was a company agreement for the new subsidiary of the German-based car producerVolkswagen (VW),Auto 5000 GmbH (DE0109201F). On the basis of an average 35-hour week over a year, the agreement provides for:

• the application of a three-shift-system and a regular working week starting with the Sunday night shift and ending with the Saturday morning shift;
• a maximum of 30 Saturday evening shifts on the production lines every year, which means a maximum of 10 Saturday evening shifts for every employee;
• a maximum weekly working time of 42 hours; and
• an individual working time account, in which a maximum of 200 hours per year can be saved, usually compensated by additional time off.

If a certain shift is not able to fulfil product and quality targets, the employees are obliged to work overtime. The overtime will be paid only if the reasons for the performance shortfall are the responsibility of the employer. Originally, VW management aimed to achieve a total'decoupling' of pay and working time, whereby employees would have been obliged to work as long as necessary (up to the statutory maximum working week of 48 hours) to reach a certain production target without any overtime or other extra pay. This, however, was strongly rejected by the trade unions (DE0107235F).

Pay inequalities

Pay inequalities between men and women were not a major issue in the 2001 collective bargaining round. To a certain extent, the issue played a role in the negotiations between social partners on the modernisation of the collective framework pay agreements in metalworking. The German Metalworkers' Union (IG Metall) had called for an abolition of traditional job descriptions which put'typical female jobs' in low pay grades. The negotiations, however, have not reached an agreement so far.

Job security

The most outstanding agreement dealing with job security in 2001 was the so-called'5000 x 5000' project at Volkswagen (DE0109201F). Volkswagen management had proposed creating 5,000 new jobs, with the employees concerned receiving fixed monthly pay of DEM 5,000. The new employees were to work in a new VW subsidiary, Auto 5000 GmbH, which would not be covered by the VW company agreement but would have rather flexible working conditions (see above under'working time'). After a heated dispute between VW and IG Metall, the bargaining parties finally reached a compromise according to which pay and working conditions are below the VW company agreement but basically adhere to the collectively agreed standards of the branch-level agreements in metalworking.

Training and skills development

In March 2001, the national tripartite Alliance for Jobs (Bündnis für Arbeit) adopted a joint statement on training, which recommended that trade unions and employers' associations conclude new collective agreements to secure and improve further training at company level (DE0103213F).

In June 2001, the collective bargaining parties in metalworking concluded a new collective agreement on further and continuing training for the region of Baden-Württemberg which entitles employees to determine their training needs in annual consultations with their employer, with the latter paying for the subsequent training (DE0107233N). The parties also agreed to set up a new agency which will assist companies and employees in improving the maintenance, adaptation and upgrading of skills. The metalworking employers' associations in other regions, however, have so far refused to conclude similar agreements on further training.

A far-reaching agreement on further training was also concluded at the at the new VW subsidiary Auto 5000 GmbH (DE0109201F). The VW agreement provides that every employee should receive on average three hours per week of training, with half of the training time paid by the company and the other half in the employees' own time. Every employee should have the right to an individual training plan which combines work process-related training (training on the job) with broader training (training off the job), including training in social skills.

Other issues

Following legal changes in the German pensions system (DE0106227N), private pensions became a prominent issue in the 2001 collective bargaining round. The first collective agreement on the introduction of a sectoral private pension scheme was concluded in January 2001 in construction (DE0104216N). In September 2001, agreements to set up sectoral pension funds were concluded in chemicals and metalworking (DE0111201F). The agreements provide workers with new options to convert part of their income into pension assets.

Legislative developments

A relatively large number of new laws were formulated and approved during 2001. In May 2001, theFederal Council (Bundesrat) - the upper house of parliament - finally approved the second part of the government'spension reform and thus cleared the way for a substantial revision of the German pensions system. In essence, the reform will replace the current'pay-as-you-go' state pension scheme (whereby current pensions are covered by the contributions of those currently in employment) by a dual pension scheme, consisting of both a reformed pay-as-you-go state pension and a private pension, with employees obliged to pay a proportion of their income into company or other private schemes (DE0106227N).

In November 2001, the Bundesrat passed the so-called'Job-AQTIV-Gesetz' on thereform of labour market policy, which came into force on 1 January 2002 (DE0111203F). This law aims to improve the efficiency of employment services, strengthen training and skills development and allow a better reconciliation of work and family life. A key element of the reform is the introduction of an'integration agreement' (Eingliederungsvereinbarung) between unemployed people and public employment offices. In addition, the new law extends social security cover during unemployment by filling the gaps in the social security system and aims to promote equal opportunities for men and women through gender mainstreaming and the extension of special measures for the promotion of women's employment.

In October 2000, parliament approved the Act to Fight Unemployment of Persons with Disabilities (Gesetz zur Bekämpfung der Arbeitslosigkeit Schwerbehinderter, SchwbAG), which in April 2001 was revised and incorporated into the Social Security Code. Book IX of the Social Security Code now includes a comprehensive set of regulations ondisability, and in particular includes measures aimed at helping employees with physical and psychological disabilities to be integrated into the labour market (DE0112238F). In November 2001, the government approved a draft Law on Equal Opportunities for People with Disabilities (Gleichstellungsgesetz für behinderte Menschen), which is due to come into force on 1 May 2002. This law completes a series of reforms and political initiatives by the'red-Green' coalition government, intended to fight discrimination against people with disabilities (TN0102201S).

Finally, also in November 2001, the Bundesrat passed a law on the realisation ofequal opportunities (Gleichstellungsdurchsetzungsgesetz) for employees of the federal civil service and of the federal courts, which replaces the existing law of 24 June 1994 on the promotion of women in the civil service (DE0112206N).

The organisation and role of the social partners

The most important change in the organisation of German social partners in 2001 was the creation of the Unified Service Sector Union (Vereinte Dienstleistungsgewerkschaft, ver.di), which was completed in March 2001 (DE0104220F). Ver.di now represents almost 3 million workers in some 1,000 different occupations, most of them in public and private services. There were five unions involved in this merger: the Public Services, Transport and Traffic Union (Gewerkschaft Ã-ffentliche Dienste, Transport und Verkehr, Ã-TV); the German White-Collar Workers' Union (Deutsche Angestelltengewerkschaft, DAG); the Post Workers' Union (Deutsche Postgewerkschaft, DPG); the Commerce, Banking and Insurance Union (Gewerkschaft Handel, Banken und Versicherungen, HBV); and the Media Union (IG Medien).

Ver.di is structured as a'matrix' organisation with a vertical and horizontal structure. The vertical structure follows geographical lines, with a central organisation at national level, located in Berlin, and further organisations at regional, district and local level. The horizontal structure involves 13'sectoral areas' (Fachbereiche). Each sectoral area has its own suborganisation at the various geographical levels, as well as at the establishment level. Although ver.di faces significant difficulties in retaining its members, the union has already showed itself to be a competent and powerful actor in collective bargaining in a variety of industries.

With most DGB-affiliated trade unions concerned about ongoing membership decline (DE0103210N), some unions have started to set up new programmes for membership recruitment. While ver.di founded the'connexx ' project to attract high-skilled employees in the media industry (DE0111204N), the Construction Workers Union (Industriegewerkschaft Bauen, Agrar, Umwelt; IG BAU) - the union with the most dramatic membership loss - decided to concentrate its efforts on recruitment in fields adjacent to construction (DE0110202N).

Organisational developments within employers' associations have been closely related to the ongoing restructuring process of the German branch-level collective bargaining system. Since the 1990s, a number of individual companies have withdrawn from employers' associations and thus refrained from industry-wide collective bargaining. As shown in table 3 below, this problem is most serious in east Germany.

Source: German Institute for Economic Research (Deutsches Institut für Wirtschaftsforschung, DIW).

Industrial action

There were no major strikes at sector level in 2001 and consequently only a limited number of working days was lost due to industrial action. There were, however, two strikes which affected only a limited number of employees but which drew a lot of public attention.

• In the airline industry, the VC pilots' trade union organised a number of warning strikes as well as two 24-hour work stoppages at Lufthansa (DE0106226F), forcing it to cancel most of its domestic flights (see above under'Pay'). In addition, the airline had to suspend temporarily most of its cargo services. After the dispute had dragged on for eight weeks, a settlement was reached by way of a joint resolution agreement. The agreement was reached with the help of a special arbitration committee bringing together VC and Lufthansa, which was chaired by the former minister for foreign affairs, Hans-Dietrich Genscher.
• In January 2001 the IG Medien media workers' union called a strike of technical staff at the musical'Cats' to protest about plans by theStella musical corporation to transfer'Cats' from Hamburg to Stuttgart (DE0102205N).

In addition to these strikes, there were also several warning strikes which accompanied branch-level collective bargaining, notably in public broadcasting (April 2001), the retail industry (June and August 2001), horticulture (October 2001) and among the civilian staff of the German army (May 2001). In May 2001, the most notable warning strike took place in the metalworking industry in the southwest of Germany, where IG Metall called some 60,000 workers in companies such asDaimlerChrysler,Audi andPorsche out on a warning strike. This protest was staged in support of the union's demand for a first comprehensive collective agreement on further training. Several smaller warning strikes followed before employers and IG Metall finally concluded an agreement (DE0107233N) in June (see above under'Training and skills development').

National Action Plan (NAP) for employment

There is no special institution through which the German federal government involves the social partners when drawing up its National Action Plan (NAP) for employment in response to the EU Employment Guidelines. Instead, the government sees the national tripartite Alliance for Jobs as the central framework for involving the social partners in employment-creating policies, which also includes the issues raised in the NAP. In its2001 NAP, the German government made reference to several agreements and declarations which has been concluded within the Alliance for Jobs. The 2001 NAP as such, however, played a prominent role neither in relations between social partners nor in the public debate.

In 2001, the number of activities and agreements within the framework of the Alliance for Jobs showed a significant decrease in comparison with the previous year. There was only one official top-level meeting between representatives of the federal government, trade unions and employers' associations, which took place in March 2001 (DE0103213F).

Company restructuring

There were two major cases of companies which found themselves forced to adjust their business operations substantially during 2001.

• As a consequence of the terrorist attacks on the USA of 11 September 2001, most major German airlines suffered from declining numbers of passengers and subsequent financial losses. Among the most severely affected wasLTU, which was for a while on the brink of bankruptcy (DE0111207F). In a joint effort by company management, LTU's major shareholders, the state of North Rhine-Westphalia, and the two unions representing pilots, flight attendants and ground staff, a rescue package was drawn up, seeking to bring the airline through this difficult time. Employees represented by the VC pilots' union and ver.di (representing ground crew and flight attendants) agreed to wage cuts and to forgo bonuses as part of a comprehensive rescue package. The plan will streamline LTU's operations and change its shareholder structure.
• Adam Opel AG, a subsidiary of the US-based motor manufacturer,General Motors, introduced the'Olympia' restructuring programme, seeking to make the company profitable again. Among other points, the programme includes measures such as the reduction of production capacity and savings in the area of supplies. In June 2001, a framework agreement on this programme was negotiated at the European level within the context of the GM European Works Council (BE0109301F), with exact specifications subsequently negotiated at the national level. In negotiations between the Opel German works council and national management, both parties agreed to reduce the company's workforce by 2,500 but to refrain from compulsory redundancies. However, the company subsequently published new reports relating to the 2001 business year, which revealed that Opel lost even more money than in the previous year, and it is therefore still unclear as to whether these measures will be sufficient to get the company back on track.

Employee participation

As the debate on the EU European Company Statute and its employee involvement provisions (adopted in October 2002 -EU0110203N) is as yet developing slowly within the German business community and trade unions, most attention during 2001 focused on the reform of the Works Constitution Act (Betriebsverfassungsgesetz, BetrVG), approved in June, which is considered to be the boldest reform in the field of co-determination since 1972 (DE0107234F,DE0103221N andDE0102242F).

Through this reform, the government has adjusted numerous provisions of the Works Constitution Act to the changed business environment, in particular giving works councils a say in areas such as training, employment security, the environment and fighting xenophobia and racism. At the centre of the reform are rules to: streamline the election procedure in small companies; make it easier for workers to elect a works council; abolish separate elections for white- and blue-collar workers; increase the total number of works councillors; and improve rules governing the release of elected works councillors from their regular work duties.

The new law also seeks to improve the representation of women in works councils by introducing a'equality quota', whereby the gender which is in a minority within the workforce must be represented by at least a corresponding share of works council members.

New forms of work

With the advent of the reformed labour market law, the'Job-AQTIV-Gesetz' (see above under'Legislative developments'), opportunities to integrate unemployed workers into the labour market through temporary work agencies have been increased. The maximum period of employment for temporary agency workers with the same employer (Ãœberlassungsdauer) has therefore been extended from 12 to 24 months - if it is not expected that the person concerned will take on another form of employment in the near future.

In April 2001, the ver.di trade union and the leading temporary employment agencyRandstad Deutschland GmbH concluded an agreement on pay increases for about 21,000 of the latter's employees working in various companies (DE0105222N). Although most agency workers are currently not covered by collective agreements, this was to set an example for the whole sector. Randstad had previously introduced a company agreement regulating working conditions, and - in April 2000 - concluded a three-year collective agreement on working time, overtime pay, holidays, bonus system and periods of notice with the unions in this sector.

'Job rotation' has been introduced within the framework of the'Job-AQTIV-Gesetz'. This is a measure whereby wage cost subsidies are provided to employers to encourage them to employ an unemployed person as a temporary substitute for an employee released from work to undergo further training. The subsidy is from 50% to 100% of the wage for the substitute.

There is currently no analysis of the number of part-time workers affected by the new law on part-time work and fixed-term employment relationships (Gesetz über Teilzeitarbeit und befristete Arbeitsverträge), which came into force on 1 January 2001 (DE0011293F). The law introduces a right for workers in companies with more than 15 employees to reduce their working time, as long as no internal company reasons prevent such a reduction, and restricts the possibilities for concluding fixed-term employment contracts.

Other relevant developments

In July 2001, the government and employers' associations signed an agreement on equal opportunities in the private sector, in which the latter declared their intention to develop and implement their own measures to promote equal opportunities and'family-friendly' employment conditions. The conclusion of the agreement means that a binding law on equal opportunities, which had formed part of the current'red-Green' government's coalition pact, has been put on hold and binding legal regulations have been substituted by declarations of intent (DE0107231F).

Outlook

There are two major factors which will influence the development of German industrial relations in 2002. The first is the forecast poor performance of the German economy and a persistently high level of unemployment. The second is the forthcoming general election, in the autumn of 2002.

With regard to the election, it has already become clear that some of the labour law initiatives taken by the current federal government, such as the reform of dismissal protection or the new Works Constitution Act, will play a prominent role in the electoral campaign, since the opposition parties have already called for further changes to these laws. Since the current high unemployment figures might diminish the present government's re-election chances, it is likely that 2002 will see further initiatives to promote employment, in particular in the'low-wage sector'.

Finally, the 2002 collective bargaining round will have a major influence on the relationship between German employers' associations and trade unions. The positions in the run-up to the bargaining round made clear that both parties have rather conflicting viewpoints (DE0112248F). While the employers are calling for a continuation of moderate pay increases in order to secure employment, a large number of unions are convinced that a policy of pay restraint does not lead to more employment but, instead, believe that employment will be stabilised only through pay increases which are sufficient to promote domestic economic demand.