The German trade union confederation, the DGB, represents the country’s powerful labor organizations. When Reiner Hoffmann took its helm in May 2014, he was just in time to oversee the final negotiations over the first ever minimum wage in Germany, a measure that became law in 2015 and that unions celebrated as an historic breakthrough.
The minimum wage was not such a victory for Ingo Kramer, chairman of the confederation of German employers’ associations since 2013 . The employers opposed the mandatory introduction of a nationwide minimum wage of €8.50 ($9) an hour, and pleaded for individual sector agreements instead. Now that they have lost the initial battle, the group is calling for adjustments to the existing law.
Both sat down for an interview with weekly business magazine WirtschaftsWoche to discuss the current state of labor relations, the future of temporary labor, the minimum wage, and the merit of striking smaller unions.
WirtschaftsWoche: Mr. Hoffmann, can you imagine a world where Ingo Kramer says “The minimum wage is one of the greatest achievements of the welfare state”?
Mr. Hoffmann: You might be disappointed, but actually I can. After all, many of the gloomy predictions of how terrible everything will be with the minimum wage have not materialized, and won’t materialize. The rate of €8.50 creates a clean competitive base – employers benefit from that a lot as well.
Mr. Kramer: I have to add something right there. The question is missing two crucial words: legally mandated! I’m all for minimum wages, as specified in our collective wage agreements. But the legally mandated minimum wage I deem a great economic mistake.
Mr. Kramer, can you imagine the head of the DGB saying “Employers have become so decent that my work has become superfluous”?
Mr. Kramer: Superfluous? No, I’m lacking the imagination for that. But I sincerely hope that the chairman of the DGB could acknowledge how many very decent, very committed employers there are in this country.
Mr. Hoffmann: Stop, I’ve already said that on countless occasions. Unionists can differentiate. Many sectors have good working conditions, but unfortunately not all do. The low-wage sector in Germany has grown to an unacceptable size over the past 15 years – that didn’t fall from the sky. We urgently have to do something about that.
That brings us to the minimum wage. It has been in force since January 1, and has been under heavy attack. Justifiably so?
Mr. Kramer: The political decision has been made – a different one than we thought right, but it has been made. Now the implementation is the crucial part, and things could have been much better in that respect. Those €8.50 won’t ruin our economy, but the fact that there are considerable problems in some industries and regions can’t be surprising either. We for our part have cautioned loudly against it from the start.
Chancellor Angela Merkel and Labor Minister Andrea Nahles have promised to reexamine the law to correct any flaws. What should be revised?
Mr. Kramer: Even employees with a pre-tax income of about €3,000 [above the minimum wage] are getting caught in the law’s red tape. It would be sufficient to restrict it to €2,000 or less. The government has gone way over the top here. I’m counting on a non-ideological reform of the reform.
Mr. Hoffmann: First of all, I’m delighted that you don’t join the silly naysayers claiming the minimum wage would hit the German economy right in the heart. When it comes to implementation and adaptations, I’m willing to negotiate to some extent. But we do have to be able to monitor the minimum wage. Whoever doesn’t pay this wage is not simply committing a harmless offense.
Can you, Mr. Hoffmann, sympathize with the complaints about onerous paperwork that has to be completed when it comes to working and break times?
Mr. Hoffmann: Well, that’s exaggerated. Today, everyone can track their ordered packages online at any second. But tracking working hours is considered an insurmountable hurdle? I don’t get it. There are time sheets, whether online or very old school on paper. It’s not exactly miracle work.
So the employers are making a fuss?
Mr. Hoffmann: Not “the employers,” it’s only some. I haven’t heard such complaints from Mr. Kramer yet. But the discussion shows that some representatives of the business side have not yet made their peace with the minimum wage and are still looking for the tiniest reasons to discredit it.
Mr. Kramer: Sometimes making peace takes a bit longer. And justifiably so, I have to add. I do expect politicians to listen carefully when those who have to deal with the minimum wage every day voice their complaints. We need politicians who are sensible and have a sense of proportion. If the government cut the red tape surrounding the minimum wage, that would eliminate much of the resentment.
Mr. Hoffmann: However, wherever people are systematically trying to circumvent the law, monitoring mechanisms need to be in place. The coalition government wants a first report by Easter. The minimum wage commission [set up to monitor the implementation] is tasked with such stocktaking. The current fear mongering is not comprehensible. What is clear is that there will be no major revision if we can help it, definitely not when it comes to documentation duties.
The pivotal question is: Will the minimum wage cause jobs to be lost?
Mr. Hoffmann: The head of the Federal Employment Agency, Frank-Jürgen Weise, said that so far there are no signs of that. That’s good news. But he has also emphasized that it’s too early for the a assessment.
Mr. Kramer: Exactly! We’ll only see the bottom line in one or two years.
Mr. Hoffmann: But we definitely won’t experience a disaster.
The federal government is planning to tackle more issues that will divide the two of you, such as the regulation of temporary labor and service contracts. Are you still hoping for a more moderate reform, Mr. Kramer?
Mr. Kramer: (pondering) Let me say it like this…
… ah, so that’s a clear yes.
Mr. Kramer: I hope that the federal government won’t cross the line. The way politicians perceive businesses has changed. In the first half of 2014, the grand coalition indulged in an exuberance of regulation; in the second half, it was a bit more sensitive. Economics Minister Sigmar Gabriel [who is also chairman of the SPD] is right when he says that in the future we will first have to think of generating money before we redistribute it. This insight needs to spread in 2015.
What’s so bad about temporary labor after all, Mr. Hoffman?
Mr. Hoffmann: We at the DGB are not at all against temporary work. We just stand behind the idea of equal wages for equal work. Unfortunately, we’ve seen that temporary workers were hired on a large scale to push down salary levels. That’s not their purpose and it denigrates the concept. Temporary work is meant to help bridge personnel shortages or cope with order peaks.
Mr. Kramer: There’s a nationwide collective wage agreement for temporary work, in addition there are varied models for extra payments – just not in all industries. We’re happy to work on that with all parties involved, any time.
Could employers live with the proposal that temp workers can be hired for a maximum of 18 months?
Mr. Kramer: One and a half years will cover the vast majority of temporary work. If stakeholders on-site could then in principle still negotiate longer periods of time, that would be a feasible solution. I see that in my own Bremerhaven-based company. For some assignments, I need highly specialized external welders or engineers for a while, but those projects often span more than 18 or 24 months. As an entrepreneur, I need to be able react to those requirements flexibly. But works councils who care about the health of their businesses are open to those arguments as well. The rule should be for either internally-agreed rules or state-imposed regulation.
Mr. Hoffmann: For what you’re describing, we don’t need temporary labor. We have lots of sectors and companies across Germany where things aren’t quite legal. There we often see temporary labor being misused to an extent that is unworthy of a welfare state. We need a new law to catch the black sheep there.
But isn’t there nevertheless a risk of overshooting the mark?
Mr. Hoffmann: For me it’s about communicating what temporary labor is for: to absorb order peaks or shortages. But unfortunately, some of the employers disagree on this very point. Our position is clear. Temporary labor cannot be a replacement for regular contracts. Need flexibility sometimes? Use temporary contracts to push down wages? Not with us.
Mr. Kramer, when you took office, Chancellor Angela Merkel appealed to the conscience of employers. With every new regulation, she said, employers tried to creatively get around the rules – for example by using service contracts instead of hiring permanent staff. She wasn’t completely wrong, was she?
Mr. Kramer: I feel personally attacked by these remarks, because my company is in systems engineering – a business that has always used service contracts with specialized firms. There’s nothing objectionable in that. On the contrary! There might be misuse in this country, but I reject the notion that this is the norm.
Mr. Hoffmann, how do you propose separating out the good from the bad service contracts?
Mr. Hoffmann: That’s exactly what it’s about. The fair practice Mr. Kramer is describing can be outlined very clearly: highly specialized, product-focused work that happens regularly or as a one-off. But what infuriates me is when a supermarket employee who used to stock the shelves for the standard wage is now suddenly replaced by a cheaper service contractor.
That’s much easier said than legally fixed in writing.
Mr. Hoffmann: What is crucial is whether the end product or service was created independently, or whether the worker was fully integrated into the work processes. If you receive orders and only differ from you colleagues by not wearing the company logo on your collar, you are not a contractor. It’s that simple.
Mr. Kramer: But the danger that the – probably well-meaning – government could throw out the baby with the bath water, you can’t just brush that off. Detailed differentiation is extremely difficult. Service contracts are a fundamental principle of the division of labor in our economy. Therefore, the highest diligence is required, otherwise we are risking a good and proven practice in the name of fighting misuse. The grand coalition shouldn’t make the same mistake again after the minimum wage.
You two agree on the principle that only one collective wage agreement should be valid in each industry. The government wants to end the tussle between different small, specialized unions – like between the railway unions GDL and EVG – by law. Why shouldn’t there be competition here?
Mr. Kramer: That argument is used to push us employers in a corner. That’s not how it works! In the end, competition should mean that I have a choice – but I don’t have a choice here. Companies suffer under these specialist trade unions that are very aware of their power at the expense of others, namely of their clients and colleagues. We can’t accept this cherry picking in the long run.
Mr. Hoffmann: It’s one of the cornerstones of our self-concept as unions to prevent competition among employees, so as to be able to take a strong stand vis-à-vis the employers. That’s where the principle “one company, one union” in Germany originated.
Mr. Kramer: … and that has worked well for decades!
Mr. Hoffmann: We therefore don’t accept a situation where small professional groups push through their own interests at the expense of all other colleagues. That undermines our idea of solidarity. In the competition of employees with each other, there are no winners.
So you don’t mind at all that many lawyers regard the draft law on wage agreement unity, which is meant to contain these small, specialized unions, as unconstitutional?
Mr. Kramer: I’m not a lawyer and therefore can only very calmly acknowledge that these understandings differ. Well-renowned lawyers and the responsible ministries have no doubt that the draft is constitutional.
Mr. Hoffmann: Of course the law has to be constitutional, and it’s just as much a matter of course that no limitations can be imposed on the right to strike. But all ministries involved stress those very points, so I’ll have to trust them here.