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Niels-Erik Wergin, cand. PhDLondon School of Economics

Industrial Relations Department

Decentralisation of Collective Bargaining and its Impact on Trade Unions

An Anglo-German Comparison

13th IIRA World Congress

Freie Universität Berlin

8-12 September 2003

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Industrial Relations in Germany

• Stability?“One of the most remarkable features of the German System of Industrial Relations is its resilience”

• Dual structure of interest representation:

1. Collective Bargaining2. Co-Determination

→ legally separated

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Collective Bargaining (CB)

• At sectoral-level, within regions but: high degree of co-ordination between regions

• Between one Trade Union and one Employers’ Organisations

very centralised

• Result: sectoral collective agreement (Flächentarifvertrag)

• Traditionally, high coverage of employees: about 3/4

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Co-Determination• At Plant- and Company-level

• Institution: Works Council; negotiates with Management De jure, institution of labour law, not trade unions Works Councillors are elected by all employees De facto, works councils are union-institutions: most councillors (ca. 4/5) are DGB-union-members

• By law, Works Councillors are obliged to act in the interest of the firm, no right to strike

• In Fact, relations between works councils and management are usually rather good and constructive

• Reason: CB at sectoral level has kept conflict out of plants

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Separate Tasks?Legally: clear separation of tasks between CB (sectoral-level) and co-determination (enterprise-level)In reality, however, both levels are closely linked.

Main reason: Most Works Councillors are active union members

As such, Works Councillors have always been members of unions’ collective bargaining commissions

Distinction between levels gets increasingly blurred because of the de-centralisation of CB CB at plant level

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Challenges

The German model of IR, and in particular the system of CB, is coming under increasing pressure:

1. Globalisation

2. High unemployment

3. Neo-liberalism

4. Changing working-practices

5. Unions and employers’ organisations lose members

6. Situation in East Germany

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Sectoral Bargaining Coverage is Decreasing

Companies Covered by Sectoral Agreements

West Germany

East Germany

Investment Goods 1995 58.5% N/A 1997 58.2% 34.9% 2000 41.7% 16.8%

Economy-wide 1995 51.8% N/A 1997 49.0% 25.7% 2000 45.4% 23.2%

Source: IAB-Betriebspanel

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Sectoral Bargaining Coverage is Decreasing...

Employees Covered by Sectoral Agreements

West Germany

East Germany

1995 72.2% N/A 1996 69.2% 56.3% 1998 67.8% 50.5% 2000 62.8% 45.5%

Source: IAB-Betriebspanel

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... and Number of Company Agreements is rising

companies with company agreements

0

1000

2000

3000

4000

5000

6000

1990 1991 1992 1993 1994 1995 1996 1997

West

East

Total

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De-centralisation: Two Forms

1. Organised/regulated de-centralisationWithin the framework of sectoral CB :devolution of only certain bargaining areas to the

workplace level, negotiation of overarching agreements at sectoral level continues

Potentially, unions can still co-ordinate CB

2. Disorganised/unregulated de-centralisation• Employers leaving employers’ organisation (or not

joining in the first place) or• Illegal undercutting of sectoral agreement Co-ordination of CB very difficult or impossible

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Opening Clauses• Social partners in the German metalworking industry prefer

the option of ‘regulated de-centralisation’• Major instrument for regulated de-centralisation of CB:

‘opening clauses’ in the sectoral agreement• Concluded at sectoral between social partners• Allow companies to diverge from provisions in the sectoral

agreement in certain areas (e.g. wages, working time) under certain conditions

• Management and Works Council utilise an opening clause by concluding a separate agreement for the respective plant, replacing the concerning sections of the sectoral agreement

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Opening Clauses: Two Types

1. Plant agreements (Betriebsvereinbarungen):• automatically substitute the concerning sections of

sectoral agreement • preferred by employers

perceived flexibility

2. Additional agreements (Ergänzungstarifverträge):• need approval of social partners at regional level • preferred by unions

allow co-ordination of collective bargaining policies

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Opening Clauses: Three Phases Three major steps in the decentralisation of CB in the

German metalworking industry:

1. 1970s: ‘Humanisation of Working Life program’ by the social-liberal Brandt-government: opening clauses concerning qualitative aspects

2. Since 1984: introduction of ’35-hour-week’: opening clauses allowing flexibilisation of working time

3. Since 1993: Recession, particularly difficult economic situation in East-Germany after unification: opening clauses allowing lower wages in serious cases (‘hardship clauses’)

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Relationships between Workplace IR Actors

Membership D

Works Council

Vertrauensleute E

Collective Bargaining B

Employment Security C

Management

Workforce Union

A

F G

Source: French 2001

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Consequences of De-centralisation

Micro-Level Macro-level

De-centralisation of Collective Bargaining

Works Councillors gain competencies for CB

Full-time-officers lose competencies for CB

Works Councillors become more independent and self-confident

Full-time-officers lose influence on works councillors

Works Councillors are more likely to conclude company-level ‘pacts’

Full time officers are less able to ensure coherent bargaining out-comes throughout the industry

Company-Syndicalism

?

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Works councillors unconvinced about de-centralisation of CB

Evaluation of de-centralisation of collective bargaining by works councillors

Germany (Total)

West Germany

East Germany

Positive 12% 12% 9% Ambiguous 40% 41% 36% Negative 37% 36% 39% Difficult to evaluate 12% 11% 14%

Source: WSI works/staff council survey 1997/8, in EIRO 1999

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Why are works councillors unconvinced about de-centralisation?

• Diminishes their bargaining power at plant- and company-level

• Reason: Branch-level collective agreements have a ‘relief-function’ (Entlastungsfunktion)

Makes it easier for works councillors to reject employers demands for reductions

• Against present background (high unemployment, increased competition), de-centralisation increases pressures on works councillors to accept social concessions

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Works Councils’ Strategies

Behaviour of a Works Council in a Multi-player Prisoner’s Dilemma Game

Treatment of Sectoral Agreement Short-term Impact

by Works Council

in Plant A by all other

Works Councils on Job

Security on Sectoral Agreement

1 undercut accept increases none 2 accept accept none none 3 undercut undercut none breakdown 4 accept undercut decreases breakdown

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Works Councillors and De-centralisation

Two main factors to consider when assessing how Works Councillors will deal with a decentralisation of CB:

• Works Councillors’ willingness to agree to plant agreements violating the sectoral agreement

• Works Councillors’ ability to resist such agreements

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Works Councillors and De-centralisation

Works Councillors’ willingness to agree to plant agreements violating the sectoral agreement depends on:

• Their involvement in interplant trade-union structures

• Their perception of the economic situation in general, and of their plant in particular

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Works Councillors and De-centralisation

Works Councillors’ ability to resist such agreements depends on the Works Council's bargaining position, which is contingent upon its power resources.

Those power resources depend on support Works Councillors get from:

• Law and the state

• IG Metall

• Plant’s workforce

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Works Councils and IG Metall

De-centralisation of CB results in:

• The enterprise level becoming more important in the area of CB, and Works councils becoming more independent

• IG Metall losing control over ‘its’ Works Councillors

“When the Works Council chairmen of automobile companies come to Frankfurt, they tell Zwickel what to do rather than the other way round.” (interview notes)

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Works Councils and IG MetallFor IG Metall, problems arise during an economic crisis:

A crisis leads to increased willingness of Works Councillors to co-operate with management, the more the enterprise is perceived to be in a critical situation, and to undercut the sectoral agreement

increases the competitive situation of the own enterprise helps protecting jobs

‘Betriebsegoismus’ (plant egoism) (Streeck 1984) IG Metall, in its fight to defend sectoral CB, has to fight a war on 2 fronts, against employers and ‘disloyal’ councillors

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Relations Between Works Councils, Unions and Management

Works Council Chairpersons’ views on relationships with management and unions

in the Brandenburg-Berlin metalworking industry

Disagree/ Strongly Disagree

No View

Agree/ Strongly Agree

Economic difficulties make close co-operation with management unavoidable. 22% 15% 63%

Sometimes it is necessary to contradict the policies of IG Metall in the interests of the firm. 35% 13% 52%

If necessary the works council would agree a works agreement to protect jobs, although it undermined the collective agreement.

47% 16% 37%

Source: French 2001

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Comparison – Views of East- and West-German Works-Council Chairpersons

Works Councillors’ views on relationships with management and unions in the east- and west-German metalworking industry

Disagree/ Strongly Disagree

No View

Agree/ Strongly

Agree

In general relations between the works council and management in our establishment are good.

East

West

20%

36%

0%

9%

80%

55%

The establishment's management is a trustworthy bargaining partner.

East

West

42%

49%

6%

15%

53%

36%

The works council can only be successful if it harmoniously works together with management.

East

West

42%

49%

7%

6%

51%

45%

Sometimes it is necessary to contradict the policies of IG Metall in the interests of the firm.

East

West

35%

36%

11%

15%

55%

49%

Source: French 2001

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Works Councils and IG Metall

This development could result, de facto, in a gradual transformation of Works Councils into the core of an emergent enterprise unionism.

Betriebsegoismus cuts the links between the two levels of interest representation in the dual system. Works Councils behaviour not controlled by, and conditional upon sectoral agreements any more instead, guided by market forces ‘return to the market’

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Consequences for IG Metall I

The survival of IGM as a central actor in German IR depends essentially on its capacity to prevent this development.

For IGM is, this development destroys their strategic capacity for solidaristic interest representation aimed at protecting the status of individual workers from the uncertainties of the market.

However, if IGM allows market forces to widen the disparities between their differently privileged member groups, it will sooner or later have to face its own decline as collective actor.

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Consequences for IG Metall II

There is a real danger that IG may degenerate, in the long term, into a mere service organisation for strong Works Councils, supplying them with legal advice and economic data instead of guiding their policies.

A development in this direction is already taking place, and it has progressed much faster than expected.