The Iron Union - A Profile of IG Metall

By: Sam Vaknin, Ph.D.

Also published by United Press International (UPI)

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A measure of IG Metall's clout is the persistent rumor that the ECB has held off on sorely needed interest rates cuts on account of the German trade union's wage demands. Moreover, though, with 2.7 million members, it is only the second largest, IG Metall serves as the benchmark and the trendsetter to less veteran or less sonorous unions in Germany.

Ver.di, the service sector's behemoth, with 3 million members, waited for IG Metall's regional wage boards to pronounce their sentence before plunging into its own negotiations with employers. Miraculously, it - and many other unions - ended up demanding the very same pay rise as did the metal-bashers. IG Metall's standing reflects the historical reverence accorded in Germany to the engineering and scientific professions.

IG Metall justified the outlandish wage increases it insists on (4-5 percent) - and the impending strike in Baden-Württemberg by 50,000 (out of 3.6 million) metalworkers on May 6 - by saying that the raises will boost domestic consumption and revive the flagging economy. Some of the extra money will be used to modernize the pay framework agreements and equate the status and the remuneration of blue collar and white collar workers doing "similar" jobs.

Warning strikes have already erupted over the last few weeks. The main employers' federation, Gesamtmetall, threatened the striking employees with lockouts.

The strike may yet be averted. Employers are offering an across the board hike of 3.3 percent over the next 15 months and a one time cash handout of $170 per worker. This is imperceptibly lower than IG Metall's target of 4 percent. IG Metall is likely to buckle down and agree to arbitration or mediation, perhaps by the embattled Schroeder, though he is reluctant to gamble his political future on the outcome as he has done two years ago. A compromise of 3.6 percent is likely, though. As IG Metall knows, many an invincible union perished through bungled strikes.

Moreover, IG Metall's previous strike was in 1995 and it cannot afford to alienate a socialist Chancellor who is in the throes of a re-election campaign. Still, it is implausibly threatening to spread the unrest from its stronghold, the southern state of Baden-Württemberg, to Berlin and Brandenburg. Ominous mutterings of a repeat of the mythical six weeks strike in the spring of 1984 abound.

This reads like a repeat of the wage negotiations in 2000. Then, as now, IG Metall demanded an increase of 5.5 percent as well as a reduction in retirement age to 60 and in the working week to 32 hours. Warning strikes petered out and the union capitulated by accepting a two year contract with modest pay rises (3 percent in 2000 and 2.1 percent in 2001).

The two previous annual wage settlements trailed inflation, expected to reach 2 percent this year. They reflected only a part of the handsome productivity gains throughout German industry. Net profits in IG Metall's sectors climbed from 1 billion DM in 1993 (a recession year) to 55 billion DM in 2000.

Real unit labour costs tumbled - but mainly due to massive layoffs. More than 1.5 million workers out of a total of 5 million in 1991 were sacked. IG Metall wants its members to recoup some of their past generosity. In a typical German euphemism, this grab is called a "redistribution component".

Admittedly, German employers abused the union's relative wage restraint during the 1990's. They did not create additional employment, nor did they invest in the retraining and re-qualification of workers made redundant. The union justly claims that wage moderation only fostered the transfer of wealth from labour to capital (i.e., from employees to shareholders).

Whatever the outcome of this industrial action, the employers will foot the bill. "Frankfurter Allgemeine" estimates that every day of the strike would translate to a whopping $2.3 billion in lost net output. Each 0.1 percent in wage increases costs the metal and electric industries c. $140 million a year. This in an industry mired in declining orders and falling production.

IG Metall's Web site is a militant affair. "Right to Strike - Away with the anti-strike paragraphs!" -it thunders. "Strike is a civil right - lockout is a misuse of power" - it preaches. It even provides practical "how-to-strike" guides, tips for strikers, and promotes a new model of "flexi-strike".

IG Metal is strict about the universal implementation of the collective agreements it painstakingly negotiates with employers. Such agreements typically tackle not only wage levels but issues like training, reduction in working time, safeguarding jobs, and equating eastern pay with western standards. The comprehensiveness and all-pervasiveness of the collective bargains is Procrustean.

"The Economist" reports the case of Viessmann, a German engineering firm. To avoid shifting the production of a new boiler to the Czech Republic, it negotiated with its workers an increase in the working week without a commensurate pay rise. IG Metall blocked the deal, though it later compromised.

This is a typical story. The collective agreements in 2000 and 2001 were an aberration and a political concession to a socialist regime in trouble. In contrast, wages rose 4.1 percent in workplaces covered by the 1999 settlement with IG Metall - most of them multinationals who exploited the agreement's egregious terms to squeeze their indigenous Mittelstand suppliers.

IG Metall is notoriously intransigent. Unlike its brethren in other industries, it refuses to link pay rises (or even annual bonuses) to profitability, for instance. It rejects the idea of implementing, by mutual consent of employees and employers, wage reductions or overtime to prevent lay-offs. It abhors profit sharing schemes, either regional, or sectoral, or even confined to the single plant level.

It would not sign two-year pay agreements based on "bad experience" in the past. Many exasperated firms resort to the profligate exercise of "opening (escape) clauses". They renege on the collective agreements without being seen to flout the rules.

Employers ask employees to continue the working day at home after hours. Some workers clock out but continue to work all the same. Other firms - especially in the east - opt out of the employers' associations altogether, thus exempting themselves from onerous collective pay agreements.

Many attribute IG Metall's irrational exuberance to its rational fears of becoming marginalized and irrelevant. Wage increases - the union's only political leverage - are hard to negotiate in an environment of stable and low inflation, high unemployment, and ever more flexible labour markets.

The unions hitherto refrained from tackling the most pressing issues: flexible time, part time work, retirement, low wage jobs, social security reform, illegal immigrants. IG Metall spent the last 15 years negotiating an agreement to apply uniform wage criteria to blue-collar and white-collar workers.

The "Alliance for Work" pact between unions, employees, and government, proposed by its Chairman, Klaus Zwickel, in its 18th convention in 1995, went nowhere effective, though it was signed by all three parties. It included revolutionary ideas like linking pay to productivity - in return for job creation by the private sector and unemployment subsidies by the state. This was also the fate of a 1997 initiative to reduce working hours in parallel with wages in order to boost job formation.

Paradoxically, the higher the pay of its members - the less strike-prone is the union. Lay-off and strike pay doled out by the union is a function of the striking member's base wage. Add to this current expenditures - IG Metall employs more than 2000 people in its headquarters alone - and the limits of its postured belligerence become discernible.

In a major survey conducted last year in the framework of the unions' "Debate on the Future" initiative, 78 percent of German workers - union members and non-members alike - professed to being more interested in job security than in higher pay. Nine out of 10 respondents expected the unions to support secure jobs and fight unemployment.

Some workers begin to fathom the union's role in destroying employment by foisting a non-competitive wage structure upon reluctant employers. Eighty percent of employees surveyed expected IG Metall to do much more for the unemployed. Regrettably, the vast majority of the membership of IG Metall are still pugnacious and under the sway of populist activists.

Even so, IG Metall is past its heyday. It is the anachronistic outcome of numerous mergers with other fading unions in the plastics, textile, and wood industries. Despite these acquisitions and the influx of East German laborers, its membership hasn't budged since the early 1980's. In the 1990's alone it has declined by more than a million members - almost one third of the total - despite acquiring a million new members from the east.

One third of the members are retired. Less than 7 percent are under the age of 25. Women are deserting the union in droves. IG Metall represents less than 30 percent of actively employed workers in its industrial sectors.

In its "Debate on the Future" survey only 5 percent of all respondents said they would "definitely" join IG Metall. Only 3 percent imagined a long-term membership. Two thirds of the unorganized employees surveyed said they have no interest whatsoever in becoming union members.

The surges in membership that followed previous confrontations with employers seem to have abated. And 1 percent of gross wages in membership dues is a lot to pay for ill-defined and uncertain benefits. The average wage in industry - among the highest in the world - amounts to $37,000 a year, including social security contributions.

To make matters worse, in the last few significant rounds of wage negotiations, IG Metal lost its traditional bellwether role to IG BCE, the more nimble union of workers in the chemical and energy sectors. This much smaller new union signed the first collective agreements each time, thus weakening IG Metall's hand in its own negotiations.

There are cracks in IG Metall's hitherto uniform ideological facade. On March 1998 it signed an agreement with Debis -  a group of car makers and metal bashing firms represented by Daimler-Benz. It agreed to let the employers decide how to flexibly implement a reduced working week of 35 hours. Five thousand companies had individual contracts with unions by the end of 1997.

Last August, bowing to political pressures by the SDP and the public outcry of its own members, IG Metall signed a plant level agreement with Volkswagen. This vitiated its insistence on exclusive industry-wide agreements. Moreover, the VW deal includes flexible work rules and pay. Five thousand workers are each to be paid 5000 DM a month to produce Volkswagen's 5000 model.

The convergence of the manufacturing and services sectors leads to mergers or collaborative efforts among competing unions. Fields like Information Technology (IT), telecommunications, pharmaceutics, and biotechnology blur the lines between knowledge and production.

Last year, for instance, IG Metall created a joint bargaining committee with the new umbrella services union, Ver.di. The committee - the indirect outcome of arbitration involving the two unions - will represent all of IBM's 26,000 workers in its German subsidiaries. Ver.di includes as one of its components one of IG Metall's most bitter rival unions, DAG.

But it would take a determined - and somewhat Thatcherite - government to face the unions down. Many German luminaries advocate a sea change in the laws pertaining to strikes, labour relations, and wage bargaining. Strikes should be allowed only after mediation fails. Employers and employees should negotiate plant-level arrangements. These seismic shifts will not transpire without a bloodied fight. Unions are monopolies and they act as cartels. Their interests are overwhelmingly vested in the status quo.

Yet, such a showdown is long overdue - and victory is within reach. Only one in five working age Germans - less than 8 million - belong to a union. Overall membership deflated by almost two fifths since unification. Even the awesome industry wide agreements cover a mere one fourth of German firms in the east - and a one half of all businesses in the western Lander.

No wonder that IG Metall has in its sights targets in east Germany and in Germany's "sphere of influence". The union owns the Otto Brenner Foundation. It is named after IG Metall's first boss and was established in 1972 "to promote the metalworkers trade union". In 1997, its dismal finances were boosted by the serendipitous liquidation of IG Metall's assets in the former East Germany.

Though claiming to engage in impartial "scientific" research, the Foundation aims to spread the union gospel among the heathen of central and eastern Europe and, especially, the eastern German Lander. The Foundation's Administrative Board is appointed by IG Metall.

Perhaps in an effort to improve its public image, IG Metall issued, in January 1999, a press release in support of compensation for forced laborers in the metal industry. It notes that the 10 million slaves that toiled and perished in German factories during the Nazi occupation of Europe constituted 40 percent of Germany's industrial workforce. More than 1000 concentration camps were "directly near or on" company property.

It took IG Metall - an ostensibly leftist organization - almost 50 years to condemn the crimes of German business and industry during the Nazi era. It is a measure of the glacial tempo of its decision making processes. Nothing seems to shake it from its well rehearsed torpor. It, therefore, is probably doomed to share the fate of other unions - gradual but assured dissipation.

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