Collective agreements are least common where workers need them most
Workers earning the lowest wages are the least likely to be covered by collective agreements in Germany, despite being the group for whom these protections are arguably most important. In 2021, only 34 percent of workers in the lowest wage decile were covered by collective agreements, compared with over 60 percent of workers in the middle of the wage distribution. These are the findings of a new study by the ROCKWOOL Foundation Berlin (RFBerlin) and the Institute for Employment Research (IAB) in Nuremberg.
“Collective bargaining coverage has long been a central pillar of balanced wage development in Germany,” says Christian Dustmann, director of RFBerlin and professor at University College London. “The decline in collective bargaining coverage – particularly among low-wage workers – raises significant questions about the future role of the collective bargaining system.”
These findings are linked to a long-term decline in collective bargaining coverage in Germany. While around 68 per cent of employees were covered by collective agreements in 2000, this figure had fallen to just 49 percent by 2023.
Collective agreements have traditionally played a key role in reducing wage disparities and strengthening employees’ bargaining position vis-à-vis employers. However, when collective bargaining coverage is lowest precisely among those earning the least, these protective mechanisms become less effective.
“The very low level of collective bargaining coverage in the low-wage sector is particularly striking,” says Bernd Fitzenberger, director of the IAB. “It is precisely where employees have the least bargaining power that collective bargaining coverage is low.” Co-author Lutz Bellmann from the IAB adds: “This poses a key challenge for the German model of industrial relations.”
This also helps to explain why the statutory minimum wage has become increasingly important since its introduction in 2015. For many low-income workers, it now partly replaces the protective function that was previously more commonly provided by collective agreements.
The impact of collective agreements extends beyond companies that are formally bound by them. Many companies voluntarily align themselves with the standards established in collective agreements, even though they are not legally bound by them. When these companies are also taken into account, effective collective agreement coverage rises to around 68 percent of employees.
Wissenschaftlicher Ansprechpartner:
Prof. Christian Dustmann, 0044/ 7818 048 380, cd@rfberlin.com
Prof. Lutz Bellmann, 0049/ 151/ 17 40 30 69, lutz.bellmann@iab.de
Prof. Bernd Fitzenberger, 0049/ 911/ 179 31 13, bernd.fitzenberger@iab.de
Originalpublikation:
RFBerlin Research Insight: "Who Is Left Out? Collective Bargaining and Low-Wage Workers in Germany" by Lutz Bellmann, Christian Dustmann and Bernd Fitzenberger;
https://www.rfberlin.com/research-insight/
Weitere Informationen:
https://www.rfberlin.com/discussion-papers/ RFBerlin Discussion Paper: “Collective Bargaining in Germany: Trends and Challenges”, by Lutz Bellmann, Christian Dustmann and Bernd Fitzenberger
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