1 Niels-Erik Wergin, cand. PhD London School of Economics Industrial Relations Department Decentralisation of Collective Bargaining and its Impact on Trade Unions An Anglo-German Comparison 13 th IIRA World Congress Freie Universität Berlin 8-12 September 2003

2 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 Bargaining 2. Co-Determination → legally separated

3 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

4 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

5 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

6 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

7 Sectoral Bargaining Coverage is Decreasing

8 Sectoral Bargaining Coverage is Decreasing...

9... and Number of Company Agreements is rising

10 De-centralisation: Two Forms 1.Organised/regulated de-centralisation Within 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

11 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

12 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

13 Opening Clauses: Three Phases Three major steps in the decentralisation of CB in the German metalworking industry: s: ‘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’)

14 Relationships between Workplace IR Actors

15 Consequences of De-centralisation

16 Works councillors unconvinced about de-centralisation of CB

17 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

18 Works Councils’ Strategies

19 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

20 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

21 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

22 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)

23 Works Councils and IG Metall For 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

24 Relations Between Works Councils, Unions and Management

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

26 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’

27 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.

28 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.