Note: Where available, the PDF/Word icon below is provided to view the complete and fully formatted document
Germany: metalworkers in union strike

KEVIN HUME: Well, Germany's industrial relations system, the rock on which it's post-war prosperity was founded, is showing signs of cracking up. As you may have heard in the news at seven, talks have broken down again this week between unions and employers in Germany's steel industry and it's likely there'll be more industrial action in factories in both Eastern and Western Germany. To explain what's gone wrong here's RN's European specialist, Tom Morton.

TOM MORTON: Consensus and co-operation were once as much a part of the made in Germany trademark as reliability and quality workmanship, but, the close relations between employers, unions and government which have characterised industrial relations in Germany for forty years, are coming unstuck. In April this year, employers in the iron and steel industry reneged on a year-old agreement to pay wage increases of around 25 per cent to workers in Eastern Germany. This would have brought their wages up to around 80 per cent of earnings in the West. Well, the employers refused to pay the increases and Germany's metalworkers union, the E.G. Metall, began a campaign of strikes in factories in the East. Since then, the employers have rejected a series of compromises offered by the unions. They claim that while the productivity of iron and steel workers in the East is still only 30 per cent of their colleagues in the West, they can't afford to pay the higher wages. But according to Professor Almer Altvater, a labour economist with the Free University in Berlin, this argument could have dangerous social consequences.

ALMER ALTVATER: Yes, by saying this, the people say exactly that they do not want the unification. You may have different levels of productivity but normally you have them not within one social and economic system but in two different ones and separated ones by means of frontier of exchange rate of different currencies. When they say that we need different wage levels according to the different levels of productivity, they say that we do not want the political unity because you can't have political unity in our country, and you can't have it in Germany when you have different standards of living, two lifestyles in the West and in the East.

TOM MORTON: Of course the employers would say that the consequence of having real economic unification and wage parity between East and West is just going to be more job losses, the need to close down more factories in the East.

ALMER ALTVATER: Yes, they say this but they do not give any guarantee that they do not shut down factories and do not fire persons employed by them in the case that they do not demand higher wages. They do not give any guarantee, and that's the problem which is for the trade union a very crucial point. The trade union said that they would agree to any accord with the employers in the case that they do give this kind of guarantee, but they renounce doing this up to now. But there are other points important in this quarrel and that is the chance which the employers in the West are seeing now to dismantle the system of industrial relations, which is very highly regulated in Germany, much more regulated than in many other Western countries. And in order to keep up with the deregulation processes in Great Britain, the United States, in France, Italy and so on and so forth, they want to do the same in the Western part of Germany, and they need or they use the situation, the very weak position of trade unions and the workers in the East, in order to dismantle social rights also in the West.

TOM MORTON: A lot of people have said to me though that really the gap that you should be looking at is not the gap between Eastern and Western Germany but between Eastern Germany and its neighbours in, say, Poland or Czechoslovakia or Hungary. And the point that they make is that while people can still or while industry can still produce things much more cheaply in those neighbouring countries because of lower wage rates there, East Germany simply isn't going to be able to compete in trying to attract both investment and also building up new industry there.

ALMER ALTVATER: That is completely right and, therefore, that has a consequence for Germany too, because it is impossible for Eastern part of Germany to base industrialisation strategy, for instance, on low wages because in Czechoslovakia or in the Czech Republic, because Czechoslovakia doesn't exist any more, or in Poland you'll pay one-tenth more or less one-tenth of the wage rate in the Eastern parts. The Eastern parts wage rate is more or less 60 per cent of that in the West. But in Poland, it's 10 per cent of the 60 per cent. So, it is impossible to compete with low wages. You only can compete by means of quality production, diversified quality production and that means infrastructure; that means competence of managements and workers; it means a new network between the science sector and the economy; that means higher qualifications of workers and all that. And in order to give a stimulus to workers to learn to get more qualifications, you have to give them higher wages.

KEVIN HUME: Yes. It just goes round and round and round doesn't it? The chase for higher profits, higher wages and higher skills is the basis for all of that. Professor Almer Altvater of the Free University in Berlin speaking with Tom Morton from the Europeans.