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
13th IIRA World Congress
Freie Universität Berlin
8-12 September 2003
1
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
2
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
3
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
4
Separate Tasks?
Legally: clear separation of tasks between CB (sectorallevel) 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
5
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
6
Sectoral Bargaining
Coverage is Decreasing
Companies Covered by Sectoral Agreements
West
Germany
East
Germany
Investment Goods
1995
1997
2000
58.5%
58.2%
41.7%
N/A
34.9%
16.8%
Economy-wide
1995
1997
2000
51.8%
49.0%
45.4%
N/A
25.7%
23.2%
Source: IAB-Betriebspanel
7
Sectoral Bargaining
Coverage is Decreasing...
Employees Covered by
Sectoral Agreements
1995
1996
1998
2000
West
Germany
East
Germany
72.2%
69.2%
67.8%
62.8%
N/A
56.3%
50.5%
45.5%
Source: IAB-Betriebspanel
8
... and Number of Company
Agreements is rising
companies with company agreements
6000
5000
4000
West
East
3000
Total
2000
1000
0
1990
1991
1992
1993
1994
1995
1996
1997
9
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
10
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
11
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
12
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’)
13
Relationships between Workplace IR Actors
Management
A
Employment Security
C
Collective Bargaining
B
Works Council
G
Vertrauensleute
F
E
Workforce
Union
Membership
D
Source: French 2001
14
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 outcomes throughout the industry
Company-Syndicalism
?
15
Works councillors unconvinced
about de-centralisation of CB
Evaluation of de-centralisation of collective
bargaining by works councillors
Positive
Ambiguous
Negative
Difficult to evaluate
Germany
(Total)
12%
40%
37%
12%
West
Germany
12%
41%
36%
11%
East
Germany
9%
36%
39%
14%
Source: WSI works/staff council survey 1997/8, in EIRO 1999
16
Why are works councillors
unconvinced about de-centralisation?
• Diminishes their bargaining power at plant- and companylevel
• Reason: Branch-level collective agreements have a ‘relieffunction’ (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
17
Works Councils’ Strategies
Behaviour of a Works Council in a Multi-player Prisoner’s Dilemma Game
Treatment of Sectoral Agreement
1
2
3
4
Short-term Impact
by Works Council
in Plant A
by all other
Works Councils
on Job
Security
on Sectoral
Agreement
undercut
accept
undercut
accept
accept
accept
undercut
undercut
increases
none
none
decreases
none
none
breakdown
breakdown
18
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
19
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
20
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
21
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)
22
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
23
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
24
Comparison – Views of East- and WestGerman Works-Council Chairpersons
Works Councillors’ views on relationships with management
and unions in the east- and west-German metalworking industry
In general relations between the works council
and management in our establishment are good.
The establishment's management is a
trustworthy bargaining partner.
The works council can only be successful if it
harmoniously works together with management.
Sometimes it is necessary to contradict the
policies of IG Metall in the interests of the firm.
Disagree/
Strongly
Disagree
No
View
Agree/
Strongly
Agree
East
20%
0%
80%
West
36%
9%
55%
East
42%
6%
53%
West
49%
15%
36%
East
42%
7%
51%
West
49%
6%
45%
East
35%
11%
55%
West
36%
15%
49%
Source: French 2001
25
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’
26
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.
27
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.
28