background
75 years ago, the Collective Bargaining Act came into force – and shaped the German economic model. But collective bargaining is in crisis. Trade unions and employers view the issue very differently.
Car, industry, social partnership – these were the buzzwords about the German economy for decades. Many people from abroad also looked with interest at the German model: the strong economic performance was accompanied by high wages and good working conditions, negotiated by employers and unions.
The basis of the model: the Collective Bargaining Act of 1949. It came into force on April 22nd, almost exactly 75 years ago. First in the British and American zones – later also in the French zone. Today the German Federation of Trade Unions is celebrating the anniversary in a big ceremony.
Origins in the Weimar Republic
“This makes a central determination that remains to this day: the social partners are the competent actors in shaping working and economic conditions,” explains IG Metall legal advisor Johanna Wenckebach.
The origins of the so-called collective bargaining law go back to the Weimar Republic. Numerous judgments have interpreted the 13-paragraph law in the past decades. The law has changed little over the years.
“Tariff policy is participation policy”
The verdict from employers and unions on the collective bargaining law is similar – both praise it as a slim and good law.
IG Metall legal advisor Wenckebach highlights one point in particular: “Tariff policy is participation policy. This is a democratic instrument. Especially in times when many feel powerless in the face of upheaval and transformation, it is important to strengthen and experience this that you can bring in your own interests.”
Only a fifth of the companies are still bound by collective agreements
Although the collective bargaining law may have survived the decades well, the scope of collective agreements has fallen drastically over the decades. While in 1998 73 percent of all employees were employed with a collective agreement, in 2022 the proportion was only 51 percent. According to the union-affiliated Social Sciences Institute of the Hans Böckler Foundation (WSI), only a fifth of all companies are currently bound by collective agreements.
This means that Germany, of all places, where IG Metall is the largest union in the world, is only in the middle of the European Union when it comes to the scope of collective agreements across the EU. In Spain, Denmark, France, Austria, Belgium and Italy, the coverage of employees with a collective agreement is 80 percent and higher, according to OECD figures for the years 2017 to 2022.
Small and younger companies are less likely to pay according to the tariff
This is also due to a change in the German economic system: Recently, the sectors in which collective agreements are less common or are even atypical have grown here – such as the start-up industry or the private service sector.
In addition, smaller companies in particular, such as those common in the service sector, are difficult for unions to organize. The German automatism “automotive industry equals collective agreement” is also over. This is shown by the example of Tesla in the Gigafactory Berlin-Brandenburg.
“Germany is taking a special path”
Thorsten Schulten, head of the collective bargaining archive at the union-affiliated WSI, says opposite tagesschau.de: “The unions are trying to take new paths and reposition themselves through new organizational strategies and collective bargaining in smaller companies – with some success. But that will not be enough to significantly increase collective bargaining coverage.”
He therefore calls for the general applicability of collective agreements to be made easier in order to stabilize the collective bargaining system – for example, by abolishing the employers’ double right of veto. “Germany is taking a special path in Europe. Most neighbors with similar collective bargaining systems to ours very often declare their collective agreements to be generally binding,” says Schulten.
Declaring it generally binding means that a collective agreement previously negotiated by the collective bargaining parties applies to all companies in the industry – regardless of whether they took part in the negotiations or not.
Things are different in Belgium and the Netherlands
Schulten hopes that this will make membership more attractive to both employers and the union: “In order to negotiate the provisions in the collective agreement, the companies or employees then have to join the associations.”
The instrument has rarely been used in Germany because the unions and employers’ associations were so strong here for decades that the collective agreements had a wide reach anyway.
In 2022, according to the WSI, 0.8 percent of all industry collective agreements in Germany were declared generally binding, while in the neighboring countries of Belgium and the Netherlands “almost all important industry collective agreements,” writes scientist Schulten in an analysis.
Industrial peace as an advantage for companies
While the unions are celebrating 75 years of the Collective Bargaining Act with numerous chronicles and press releases, the mood among the employers’ associations is more cautious. But here too it is said that the Collective Bargaining Act is a “proven basis for stable working relationships and economic success”, as the Federal Association of German Employers’ Associations (BDA) writes in a tweet on the news platform X.
On its website, the association reminds people of the advantages of area collective agreements for companies, such as the fact that they maintain operational peace – and financial planning security.
But like the unions, employers are pushing for reforms in order to stabilize the collective bargaining system in the long term. They only rely on other instruments to get there.
Employers demand Flexibility
Employer associations such as the BDA, for example, are calling for collective agreements to be made more flexible using a modular principle. What this means is that companies only have to select the wages component, but do not have to apply the working time rules agreed therein. The idea behind it: In this way, companies that were previously skeptical about the model could also be introduced to collective agreements. Area collective agreements come from a time when it was primarily about large companies – the regulations are sometimes too complex for small ones.
The unions reject this. They are concerned that this could undermine the tariff system.
BDA sees Freedom of association injured
When it comes to general applicability, the demands of the union and employers also point in opposite directions. The BDA does not want to expand the instrument, but rather restrict it.
In 2015, the grand coalition eased the requirements for a declaration of general applicability. The previous 50 percent criterion – i.e. that 50 percent of the employees in the area of application must be employed by employers bound by collective agreements – was no longer applicable. The association sees this as violating the constitutionally guaranteed freedom of association.
Ministry of Labor wants to strengthen social partners
Even if employers are generally opposed to new state interventions in the field of collective bargaining, the BDA sees a need for action in one place: “We need clear industrial action law, especially for the railways and comparable areas,” said BDA general manager Steffen Kampeter of the “Rheinische Post“ with a view to the strikes by the train drivers’ union GDL this year.
Labor Minister Hubertus Heil also wants to strengthen the social partners. However, the current coalition agreement does not provide for any right to industrial action, nor are there any changes to the declaration of general applicability. The ministry refers to tagesschau.de-Inquiry about other measures agreed in the coalition agreement – such as the legal anchoring of digital access rights for unions and the continued validity of collective agreements in the event of spin-offs.
Public contracts only for companies bound by collective agreements?
But the federal government’s central project – the Federal Tariff Compliance Act – was recently stuck for months. It is intended to regulate that federal public contracts are only awarded to companies that pay according to tariffs.
Another plan of the traffic light is actually to declare so-called “union busting” – the systematic pushing out of unions by employers – an official offense. But a little more than a year before the next federal election, the government has not yet addressed it. An official offense is a crime that public prosecutors have to investigate independently – for example, if there is an initial suspicion that a works council was intentionally obstructed or even broken up.
However, upon request, the Ministry of Labor said that the proposed law should be presented during this legislative period.