German workers trade pay for jobs

A LAST-MINUTE deal in the engineering sector at the weekend pulled the struggling German economy from the brink of an industrial confrontation that would have struck at its heart. After 14 hours of talks, Klaus Zwickel, the head of the powerful engineering workers' union IG Metall, and Hans-Joachim Gottschol, president of the employers' federation, Gesamtmetall, shook hands in the early hours of Saturday morning on an innovative compromise that will bring urgent cost relief for firms, while helping to stanch haemorrhaging job losses.

'We wanted job security and we were ready to give up money for that,' said Mr Zwickel afterwards. The settlement, which came just 48 hours before IG Metall was due to open its full strike campaign with walk-outs across the state of Lower Saxony, was welcomed on all sides as proof of the resilience of Germany's consensus-based bargaining system, despite its having been subjected to enormous strains by the recession.

The substantially below-inflation agreement by the pace- setting trade union is likely to be followed in other sectors, notably by public-sector workers, who recently began warning stoppages in support of their demands. The avoidance of a metalworkers' strike reduces the likelihood of further industrial conflict, as Germany embarks on a highly-charged political period, with a total of 19 elections, including the general election in October.

The engineering sector deal gives the 3.6 million employees in western Germany a 2 per cent pay increase for 1994. Because wages will be frozen until June, with the rise running only for the remaining seven months, the effective increase is 1.6 per cent, about half the expected rate of inflation for this year. Once reductions in benefits are taken into account, the overall settlement will enable employers to meet their key demand of a reduction in real labour costs. 'Companies will bear no additional costs from this deal in 1994,' said Mr Gottschol. 'And no increase in costs means costs have actually been cut when productivity rises are taken account of.'

The most innovative part of the deal introduces flexibility into working times, allowing firms to save costs during weak periods such as now, while meeting the unions' wish to secure jobs. Companies may reduce their working week to 30 hours from the current 36 hours, while giving those workers who forgo compensation a guarantee of job security for a fixed term.

Job losses in the engineering sector, which covers such key industries as car-making and electricals, have been rising by 30,000 a month. With the economy struggling to free itself from recession, unemployment in Germany smashed the 4 million barrier in January, as firms continue to try to reduce costs that have streaked ahead of the international competition. IG Metall always knew it had a weak bargaining hand.

But Germany's biggest union, with 3.2 million members, left little doubt that it would fight to avoid the more extreme demands of Gesamtmetall, which had set out to secure a 10 per cent reduction in costs and the scrapping of numerous benefits. In the IG Metall strike ballot last week in Lower Saxony, 92 per cent voted in favour of industrial action. 'The employers would never have budged without the commitment of some 1.5 million token strikers, without the fantastic strike ballot vote in Lower Saxony and without the fighting spirit of our members,' said Mr Zwickel.

The 1.6 per cent effective wage deal for 1994 makes it the second year that engineering workers will have increases well below the rate of inflation. This reverses a trend of the previous eight years, when western German wages rose by a real 21 per cent, nearly double the gain in industrial output over the same period, and much faster than increases among the main international competitors. According to Federal Statistics Office figures, real wages rose by 12 per cent in Japan during this period, by 6 per cent in France and 5 per cent in Italy, while in the US real wages declined by more than 8 per cent.