The erosion of corporatism? The rescaling of industrial relations in Germany

Abstract

By the 1980s, some scholars had already claimed that corporatism, as an expression and institution of the bilateral negotiations between trade unions and employers’ associations, had come to an end. This perception is stronger nowadays than it was then. Quite often it is argued that, as a result of economic liberalisation and the paradigm shift from Keynesianism to Monetarism, industrial relations are under pressure, and that this is accompanied by a weakening of trade union power. In this article, the development of collective negotiations and the new contours of corporatism are analysed with respect to Germany. At the moment we are witnessing a decentralisation of formerly central negotiations and their differentiation in the direction of collective and/or concession bargaining at the level of the firm. At the same time, there is an important trend towards the up-scaling of industrial relations to the European Union level. The central argument of the article, therefore, is that a rescaling of industrial relations is taking place, which does not necessarily mean an end to corporatism but, rather, profoundly new qualities of corporatism. In order to develop the argument, changes in industrial and political organisation are examined.

Keywords

Collective agreements corporatism industrial relations labour geography trade unions

In 1987, Scott Lash and John Urry argued that corporatism, with its system of bilateral negotiations between trade unions and employers’ organisations, had come to an end (Lash and Urry, 1987). The deregulation and internationalisation of markets, intensified economic competition, flexible production, deregulated employment systems and, above all, a paradigmatic shift from Keynesianism to Monetarism had exerted pressure on corporatism. Considering the changes in Britain in the 1980s, this analysis is not surprising. Several authors, such as Jessop (1991) and Burgi and Jessop (1991), have understood Thatcherism as a political answer to the crisis of Fordism combined with an attack on trade unions.

In contrast to the British model, the German way out of the crisis of Fordism has consisted of the strengthening of corporatist alliances between trade unions and employers’ organisations (see Jackson, 2005; Leborgne and Lipietz, 1994; Traxler, 2005). These reformist approaches in Germany, in contrast to the Anglo-American model, have combined economic competiveness with the attempt to balance social inequalities. The small size of the differences between high and low wages, compared with Britain or the USA, and the high qualification level of employees and job security have been seen as evidence supporting this argument.

However, looking at the data on the collective bargaining coverage of employees and firms it seems that nowadays Lash and Urry’s analysis also applies to Germany. The share of employees in firms with collective bargaining coverage declined in West Germany from 69% in 1996 to 57% in 2006. In East Germany the situation is even more pronounced: coverage declined there from 65% to 41% (Fischer et al., 2007). That means that these days the labour contracts of no more than 50% of all employees in Germany are regulated by the agreements between labour and capital. The agreements are important because they structure the participation of employees in economic prosperity – understood here as a question of wage increases, working time and working conditions.

Does this mean that Germany is experiencing an erosion of collective bargaining? Is this development an indicator of the end of corporatism in Germany? If we consider the data on collective bargaining coverage the answer is clearly ‘yes’. However, it is necessary to have a closer look at the quality of changes and their impact on labour relations. In fact, there is less evidence for an erosion of corporatism than for transformations in its form and quality. I argue in the remainder of the article that collective bargaining as an institutionalised form of labour relations and corporatism is being rescaled and transformed in its spatial and organisational dimensions but that it is not undergoing a general erosion.

This article focuses on changes in the system of collective bargaining in Germany and on the new contours of corporatism. The existence of institutionalised politics of collective bargaining over the last 50–60 years is evidence of the endeavour to de-individualise negotiations between employers and employees. Efforts were made to negotiate working conditions and wages not exclusively at the level of the establishment, but also on regional, national and/or sectoral scales. Since the 1990s, however, there has been a reverse movement: more and more bargaining contracts are applied not on a national scale but on a regional one or even at the plant level. This development is accompanied by the emergence of new actors in the form of European Works Councils (EWCs) and new trade union organising strategies at the plant level. Considering these changes, we may doubt the correctness of the assumption that corporatism is coming to an end. Rather, transformations of corporatism have taken place which profoundly affect the spatial dimensions of social bargaining.

The next section investigates the contours and role of collective bargaining in Germany, as well as some of the major European differences. The more recent development of the German system of collective bargaining is then outlined. This includes the flexibilisation and decentralisation of the collective bargaining system, starting in the 1980s. Following that, I elaborate the Europeanisation of industrial relations in the form of EWCs. Decentralisation and Europeanisation are two scale ‘additions’, signalling the importance of the spatial and scale dimensions of social bargaining. Finally, the argument for a transformed corporatism will be substantiated.

Contours and functioning of collective bargaining

Following the first attempts to regulate collective bargaining in the Weimar Republic, the system of collective bargaining has become a fundamental institution of the West German economic order. At the end of the 1940s, it was established as a symbol of the historical compromise between labour and capital following ongoing conflicts (Streeck, 1995). The right to engage in collective bargaining without state interference was guaranteed in 1953. Since then, the collective regulation of employment contracts has been based on two pillars: one includes bargaining between employers’ associations and unions at the industry level and the other is co-determination between management and works councils at the establishment level (French, 2001: 562). Although the management and the works council of the individual firm implement collective agreements within the firm, legal restrictions are laid down by the Collective Bargaining Act (Tarifvertragsgesetz: section 4) and the Works Constitution Act (Betriebsverfassungsgesetz: section 77) to ensure that minimum standards contained in collective agreements cannot be undermined by agreements reached at establishment level (French, 2001: 576). In this sense, trade unions and works councils have different tasks but over the last 50–60 years the trade unions have had a strong influence on the works councils.

Generally speaking, collective regulation is about the wider goals of working-class solidarity (such as equal pay for equal work) and it aims to establish similar working conditions for a whole sector or parts of it, for certain regions in Germany or nationwide. Collective bargaining aims to regulate, for example, wages, tasks, apprenticeship pay, holidays and notice periods on a general level; at the level of the establishment, firms have to consult works councillors in the planning of plant restructuring (new technology, renovation, construction), work practices and employment (‘co-determination’). Another key task of works councils is the negotiation of ‘social plans’ to support workers in the case of mass layoffs (Doellgast and Greer, 2007: 74).

At the outset, attention was paid mainly to working time and wages, whereas in the 1970s questions of advanced vocational training, the specification of job requirements, the use of technology, protection against rationalisation and dismissals became more important because of economic change (Schulten, 1999). An extension of collective bargaining can also be observed in spatial terms. Until the first collective bargaining contract on a national scale between the IG Metall¹ and Gesamtmetall² in 1956, all negotiations had taken place on establishment, local or regional scales (Schauer, 1999). The national contract in the metal industry served as a role model in so far as central collective bargaining was increasingly adopted in the 1960s in other sectors.³ The willingness of the employers’ organisations to do this must be seen in the light of new economic structures in West Germany (Herrigel, 1996; Hirsch and Roth, 1986). As a result of the emergence of the European market, the decentralised economic and firm structures were no longer adequate to cope with mass markets: they gradually became transformed into structures of industrial mass production. However, in contrast to decentralised producers, the mass producers were in need of stable, calculable institutional and political conditions. They were dependent on markets with high absorptive capacities that rely on strong demand and high wages. This contributed to an understanding that the micro-regulation of working conditions and wages was no longer appropriate for stabilising market conditions. Rather, wages should develop in line with increases in productivity in order to stabilise demand (see also Streeck and Thelen, 2005: 18).

In that respect, collective bargaining obtained an important position in Keynesian economic policy. The aim was to regulate demand and economic growth through wage development (Traxler, 2005). Collective bargaining contributed to the establishment of similar working conditions within industries and to limiting variations among industries and across space. At the end of the 1990s, about 50,000 collective bargaining contracts existed, which had been negotiated in 250 different industries. This huge number of collective bargaining contracts is a reflection of variations in duration and regulation issues, and of spatial and firm-specific validity (WSI, 2002).

Over the years, the interests and hierarchies in the discussion of collective bargaining changed. One of the main interests of employers’ organisations was, and is, to prevent trade unions playing off employers against one another with respect to wages and working conditions in periods of economic prosperity. Moreover, collective bargaining contracts offer the advantage of reducing transaction costs. Certain aspects concerning jobs and contracts are fixed in bilateral negotiations, and thus are givens for both employees and employers. This shifts some of the burden of negotiating general working conditions away from the level of the firm. Another advantage of central collective bargaining – from an inter-company perspective – is the equalisation of competitive conditions concerning labour. Instead of using reduced wages as a competitive advantage, firms and corporations are encouraged to improve the quality and innovation of their products and services.

From the perspective of labour, co-determination and collective bargaining place limits on the imbalances of power in the labour market. The aim is to make wages independent of both economic cycles and the individual firm’s performance. Collective bargaining contracts are expected to provide security against individual risks such as old age and disease as well as guaranteeing a salary that makes it possible to participate fully in society. In that sense, collective bargaining contracts have different functions for employers, employees and the state (Bispinck/Schulten, 1998).

For a long time the German system of industrial relations – in the form of collective bargaining – has been perceived as a central pillar of West Germany’s economic success (Traxler, 1998: 249). Many European countries also established systems of collective bargaining after 1945. At the beginning of the 1990s, all EU members apart from the UK applied a system of centrally organised collective bargaining. In spite of conflicts concerning validity and application, all continental European countries still follow the corporatist path, regulating wages and working conditions on an inter-company basis, usually at the national scale.⁴ In contrast, in countries with a low degree of corporatist-collective regulation or where bargaining at the level of the firm prevailed – such as the UK, New Zealand and the USA – forms of collective wage agreements came to an end and industrial relations underwent a fundamental deregulation.⁵

But there are also differences among the continental European countries (see Boehm, 2010: 4f.) In the Scandinavian countries and the Netherlands, the leading associations of trade unions and employers use collective bargaining to coordinate national economic development. In comparison to this nationally centralised regulation, collective bargaining in Germany is organised decentrally but quite often applied nationwide. The bargaining results of the leading sector work as a kind of ‘manual’ for negotiations in other economic sectors. In that sense, decentralised bargaining dominates, although its reach is nationwide (Traxler, 2005: 381).

Flexibilisation and decentralisation of central bargaining contracts

The German system of collective bargaining has proven quite resilient to the shift from Keynesianism to Monetarism as a result of the prevailing understanding of collective bargaining as a way to manage economic challenges. However, the close connection between collective bargaining and economic growth gradually began to falter in the 1980s.

It can be regarded as an unintended side-effect of success that flexibilisation started off with a decisive victory by the trade unions. After several weeks of strikes in the metal and printing industries in 1984, the IG Metall managed to negotiate a reduction of working hours from 40 to 38.5 hours per week; an agreement was signed that in a second step in 1987 weekly working hours were to be reduced further. Similar to earlier collective bargaining innovations, reducing working hours became the guiding principle of negotiations in other industries. Of interest here is that, in exchange for the stepwise reduction of working hours, the IG Metall had to agree to their flexibilisation. The employers’ association (‘Gesamtmetall’) argued that reducing working hours would require more flexibility in the coordination of work in order to prevent discontinuity in the production process. Since then, bifurcated working times, irregular employment, working hour corridors and ‘balance sheets’ have structured employment (Bispinck, 1997: 553): in that sense, standardised working hours and days have become history.

The impact of German reunification on collective bargaining was even more severe. Although the collective bargaining partners agreed to transfer the West German system to East Germany, the compromise soon broke down because of the recession that followed reunification. As early as 1993, Gesamtmetall cancelled the contract regulating the step-by-step introduction of West German working conditions into East Germany. Since then, different working times and wages for the same work have been applied in East and West Germany.

The dismantling of collective bargaining gained speed with the inner erosion of the employers’ associations. With the first indications of economic recession at the beginning of the 1990s, East German employers in the metal and electronics industry turned their back on their employers’ association: newly founded enterprises often did not register with Gesamtmetall and member enterprises left. The outcome was the decreasing effectiveness of collective bargaining because only members of the employers’ association have to comply with the regulation of contracts. Implicitly, Gesamtmetall’s right to exist – and that of collective bargaining – was questioned by the high number of withdrawals. This ‘external erosion’ of the system of collective bargaining was combined with an ‘internal erosion’, expressed in efforts to undermine bargaining contracts by members (‘wild decentralisation’). All in all, this contributed to a loss of legitimacy for collective bargaining (Bispinck and Schulten, 1998: 245).

Declining coverage of collective agreements

The coverage of collective agreements reflects the above development: whereas in 1990 65.5% of all jobs were covered by central collective bargaining agreements, in 1998 this was true for only 32.2% of all jobs. Only one-third of all enterprises applied collective agreements in 1998. In enterprises established in 1997 and 1998, only 14% of jobs were protected by agreements (Handelsblatt, 1999). In 2005, less than 50% of enterprises in East Germany across all industries applied collective agreement; in West Germany the number is two-thirds of all enterprises (see Figure 1). Wild decentralisation⁶ is not documented so that this number sheds no light on it, although member enterprises engaging in wild decentralisation are included. Bispinck (1997: 553) emphasises that it is a widespread strategy of member enterprises to violate collective agreements, so that wild decentralisation has been a serious threat in East Germany since the middle of the 1990s (see also Artus and Sterkel, 1998; Oppolzer and Zachert, 1998). For Gesamtmetall, withdrawals, wild decentralisation and the tendency to avoid membership in the association contributed to the necessity of reforming its policies. In order to regain legitimation, Gesamtmetall started to negotiate opting-out clauses within collective agreements.

Figure 1.

Bargaining coverage across firms, 1996 and 2005.

First of all, a consequence was the opening up of new categories of membership for those enterprises that could not, or did not wish to, apply collective agreements. The so-called ‘association without collective coverage’ made it possible for members not to apply collective agreements but nevertheless enjoy the advantages of Gesamtmetall membership (such as advice on wages and working contracts). In that sense, this development both explains and contributes to the declining relevance of collective agreements. However, there is a difference between small and large enterprises. In 2003, 9% of all members, with around 6% of all employees, were organised in the ‘association without collective coverage’ within Gesamtmetall (see Table 1). This implies that mostly small and medium-sized enterprises are organised in this association. In contrast, enterprises that apply collective agreements are mostly large enterprises: in 2003, 23% of all enterprises with 55% of all employees in the metal and electronics industry complied with the agreements (see Table 1).

Table 1.

Enterprises and employees in the metal and electronics industry with respect to collective bargaining coverage in 2003.^a

	Enterprises	Employees
Enterprises applying collective agreement	23%	55%
Enterprises in ‘association without collective coverage’	9%	6%
Enterprises without collective agreement (non-craft businesses)	43%	32%
Craft businesses^b	25%	7%
Total (absolute numbers)	22,692	3,478,038

Source: information from Gesamtmetall (2004).

I would like to thank Gesamtmetall for giving me the information.

In spite of the fact that craft businesses (‘Handwerksbetriebe’) are not part of Gesamtmetall for legal reasons, they are – depending on production type – included in the statistics of Gesamtmetall. The collective agreements in the metal and electronics sector are not valid for craft businesses. If organised at all, they are organised in so-called technical associations (‘Fachverbände’), which are not part of this analysis.

Faced with membership withdrawals, Gesamtmetall campaigned for a breach of collective agreements. It was argued that because of the difficult economic situation of many East German member enterprises there was no alternative. Against the background of wild decentralisation, in 1993 the IG Metall accepted with bad grace the ‘hardship or exemption clauses’ that allowed enterprises to depart from collective agreements for a certain period if the enterprise was in a precarious economic situation. In order to apply the hardship clause in a member enterprise, the works council and the management of the enterprise in question have to negotiate locational alliances. The job of locational alliances is to decide how collective agreements should, and could, be flexibilised.⁷ In the beginning, the hardship clause was applied more frequently in East Germany, but in the meantime it has spread to West Germany. In 2005, it was actually applied more often in West Germany (see Figure 1). It allows for wages and working conditions below the standards negotiated in collective agreements. The hardship clause is not confined to the metal and electronics industry, but was introduced in all industries.

Opening clauses and locational agreements

Officially, however, the hardship clause was extended to West Germany only in 2004 with the agreement on the ‘Pforzheim solution’⁸ in the metal and electronics industry; unofficially – using the term ‘opening clause’ – the hardship clause had already been applied in West Germany. In particular, large enterprises used it to pressure works councils into accepting locational alliances. Works councils in turn wished to prevent global relocation options, but in order to achieve this they had to agree to concessions involving a considerable deterioration in wages and working conditions (Bispinck and Schulten, 1998: 244). According to research by the Max Planck Institute for Social Research (Max-Planck-Institut für Gesellschaftsforschung (MPIfG), 2002), between 1986 and 1996 locational agreements and alliances were negotiated in 55 of the 120 biggest companies. Most of these agreements depart from collective agreements.⁹ At Opel Bochum, the first locational agreement was negotiated in 1991. At that time, 19,500 workers were employed in the plant. Now, following the third locational agreement, only 5000 employees remain. Every round of agreement has been accompanied by losses in employment and wages (Getzschmann, 2009).

In 83% of all cases, the locational agreements were initiated by employers. According to the Max Planck Institute for Social Research, the interest of the employers was to reduce production costs in order to improve competitiveness but not to create jobs or to stabilise employment (MPIfG, 2002: 57). The agreements included reductions in wages, the payment of productivity bonuses, increases in productivity (via the extension of running times, changes in labour organisation, etc.) and the introduction of flexible working hours. Quite often flexibilisation has meant working more hours without appropriate financial compensation (Bispinck and Bahnmüller, 2007: 17). What employers usually offered was to keep the level of employment stable and to invest in machinery/equipment, as well as to guarantee the continued existence of apprenticeships. All in all, the locational agreements or hardship clauses have been successful in shaping collective bargaining according to enterprise/plant demands. This has meant the differentiation and reduction of collective bargaining standards.

According to an enquiry among works councils in 2004/2005, 75% of all enterprises applying central collective agreements make use of hardship clauses (Bispinck, 2005: 303). An enquiry among works councils on behalf of the IG Metall revealed that, starting with the Pforzheim solution, around 500 agreements that diverged from central collective bargaining standards were negotiated in firms (Wagner and Welzmüller, 2006: 28). A somewhat different picture is presented by the IAB-Betriebspanel¹⁰ for 2006: it claims that locational agreements are used in only 2% of all firms in Germany (Fischer et al., 2007: 52).¹¹ The fact that 3% of all manufacturing firms with 27% of the employment in this sector have locational agreements is evidence of the fact that locational agreements are mostly an instrument of large enterprises (Fischer et al., 2007: 52). Figure 2 illustrates this; moreover, it shows that locational agreements are more common in East Germany than in West Germany, and demonstrates that these agreements are no longer a firm-specific solution but a widespread phenomenon.

Figure 2.

Firms with locational agreements by numbers employed (30 June 2009).

Surprisingly enough, both the business cycle and economic performance seem to have little to do with the decision to introduce locational agreements. According to the MPI study (MPIfG, 2002: 50ff.), the pressure to apply locational alliances has been even more intense in favourable economic conditions and depends closely on the degree to which the management is orientated towards shareholder value.

Changes in the position of works councils

Members of works councils are overwhelmingly sceptical, if not antagonistic, towards the decentralisation of collective agreements (Schäfer, 2005). According to an enquiry among works councils, only 12% of the members questioned welcomed the decentralisation of collective agreements (Bispinck, 2005: 304ff.).¹² A total of 81% of all works council members regard decentralisation and locational agreements as an opportunity for employers to enforce their interests. However, 48% of all staff representatives see decentralisation and locational alliances as a way of reacting sensitively to firm-specific situations and challenges. The ambivalence shown in these results is the outcome of changes in the position of works councils.

The challenges for works councils become particularly apparent in transnational production networks with complex and shifting corporate structures. For works councils, the context of political action and practice has long been the firm. Now the corporate structures are no longer spatially and organisationally fixed: the borders of firms are constantly changing due to outsourcing, to the regrouping of firms and parts of firms and to the rearranging of responsibilities and jobs within the network. In order to be able to react, it is necessary for works councils to be informed and to be part of decision-making and planning. Under the Works Constitution Law, works councils have the legal right to co-determine aspects of planning and plant construction, but with respect to outsourcing, temporary work or changes in the legal form of a company the right of works councils is limited to consultation. According to Doellgast and Greer (2007), processes of vertical disintegration (i.e. subcontracting, outsourcing and contracting with temporary agencies) are undermining collective bargaining institutions by weakening the position of works councils as well as trade unions. Works councils have only limited resources – staff and equipment – to process the information needed in order to be able to negotiate with the management face to face. The limited number of staff representatives are unable to manage the amount of work to be done in a multitude of planning councils and commissions. Staff representatives often feel the pressure to handle complex issues simultaneously in several commissions with the effect that their ability to intervene is reduced. So the frustrating impression prevails that they do not achieve apparent influence and impact.

Works councils see an answer to this development through their participating in co-management and in risk management because it is seen as a chance to comment on corporate projects and possibly to avoid negative consequences for workers. In this sense, co-determination as a politically guaranteed legal right is becoming more private and contractual. According to Schmierl, ‘works councils become co-responsible for rationalisation and become active members in processes of capitalist optimisation and exploitation. The possibility of co-management is in fact scarcely institutionalised, written down and endowed with rights. Due to these conditions, the good results of traditional representative forms cannot be achieved’ (Schmierl, 1999: 554, translated by the author).

Divergence from the national standard is not a problem per se. The firm-specific agreements of the car producer Volkswagen were very favourable for its employees until recently. However, one must take into account the specific social conditions in which locational and plant-level agreements blossom. They develop when employers are in an advantageous position to bargain over collective agreements. Plant-level agreements signal that it is no longer possible to ensure ‘national standards’. They may indeed guarantee the survival or stability of a firm in economically unstable circumstances, but at the expense of the workers. In the current period, divergence results in the enforcement of flexible working conditions.

‘Localising’ conflicts

At the end of the 2000s, East as well as West German employers across all industries were withdrawing from the employers’ association in order to avoid the system of central collective bargaining. It is difficult to get data on this because employers try to keep their withdrawal quiet. An exception is the data released by the employers’ association of the metal and electronics industry in Hessen. According to Hessenmetall, 25% of all enterprises in the Rhine–Main region are considering withdrawing from the system of collective agreement. In 2008, around 160 out of 500 member enterprises of Hessenmetall worked without collective agreements (Frankfurter Rundschau, 2008).

This development is accompanied by a tendency to decentralise conflicts revolving around industrial relations on the one hand; on the other hand, it shows the potential for mobilising on a local scale, which speaks for a new spatial dimension of labour conflicts. One example of this is the struggle at ‘Vacuumschmelze’ (VAC), a global manufacturer in material processing in Hanau. After the announcement of the management in the autumn of 2008 that it had withdrawn from the system of collective agreements in the summer of that year, the staff went on strike. Before this announcement the development of the enterprise was the subject of a controversial discussion. The firm, which had been owned by Siemens, was sold in 1999 to a British mechanical engineering producer in an attempt to restructure the Siemens portfolio. In 2005, ‘Morgan Crucible’ sold the company to ‘One Equity Partners’, a private equity fund that financed the acquisition through a credit to be paid as debt by VAC. The works council was successful in scandalising the history of selling and reselling and the accompanying deterioration of working conditions. This strategy of questioning firms’ withdrawals throughout the Rhine–Main region contributed to inter-enterprise and regional alliances of employees and their works councils. In the context of strikes, public relations campaigns and demonstrations, the withdrawal from the system of collective agreements has become a hotly questioned issue.¹³

The decentralisation of collective agreements and the differentiation of labour contracts provoke a localising of conflicts because the challenges of decentralisation and differentiation are felt particularly at the local and firm level. The firm scale is the scale where employees experience most directly, for example, the reduction of wages, extension of working hours and increase in workload. In that sense the firm is the scale at which conflicts may explode. At this scale the pressure to achieve a required return on equity for shareholders is exerted with negative effects on labour relations and conditions.

But does this justify ascribing power to the local scale and local labour movements? Or does the localising of conflicts instead signal a disempowering of the labour movement? This is difficult to answer because it depends on the ability to scandalise the labour conditions beyond the firm and to organise solidarity on a regional (and supraregional) scale. It is the local and firm scale on which it is possible to question the rationality of dismantling collective agreements and to discuss alternative pathways. Depending on the importance of the particular plant/firm within the corporative network, as well as depending on the organisational strength of the employees, it is possible to challenge the process towards locational agreements and a decentralisation of central bargaining contracts by demanding good working conditions and collective rather than individual agreements. Up to now it is still an uneasy, contested situation in which every victory is bitterly fought and the result is not predictable. However, the process of decentralisation of collective bargaining is contributing to a mushrooming of local and firm-based conflicts. The experience of successful – as well as unsuccessful – fights provoke imitations and learning, and thus dissemination.

It is interesting to see that, as a result of struggle, the system of collective agreements is far from being history. Decentralisation and a tendency towards localising conflicts is taking place, which are indications of the new significance of spatial dimensions. It is quite probable that in the near future regional differences in the coverage of collective agreements will increase as the outcome of different local industrial traditions, trade union strength and willingness to fight for aims, as well as the capacity of the workers to engage in inter-enterprise alliances. In that sense the local scale will be pivotal for reconstituting industrial relations in a global era.

Industrial relations on a European scale

Confronted with the globalisation of corporations, trade unions are trying to overcome obvious limitations in their policies. Their goal is to counter the decentralisation of the system of collective bargaining with its Europeanisation. Up to now, the most promising approach in that respect are the EWCs, which, as a result of 20 years of negotiations, were passed as a European Union (EU) Directive in 1994.¹⁴ According to Jeremy Waddington, the EWCs Directive has to be seen in the context of the introduction of the Single European Act, which opened up possibilities for economic and locational restructuring within the EU (Waddington, 2006: 560). The EU Commission reacted by fostering new institutions in the arena of industrial relations. The intention was to align the different forms of co-determination in the EU countries.

EWCs are supposed to be introduced in enterprises headquartered in the EU with at least 1000 employees and at least 150 employees in each of at least two member states. According to the EU Directive, employers have to inform and consult the EWCs about corporate results and strategies. In order to guarantee this, the EU Commission has laid down the modalities of meetings (frequency, participants and locations). Thus, industrial relations have achieved a European dimension. Via EWCs, works councils now have the possibility to get information about corporation-wide reorganisation and rationalisation strategies.

European Works Councils as the least common denominator?

In the face of European differences and contrasting interests, EWCs represent a limited agreement, which means either a gain or a loss of achievements, depending on the national trade union traditions. From a German perspective, EWCs are only a minor improvement: the EU Directive only enforces the informing and consulting of staff representatives but excludes the far-reaching forms of co-determination that are applied in Germany and other countries with cooperative–participative industrial relations, such as the Netherlands, Austria or the Scandinavian countries. In contrast, in countries with confrontational approaches to workers’ rights, such as the UK, EWCs are perceived as a progressive institution exactly because they guarantee the right of works councils to get information – a right that did not exist before (Kotthoff, 2006: 17).

An impression of how weak EWCs can be is provided by a study by Waddington, according to which more than 75% of EWC representatives are informed either only after strategic decisions have been made by the management or not at all (Waddington, 2006: 564). Obviously, EWCs are not accepted as equal partners by the management; they have neither the means nor the legal status to influence the plans and strategies of the management (Waddington, 2006: 563, see also Wills, 2000). Frequently, problems start with ‘numbers’: companies are not legally required to reveal the number of their employees and their company structure, and thereby it is not clear whether the right to establish an EWC is covered by the EU Directive (Whittall et al., 2008).

In that sense, it could be argued that EWCs are an institutionalisation of industrial relations on a European scale, but without transformative capabilities. Indeed, it is open to discussion whether EWCs represent a rescaling of industrial relations and collective agreements. Quite often EWCs defend the interests of the employees of the headquarters or plant at which the EWC is located. Different national traditions in collective agreements, and different forms of workers’ organisations and industrial relations, seem to prevent an effective cross-border organising of works councils and trade unions. It is common practice for members of EWCs to see their primary task as taking care of corporative or plant development. Within a highly unpredictable corporate environment they try to contribute to a certain degree of predictability. In that respect, they represent, as quasi-co-managers, the interests of the enterprise (Hürtgen, 2008: 172ff.).

More often than not, EWCs seem to defend local and national traditions in industrial relations, i.e. they follow a place-specific interpretation of employees’ interests (see Kotthoff, 2006: 159; Lecher et al., 2001; Waddington, 2006; Whittall, 2004). In particular, trade unions from countries with a strong tradition in centralised collective bargaining perceive EWCs as a threat to their national collective bargaining policies in so far as EWCs might open the door to alternative – weaker – forms of collective agreements (Kotthoff, 2006: 3; Waddington, 2006: 566).

Examples of this are German employees’ representatives and trade unions, which quite often take a critical stance on EWCs; they are not in favour of an expansion of the latter’s responsibilities because they fear that this will lead to a loss of their own competencies. Part and parcel of these challenges is the fact that EWC representatives quite often complain about the difficulties of getting accepted by both the management and works councils (Kotthoff, 2006). They have to overcome prejudices by means of information campaigns at both branches and headquarters. This makes it clear that EWCs are not well established within the scalar system of national and European industrial relations. With respect to labour relations, it seems that the European idea still needs more effort before it will work.

Chances and options for European Works Councils

EWCs also offer future possibilities, however. According to Whittall (2004: 163), they may contribute to ‘a common reality that transcends the local setting, highlighting the common nature of the labour process’. EWCs offer the opportunity to establish networks among employees’ representatives from different branches of multinationals in order to counter competition between branches. One indication of this is the positive evaluation of EWCs by foreign (i.e. non-German) EWC representatives. In this case the networking activities are highly valued because they foster coordination across branches (Kotthoff, 2006). EWCs are a venue for the works councillors to get information about the situation and strategic options of management. They offer the possibility of building platforms for campaigns of solidarity among employees as well as trade unions from different branches.

Altogether, the development of the institution of the EWC has been more successful than many scholars and trade unionists predicted: along with the institutionalising of EWCs, the majority of European multinationals have developed patterns of staff representation that can be called ‘cooperative’ and which are embedded in notions of social partnership (Kotthoff, 2006: 173). These patterns may be traced back to the strong presence of delegates from social-partnership countries, who bring resources, professionalism and experience into EWCs. This knowledge enables them to set the tone and to induce learning processes in and between multinationals and their branches and across different traditions of industrial relations (Whittall, 2004). Despite different traditions, EWCs can function as a starting point for joint projects because they foster an exchange of experiences and a kind of ‘everyday Europeanisation’. Although EWCs as a juridical structure only regulate the right to information and consultation within multinationals in Europe, they can support a new quality of European labour relations and organisational forms. Lecher et al. (2001) call this ‘negotiated Europeanisation’. This new quality of European labour relations has explicit spatial dimensions: in the work of the EWCs, the spatial separation and the division of labour between different branches usually become a debated issue. In this respect, the strengthening of EWCs must be seen in the light of an expansion of plant-related local and regional campaigning power. Works councils have the power to counter the erosion of collective agreements by problematising and questioning the political character of corporative reorganisation across multinational networks of branches.

EWCs do not shape or conduct collective bargaining but they may prevent the management playing off the interests of the employees of one branch against another branch through information and collaboration. In that sense EWCs are not an answer to the problem of the declining coverage of the system of collective agreements, but they can play a supportive and stabilising role in coping with the spatial decentralisation of collective bargaining. EWCs enable a politics of scale: they offer the possibility of combining the different potentials of scales from the branch, regional, national and transnational scales of corporations. Although the responsibilities of EWCs are far more restricted than those of German works councils, the EWCs have the opportunity to gain an influence on corporative strategies via collaboration between the branches (Kotthoff, 2006: 35).

Nevertheless, it must be stressed that EWCs constitute only a first step towards solving the problem of globalised capital. One example of this is the global bank Credit Suisse, which has more employees in Germany than in Switzerland but which has not been forced to establish an EWC because its headquarters are located in Zurich, which is not part of the EU (Frankfurter Rundschau, 2007). This exemplifies that the perspective of corporations does not necessarily correspond to the EU framework: corporations overwhelmingly have global perspectives that go beyond the borders of the EU. In that sense, EWCs constitute a kind of supportive structure that is short sighted in the face of transnationalising corporations but helps to develop a supranational system of dual representation despite the differing industrial relations of EU countries – and may counter plant-related chauvinism (Whittall, 2004: 166).

Outlook: the politics of scale

To summarise, corporatism has not come to an end, but has changed its form. The transformation is a result of the development and contradictions of capitalism as well as political negotiations and struggles. The process of vertical disintegration in firms, which takes the forms of subcontracting, outsourcing and contracting with temporary agencies, is weakening the position of the trade unions and works councils (Doellgast and Greer, 2007). Firm reorganisation strategies are undermining collective bargaining institutions and works councils’ strategies in core and peripheral firms. A further disorganising effect lies in the possibility of relocating industries – regardless of whether the threat is ‘real’ or discursively produced. It seems that these developments have fostered a decreasing commitment to the centralised system of collective agreements and a trend towards making struggles over issues of working conditions a local/regional issue. Many works councils – in the face of job losses – have accepted forms of wild decentralisation of collective bargaining and locational agreements, which effectively mean avoiding standards set in centralised collective agreements.

For the trade unions, these developments have triggered a rethinking of trade union strategies – particularly in spatial terms. The background to this rethinking are struggles over working conditions and the status of collective agreements that take place on a local or regional scale. These struggles are evidence of a re-regionalisation and a re-territorialisation of industrial relations and indicate that the potential strength of trade unions these days derives from regional mobilisation. It seems that the decentralisation of collective bargaining is accompanied by the search for new scales of regulation, which enables an empowerment of the trade unions. In addition to the local scale, the European scale seems to be a promising one for regulation. However, the ‘European scale’ has referred up to now to the attempt to regulate industrial relations within transnational European corporations; the contours of a system of collective bargaining in the form of European frameworks and social dialogues are rather weak.

It is still an open question as to whether these developments on a European scale are the foundations for a new form of corporatism: up to now the employers, as partners in the system of collective bargaining – in contrast to trade unions – are not organised on a European scale. The growing power and spatial flexibility of employers due to economic liberalisation have not made a European organisation necessary or mandatory. In that sense, up to now there is no stable institutional arrangement visible between trade unions and employers’ organisations on a European scale. Nevertheless, the European scale has become important via the instrument of EWCs. EWCs might – up to now it has been a hotly debated issue – be a way to counter tendencies towards the de-territorialising and localising of collective agreements in Germany.

Obviously the forms and levels of industrial relations have been transformed considerably. The power relations between trade unions and employers’ organisations are subjected to constant transformations as a result of rescaling processes. However, considering rescaling processes, it is dangerous to privilege the global scale of action over the local/regional scale of action. To assume a straight relationship between entrepreneurial reorganisation and the weak position of trade unions would imply assuming a deterministic relationship with the superiority of the capital involved. Numerous struggles on a local scale prove that local labour movements may have the power to negotiate (Leukfeld, 2010; Nehrlich, 2010; Röttger, 2008). It is therefore necessary to keep in mind the power and unpredictability of labour movements and social processes.

Struggles around collective bargaining and industrial relations in the last 60 years illustrate the social construction of scales: relevant scales of political activity are not ‘natural’ or ‘pre-given’ dimensions but the result of struggles between important actors. Only in and during conflict does the importance and dimension of scales become explicit. What in everyday activity seems to be a fixed condition and a given scale of activity – for example, centralised collective bargaining – is the result of social conflict. In that sense, the control of scales is an important dimension in struggles and bargaining. This scalarised control is not given, however, but remains dynamic. A transformation in the spatial scale is not an example of the end of corporatism but of its permanent restructuring.

Footnotes

Funding

This research received no specific grant from any funding agency in the public, commercial or not-for-profit sectors.

Notes

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