Source: DGB

1998 - The results of Germany's 1998 works council elections clearly indicate the high level of employee acceptance of works councillors as their representatives, and of the "works constitution" system as a whole. Despite losses, the DGB remained by far the most influential of the trade union confederations, with 62% of works councillors and 73% of works council chairs affiliated to its member unions. However, the results also confirm the trend away from union towards non-union representation within works councils.

*DGB (Deutscher Gewerkschaftsbund) - Grman Trade Union Federation

The calculated union density of 32.2% in 1998 even understates unions' problems. This rate is inflated by including non-working members such as unemployed or retired persons in the numerator (union membership), but not in the denominator (total employment). If these members are excluded, just about one in four employees in Germany is now a union member. Since the structural change in the economy continues, union membership and density can be expected to fall further unless unions manage to become more attractive to the individualistic employees in the growing private service sector. (Claus Schnabel, IW Köln)

Read the source for the full discussion.

June 1999 - Chancellor Gerhard Schroeder and The British prime minister, Tony Blair, co-signed a document called Europe: The third way/Die Neue Mitte.

The following is taken as is from here.

First of all, the paper states that, following the abandonment of the world view represented by the dogmas of left and right, fundamental social democratic values remain - fairness and social justice, liberty and equality of opportunity, solidarity and responsibility to others. The paper goes on to emphasize the role of enterprise and of the markets, which need to be "complemented and improved by political action, not hampered by it". Drawing on the experience of the past, social democrats ought to change old approaches and traditional policy instruments in areas such as the concept of social justice, the role of the state, the balance between individualism and collectivism, and entrepreneurial spirit. The promotion of social justice, states the paper, has sometimes been confused with the imposition of equality of outcome, resulting in the neglect of the importance of rewarding effort and responsibility. Social democrats should also refrain from the idea that achieving social justice is necessarily associated with ever higher levels of public spending regardless of what this achieves or the impact of the taxes required to fund it on competitiveness, employment and living standards. Furthermore, the belief that the state should address damaging market failures has all too often led to a disproportionate expansion of the government's reach and of the bureaucracy that goes with it, distorting the balance between the individual and the collective. Values that are important to citizens, such as personal achievement and success, entrepreneurial spirit, individual responsibility and community spirit, have too often been subordinated to universal social safeguards.

The paper goes on to state that the politics of the New Centre (Germany) and Third Way (UK) are about addressing the concerns of people who live in and cope with societies undergoing rapid change - both winners and losers. In this newly emerging world, people want politicians who approach issues without ideological preconceptions and who, applying their values and principles, search for practical solutions to their problems through honest, well-constructed and pragmatic policies. Voters who in their daily lives have to display initiative and adaptability in the face of economic and social change expect the same from their governments and their politicians.

September 1999 -- Chancellor Gerhard Schroeder's Social Democratic Party (SPD) loses state elections in Saarland, Brandenburg, Saxony, Hesse, North Rhein Westphalia, and Thuringen. The SPD also loses two municipal elections in Dortmund, Cologne, and Berlin. (In June 1999, the SPD lost the EU Parliament elections.)

Take a look at a discussion on the deteriorating labor-government relationship since Schroeder's rise to power in September 1998.

Alliance for Jobs

In November '95, the giant German metalworkers' union IG Metall signaled a notable change of course with its call for an 'Alliance for Jobs.' The essence of this initiative is that:

• In the 1997 bargaining round, IG Metall agreed to accept a wage increase no higher than the inflation rate;
  
• In return for this moderation, employers accepted a binding commitment to create 110,000 new jobs a year for the next three years, with a tenth of these reserved for long-term unemployed;
  
• The government abandoned plans to cut welfare benefits, and agree to fund additional apprenticeships;
  
• In addition, the union allowed new recruits to be taken on at lower pay than existing employees -- a proposal which it had previously strongly resisted
  
• The first initiative for a national "alliance for jobs" failed under the old Conservative/Liberal government in 1996. The new red-green coalition has made a second attempt, aiming to establish a new permanent tripartite institution at national level.
  
• Trade unions and employers are responsible for an employment-oriented collective bargaining policy and organization of work, which fulfils the company's need for flexibility and the employees' wish for "time sovereignty;"
  
• Companies are responsible for improving innovation and investment and increasing the number of training places, in order to guarantee every young person a vocational training place; and
  
• The government is responsible for creating the framework conditions for sustainable growth and employment by reforming the tax system, decreasing social security contributions, modernizing public services and launching a new "innovation offensive" in training, research and sciences.
  
• On 6 July of 1999, leading representatives of the federal government, trade unions and employers' associations met officially for the third round of top-level talks within the framework of the Alliance for Jobs, Training and Competitiveness (Bündnis für Arbeit, Ausbildung und Wettbewerbsfähigkeit). The meeting was chaired by the Federal Chancellor, Gerhard Schröder. The Alliance was established in December 1998 as a new permanent tripartite arrangement at national level, including various working groups on specific topics as well as regular top-level talks between the leading representatives of all three parties.
  
• In their joint declaration, DGB and BDA agree on the goal of a "substantial and sustainable reduction of unemployment." Since there is "no panacea" for the creation of new employment, various initiatives are necessary including "structural reforms in the fields of collective bargaining, social and tax policy as well as new innovations and investments and an improvement of vocational and continued training". In order to create a "new political and social consensus" on these initiatives, DGB and BDA want "to give a new impetus to the Alliance for jobs".
  
• Regarding collective bargaining policy, DGB and BDA have agreed on the following goals:
  1. a "collective bargaining policy which is reliable in the medium and long term", and which gives companies a stable basis for the planning of their business;
     
  2. "a differentiated and flexible working time policy and a different distribution of work", including
     • "an employment-creating reduction of overtime",
     • the use of working time "corridors" and annualized working time arrangements as well as yearly and/or life-long working time accounts,
     • the creation of more part-time work and the development of new models to make such work more attractive,
     • an improved utilization of partial retirement

  3. the improvement of company-related pension schemes;
     
  4. the priority use of "increases in productivity for employment promotion";
     
  5. the promotion of performance-related payments;
     
  6. a continuation of the reform of branch-level collective bargaining system, with an extension of "opening clauses" and collectively agreed "corridors" in order to allow more company-related rules.

Read more: I, II

Fighting Unemployment Using Collective Bargaining

Collective Bargaining Fund. In October 1999, the German metalworkers' union IG Metall and the Federal Ministry of Labour agreed in principle on a new concept for early retirement at the age of 60. Wanting to give older employees the opportunity for early retirement without loss of pension rights, IG Metall proposes the creation of a "collective bargaining fund" which would make additional contributions to the statutory pension scheme for workers who have taken early retirement. As the government has rejected making a direct financial contribution, the bargaining fund would be financed by employers and employees. Employers' associations, however, have already refused to participate in such a system.

Early and Partial Retirement. Furthermore, in 1996 the government replaced existing provisions on early retirement with a new partial retirement law (Altersteilzeitgesetz) which allows employees to work part-time (50% of normal hours) from the age of 55, while receiving at least 70% of their former income. In addition, various collective agreements were signed which further improved the payments to 80%-85% of their former income for employees taking partial retirement. The Federal Employment Service (Bundesanstalt für Arbeit) estimates that since the introduction of the new partial retirement law in 1996, around 100,000 employees have made use of the scheme. (Also here.)

Hardship Clauses. As stated above, under certain conditions, this allows companies (in former east Germany) with immense economic problems to pay their employees below the minimum wage set by the collective agreement for a limited period of time.

Works Constitution Act Reform - July 28, '01

In June 2001, the lower house of the German Bundestag approved a reform of the Works Constitution Act. Almost 30 years after the last major overhaul of the law on works councils, the government now aims to adjust numerous provisions to the changed business environment and in particular seeks to give works councils a say in areas such as training, employment security, protection of the environment and fighting xenophobia and racism at the workplace. Besides several provisions which seek to streamline the procedure for the election of works councils and increase their size, the new Act will also improve the representation of women. While trade unions mainly welcomed the new law, employers' associations highlighted major concerns.

The principal changes introduced under the new Act are (this section is based on, Addison, John T., Bellman, Lutz, Schnabel, Claus, and Wagner, Joachim. 2004. "The Reform of the German Works Constitution Act: A Critical Assessment." Industrial Relations, 43: 392-420):

1. The character of the works councils becomes more diverse. For example, divisional works councils can be introduced for special product or business units, or joint works councils can be set up across several establishments.

2. In establishments employing between 5 and 50 employees, the voting procedure for setting up a works council is simplified.  The new procedure has two stages: the nomination of candidates by an electoral board, followed 1 week later by another works meeting in which the works council is elected directly in a secret ballot of all employees present. In larger establishments with 51 to 100 employees, the two sides can decide voluntarily to use the new simplified procedures.

3. The size of the works council is increased via a reduction in the employment thresholds used to determine the number of councilors.  

4. Employers are now required to make provisions for a full-time works councilor in establishments with 200 or more employees instead of 300 employees as before.

5. The influence of the works council in matters of employment production and the training of the workforce is strengthened. The works council may no initiate and codetermine vocational training measures with respect to employees whose qualifications are likely to be rendered obsolete. 

6. The employer has to furnish the works council at his/her expense with access to modern information and communications equipment, such as the Internet and e-mail. Moreover, the works council is entitled to consult with internal and external experts and can delegate some of its tasks to working groups in establishments with more than 100 employees.

7. An equality quota mandates that the gender that is in the minority at the establishment be represented on the works council at least in proportion to its employment share.

8. The legislation grants codetermination rights to the works council on environmental protection issues and equips it with the means to combat racism in the workplace through an extension of its power to withhold consent in matters of the engagement and transfer of personnel.

Elections were held on 18 September, 2005. On November 11, 2005, the conservative CDU/CSU and the social democratic SPD reached a deal to form a new government in Germany. The coalition agreement includes an increase in the VAT rate from 16% to 19%, a range of austerity measures affecting the social security system - including raising the retirement age from 65 to 67 - and a relaxation of the statutory protection against dismissal.

On November 21, 2005, Angela Merkel, leader of the Christian Democrats (CDU), was sworn in as Germany's first woman chancellor.

Read more on the Coalition Government.

Decentralization of Collective Bargaining

In the context of increasing decentralization of collective bargaining, the number of collectively agreed 'opening clauses' allowing deviation from sectoral collective agreements has increased. About 75% of establishments covered by collective bargaining make use of one or more opening clauses. By far the most important area of application is that of flexible working time arrangements, as reported by over two-thirds of all works councils in establishments with operational clauses of this kind.  Among establishments with operational opening clauses, 35% use them to extend working time. When it comes to pay issues, however, the collectively negotiated provisions at sectoral level enjoy clear priority (in particular in the area of collectively agreed basic pay), and deviations at company level based on opening clauses are still seen only in a small minority of cases. This overall picture has not much changed since the last survey in 2002.

Read the full discussion of the survey

Union Membership Continues to Decline

Since 1991, when trade union membership was boosted because of gains due to German unification, membership of DGB has been in continuous decline. The 2004 figures are a setback to hopes that this decline might slow down. According to the latest figures from the Confederation of German Trade Unions (DGB), the membership of its affiliated trade unions dropped by nearly 5% in 2004 to stand at 7.01 million. Not only has membership continued to decline but DGB also faces the problem of an ageing membership and particular difficulties addressing young workers and employees in sectors with a weak trade union presence. To tackle this situation, DGB and its affiliates have decided to intensify their organizing and recruitment efforts.

One reason for this decline is the loss of jobs in sectors where trade unions are well represented. Workforce reductions, outsourcing and privatization have negatively affected the unions' membership strongholds in the traditional industries and the public sector. Trade unions find it difficult to compensate for these losses by expanding into other sectors, especially in private sector services where the predominance of small businesses make it difficult to establish an organized workplace presence, e.g. by way of setting up a works council.

Here is the full record of the survey.

Coverage of Collective Agreements and Works Councils

In July 2005, the Institute for Employment Research (IAB) of the Federal Employment Agency published new data on bargaining coverage and the distribution of works councils, based on a representative sample of German establishments. It finds that 43% of establishments in western Germany and 23% of establishments in eastern Germany were covered by a collective agreement in 2004. These establishments covered 68% of employees in western Germany and about 53% in eastern Germany. In 2004, about 10% of establishments in both parts of Germany had a works council. These establishments represented 47% of employees in western Germany and 38% of employees in the east.

The data highlights two important pillars of the German industrial relations system - sectoral collective bargaining and works councils. The data show that the sectoral collective agreement remains the predominant type of collective agreement and that, even in eastern Germany, company-level collective agreements are to be found in only a relatively small minority of establishments. Bargaining coverage of employees remained in 2004 at a comparatively high level, although the picture looks different in eastern Germany. A similar picture is found by looking at the coverage rates of works councils. Here it is particularly the small establishments that are hardly touched by institutional employee representation. A remedy to this would be additional institutional support for the establishment of works councils, especially in small enterprises. Such a reform of the Works Constitution Act, however, is not currently on the political agenda.

Read the full record of the survey

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A very good source on the evolution of codetermination