The German government is getting serious about its plan to award contracts only to companies that are subject to a collective agreement. The threshold is "an estimated contract value or contract value of 10,000 euros excluding VAT". This emerges from the draft bill for a law "to strengthen collective bargaining autonomy by ensuring compliance with collective bargaining agreements in the awarding of public contracts by the federal government and other measures", which was drawn up under Federal Labour Minister Hubertus Heil (SPD). The aim is to reverse the trend towards declining collective bargaining coverage in the German economy.
Manfred Schäfers
Business correspondent in Berlin.
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A month ago, Heil had announced that he would present a bill by June with Economics Minister Robert Habeck (Greens) that would prescribe compliance with collective bargaining agreements at the federal level. He strives for federal contractors to grant their employees all the provisions of the sectoral collective agreement – for wages, but also for allowances, Christmas bonuses and holidays. The new regulation is to come into force at the turn of the year.
The surcharge to the Collective Bargaining Act is therefore anything but surprising. In their coalition agreement, the SPD, Greens and FDP have already announced: "In order to strengthen collective bargaining, the federal government's public procurement will be linked to compliance with a representative collective agreement for the respective industry, whereby the award is based on a simple, unbureaucratic declaration." Later, the Minister of Labour repeatedly reaffirmed this intention. "If we as a state spend taxpayers' money, then entrepreneurs who do not pay their people properly must no longer benefit," Heil argues.
Criticism of more bureaucracy
In December, the Ministries of Labour and Economy launched a consultation process on the legislative plan. Associations, chambers, trade unions, but also lawyers and individual companies have participated. The reactions are extremely different. "The Federal Collective Bargaining Loyalty Regulation is a measure to strengthen collective bargaining by significantly helping to prevent social and wage dumping by creating equal competitive opportunities," says Stefan Körzell, board member of the German Trade Union Confederation, for example. If the state lives up to its role model role and underlines the role of collective agreements, this will have an impact on the private sector.
The assessment of the Association of Family Entrepreneurs is the opposite. "We reject the binding of the federal government's procurement to compliance with collective agreements," writes René Bohn, head of the labour market and social security there. Unfortunately, it has become a nonsensical practice to disqualify employers who are not subject to collective bargaining as "bad" employers per se. From the point of view of family entrepreneurs, it is inadmissible to favour companies bound by collective bargaining agreements (negative freedom of association).
Trade unions are losing their cohesive power
The German Confederation of Skilled Crafts is friendly in tone, understanding of the goal, but critical of the matter. It is a major concern of the skilled trades to provide employees with appropriate and fair working conditions. As a rule, this is done through collective bargaining structures. Collective bargaining regulations in public procurement law served social and economic policy goals. "However, the real purpose of public procurement law is to organise competition for public contracts," it says. The planned regulation would lead to further bureaucratization. "Above all, small and micro enterprises, as they are predominant in the craft sector, are thus de facto excluded from the award procedure," warns the Central Association.
As reported by the Federal Statistical Office, the employment relationship for around 43 percent of employees in Germany was recently regulated by a collective agreement – with considerable differences between West and East. But one thing is the same. The value has declined here and there. According to official statisticians, in 1998 76 percent of employees in the former Federal Republic of Germany were covered by a sectoral or company collective agreement. Their reach there has dropped to 2021 percent by 54. In eastern Germany, the figures have fallen from 63 percent in 1998 to 45 percent the year before last. The development is therefore clear: collective bargaining coverage is declining.
But if you only look at the employer's side, you will only learn half the truth. After all, the trade unions are also losing their binding power. The number of its members is steadily declining – from 7.8 million in 2000 to 5.6 million last year. That's a decline of more than a quarter. And the rule here is that trade unions with few members find it more difficult to enforce collective agreements.