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Unification with the East
Still hard to get combined data
Political ‑ Population of 82 million 2005
Most populous country in Europe (except for Russia)
Rate of population increase is zero (immigration just offsets natural decline)
1/3 Catholic, 1/3 Protestant
Parliamentary Democracy - Federal system, 16 lander
Republic with President elected for 5 year term by collegial system (state & federal legislators).  Currently Horst Koehler
Upper house (Bundesrat) has 69 seats, each state with 3-6 depending on population.  Must vote as block.  Chosen by state governments
Lower House (Bundestag) has 613 seats, combination of proportional and direct representation
Some legislation can only be blocked in upper house by 2/3 vote (e.g. budget) but other legislation require majority in both houses, including most labor and employment legislation
In course rank behind only Sweden and Britain in corruption index 2004
September 2005 election essentially a dead heat and no new Prime Minister or governing coalition chosen yet
CDU/CSU Christian Democrats
Ruled from 1983-98 –
2005 won 35.2% vote and 225 seats
SPD Social Democrats
Ruled 1969‑1983 - 1998-2005 in coalition with Greens
2005 election won 34.3% of vote and 222 seats
Appears there will be “grand coalition” of these two parties headed by leader of CDU, Angela Merkel
Free Democrats‑ liberal/middle of road‑ pro-free market
Part of most governing coalitions including SPD 1969‑83 and 1983-98 with CDU/CSU
2005 9.8% vote and 61 seats
Greens - environmental reformist party
2005 8.1% vote and 51 seats
Party of Democratic Socialism, ex-East German Communist Party
2005 merged with some of left wing of SPD and some disgruntled unionists
2005 8.7% votes and 54 seats
In previous election had only had 4% of vote so only had two seats directly elected
None of the other parties willing to consider a coalition with them
Proportional representation system makes absolute majority unlikely
5% rule
Among most technologically advanced countries in the world
Largest economy in Europe
5th largest in the world
Slowest growing in the Euro area
Major industrial activities
Metal production & processing
Manufacture of steel
Manufacture of electrical & other machinery
Vehicle production
Reasonable resource base
Per capita GDP purchasing power parity 2003 (has fallen in relative terms)
Below USA lowest in course (almost exactly equal to Italy)
Human Development index put them also at or near the bottom in 2003
2003 taxes
larger share of income than USA, Canada or Britain,  < Italy, France, or Sweden
2003 government spending
greater than USA, Britain, Canada and Italy, below France and Sweden
Highly open economy
Most export dependent per capita of all developed economies
Gender equality
Behind Sweden, Canada and Britain but more equality than France or Italy
Child Poverty
Behind only Sweden and France in the course
Guest workers
Began to import guest workers in 1960s due to labor shortages
Turks and former Yugoslavs largest groups
East grew rapidly in early 1990s
Since 1997 east has grown most slowly than west
Wages 75% western level and productivity only 2/3
$70 billion in annual transfers from west to east
2004 10.6%
Early 2005 went above 12% (highest since the great depression) and October 2005 11.6%
High wages but not high unit labor costs
High productivity
Ideologies seem compatible
With commitment to cooperation on both sides but too much upheavel in past 80 years to conclude yet system is stable
Unions in the Post WWII Period
Right to join guaranteed in Constitution
Industrial unionism
Partly to avoid earlier disunity which was felt to have helped Nazi's to power
Founded 1949 taking 100 existing unions and merging them to 16
Since 1990s have merged into 8 unions
1994 37% of all employees in unions
including civil servants
Peaked in 1951 at 50%
bit < Italy, close to Canada
2000 about 30% and 2002 a bit lower
Largest union was metal workers which has lost membership
Now down to about 2.7 million
United Service Sector Union (Ver.di) comes from 2001 merger of five other unions and now has over 3 million members
High degree centralized control
National executive determines wage and other policies implemented at lower levels
Unions collect about 2% of income in dues‑ don't strike much so build up sizable reserves
Income from economic enterprises
Nature of Relationship
By law unions must be independent of political organizations
In principle DGB unaffiliated
In practice it and  unions have had close ties to the SPD
Most top SPD officials union members
At least nominally at least ¾ of them belong to unions
Union officials one of the largest occupational groups of SPD Parliamentarians
Labor minister in most recent SPD government was IG Metall deputy chair until 1998 election
Election time, union officials almost completely mobilized for party purposes until 2005
March 2004 IGMetall and Vir.Di so unhappy with market based tendencies of SPD government that they propose creating a new party
January 2005 unhappy unionists and left-wing SPD members form new party
Later in 2005 they merge with the Party of Democratic Socialism
Management Organization‑
Business highly organized
Better than employees
70% German employers in industry employer associations
They do the bargaining
Since 1980s many small and mid-sized employers have left
Claim associations dominated by interests of the extremely large employers
In particular, object to bargains which accept shorter work weeks
BDA - Confederation of German Employers' Associations
Made up of the state associations
Contains 70% eligible enterprises with ~80% private sector employees
Public employers not included
VW and Iron and Steel companies not included
Local governments and state governments
Each have established one central association to conduct centralized bargaining with their employees
No government sponsored mediation service
Parties maintain their own
Rulemaking‑ Collective Bargaining
Government plays major role in both procedural and substantive matters
Constitution (the basic law) protects freedom to unionize
Bargaining Structure & Ground rules
No legal procedure for recognition
Hasn't been a problem
No legal duty to bargain and a few employers do refuse
Negotiations industry‑wide on state or regional level between union and employers' association
2003 62% of employees in west and 43% in the east covered by such agreements
Also some company agreements with small firms
These still small number but growing in importance
Bargainers on both sides usually empowered to make binding agreements
Union members can only reject by vote > 75%
Three basic types of agreements
Framework agreement - wage payment systems
Umbrella agreement – all terms and conditions except wages
Wage agreement - smaller territory & may be renegotiated yearly ‑ Limited to couple of basic wage rates
If association employees are the majority of industry employees, government can extend agreement terms to cover all employers in industry
In practice happens only in certain sectors of the economy
Public employees
Have same bargaining rights as private sector
Exception is civil service which does not have right to strike or even bargain.  Their unions represent them by lobbying
Social security based on legislation, not negotiation
2000 Unions proposed lowering retirement age from 65 to 60
Government didn’t agree but did allow parties to negotiate
Agreements with some major companies on “phased retirement” in which pay is reduced by 30% at age 57 but employees work full-time.  However, they stop coming to work at 60 but continue to be paid until they retire officially at 63.  Hoped this would provide more jobs to younger workers
Some fringes
Unemployment compensation (68% salary for first year)
Sick pay = 100% wages
Job Security
Has recently become the other hot topic
Must consult with Works Council about layoffs
Must convince labor court layoffs unavoidable
2004 legislation applies protections against layoffs and dismissals only to companies with 10 or more employees.  Had been 5.  Opponents argue makes small companies reluctant to add workers
Government limits length of fixed term employment contracts
Still since 1985 legislation created more options for non-standard contracts, they now amount to about 1/3 of all employment contracts
Bargaining Issues
Issues circumscribed by government at top and works councils below
Hours of work
Major issue since late 70s
Has provoked the most strikes
Germans shortest work year in course, 25% less than 1960
Began to implement 35 hour week in 1993
In most agreements has to average 35 hours over fairly long time period, sometimes a year
Average work week 1.5 hours longer in the east than the west (37.4 versus 39)
Employers now trying to negotiate this back up toward 40
Siemens and Daimler-Chrysler in 2004
Unions accepting some of this in return for promises not to move jobs overseas
IG Metall has frequently been the pattern setter in recent years
Views itself pioneer social progress
Was the leading in implementing 35 hour week and tried unsuccessfully to spread it to the east
2000 union agreed to reduce rate of wage increase by tying wages to productivity
In return got to negotiate earlier retirement
Separate negotiations in east
Set wages as percentage of those in western agreements
But those in west are minima often exceeded while those in east tend to be actually paid
Longer hours and lower benefits in east
Some firms have reached (illegal) agreements to pay wages lower than those in the industry agreements
Unions have gone along in effort to save jobs
Codetermination – Introduction
Justified in terms of political rights, not economic efficiency
Coal and steel
Most complete power sharing
Large companies‑ over 2000 employees‑
Close to coal and steel
Crucial differences enable stockholder representatives to retain more complete control
Small companies and public sector
Closer to consultation than codetermination
Applies only to corporations so many small companies refuse to incorporate
Management Board‑ Labor Director
Coal and steel and large companies only
Works councils‑ Every firm with five or more employees
About 30% of firms which should have them don't
Mostly small firms
Rule‑Making ‑ The Works Council
Legally designated representative of  employees within enterprise for purposes of codetermination and participation in social and personnel affairs
Basically operates the same in all three systems
Growing in importance
Council elected by all workers
Union and non union
No significant penalty for not setting one up
Less than 25% of firms with fewer than 100 employees have them
90% of firms with over 100 employees have them
In very small firms often depends on ability of union to persuade employer to create one
In large companies, some council members do council work full time
Company will provide offices, secretaries, etc.
Wage structures, piece rates, incentive systems
Methods of wage payment
Must be within framework of collective bargaining agreement
Technically can't negotiate wage levels  (not allowed to negotiate or modify collective bargaining agreements) but often does with result technically a unilateral employer decision
On these issues unresolved differences go to binding arbitration or the labor court
Arbitration rare, agreement is the norm
On "personnel" issues, hiring, firing, promotion, and transfers, prior consent of the council must be secured
Unresolved issues go to labor court
In some ways councils and unions quite separate and in some ways they blend together
Employers would like to keep them separate
Employers prefer to deal with councils and to let employer associations deal with unions
Existence of councils has tended to exclude unions from shop floor
Technically council‑employer agreements can't deal with bargaining issues but distinction hard to maintain
1992 BMW councils accepted Saturday work in exchange for four-day weeks over objection of their union
Growing number of companies have negotiated agreements with their councils designed to lower costs and even subvert industry bargaining agreements
Workers often identify council with union
Councils help  recruit union members and distribute union literature
Unions often recruit their officers from councils
Substantive cooperation and coordination between councils and unions
Many DGB unions run training courses for council members
Works Constitution Act of 2001
Significantly enhanced influence of councils
Required employer to provide internet and e-mail access
Increased requirement for representation of the minority gender
Extends council rights to temporary employees
Unions felt full participation in company decision‑making would help prevent misuse of economic power for political ends
This is why coal and steel were given such complete power sharing
Supervisory board appoints members of management board and oversees its activities
Equivalent of US board of directors
Doesn't engage in collective bargaining, only sets broad policy
Coal & Steel
Applies in relatively small number of companies with 300,000 employees
Worker representatives on the Supervisory Board have parity - equal representation plus neutral chair
In practice boards rarely vote
Nearly all decisions unanimous
Labor Director must be approved by worker representatives on the Supervisory Board
Still unions expect labor director to act as employer
Labor directors have often bargained vigorously against unions
No neutral, ties broken by the stockholder appointed chair
1998 IGMetall gave one of its ten seats on the Daimler Board to US UAW after Chrysler merger
Companies sometimes try to re‑organize to avoid this system
Mostly the smaller companies
Larger ones seem to like it and often say so, e.g. Daimler-Chrysler
Constitution gives wage and salary earners right to strike
Constitution = Basic Law
Courts have held conflict legal only when conducted in a labor dispute
No political strikes
No strikes during existing agreement
Must be aimed at the employer
Must be conducted by union
Must exhaust procedures for settlement
Defensive lockouts legal
In response to strikes
Union strike benefits usually 55‑75% of wages
Benefits paid only if governing body of union approves
Employers won't hire striking workers
Nor accept work from struck competitors
Level of conflict historically quite low
Short warning strikes typically not counted
Since these happen with some regularity, official conflict statistics understate the degree of conflict
Unions proposed 35‑hour week with no pay cut ‑ designed to combat unemployment
Government joined employers in opposition
Size and settlement
57,000 strikers, 147,000 locked out and > 300,000 laid off
Arbitrated settlement for 38 1/2 hour week
March 2000 series of one-hour warning strikes
By IGMetall
In East, trying to win wage parity with the west
2002 series of warning strikes by IGMetall
Most serious strikes in 7 years
Issue was wages
Succeeded in winning 4% settlements, well above what employers had offered
2003 strikes over hours in the East
Again IGMetall
Trying to get 35 hours in the East
2004 General Motors/Opel Dispute
General Motors/Opel announced plans to cut 1/3 of its German workforce
10,000 workers went on a week-long strike
Produced no agreement
Job of works council to assure compliance with the agreement
Seems to work well and to resolve most disputes at this level
Individual employees can go to labor courts
But free advice and representation from unions usually provided
Decide all individual and most collective disputes except those over new terms and conditions
Disputes between employee and employer, with or without a collective bargaining agreement
Disputes between union and employer
Disputes between works council and employer