Successful crisis management through collective trade of politics and trade unions

Rainer Grobel

Germany’s economy is depending on its export and was initially hidden hard by the crisis. In 2009 the collapse of the financial markets was also including the real economy. The impact for the export depending Germany with its high interests in industrial production was partially fatal: 2009 the export was dropping down to over 14%, the production in Germanys important investments for technical equipment to over 22%. Lots of factories in the engineering field had invasions in their purchase orders around 30%.

The export was our main concern. Germany has a stagnating interior market since decades. The saving anchor for invasion was always the booming export – but now the external balance in 2009 compared to 2008 was dropping down to 100 billion Euros.

Therefore the export was no longer safe or reliable to guarantee top-jobs. Also the crisis of both, economy and finance, relay on each other. That means the credit rating of companies changed to the worse. Banks had difficulties themselves and therefore financed less investment. This again was especially affecting small and mid-level companies, but those are the once that create far more jobs than large concerns.

2010 and 2011 a whole new picture is showing (compare image 1). The German economy was recovering amazingly fast. What was the reason for that?

As seen in image 1, in 2010 is already showing an obvious increase in all economic data. This recovery is stable until now: already the first quarter in 2011 shows a rising export, up to 18,8% compared to the corresponding quarter of the previous year. Those so-called “Chinese growth rates” are not permanently expected – the economy will also recover and regain the numbers of 2008.

What were the causes of the recovery? Due to the fact that there was arranged a lot of different sanctions (for example in the frame of G8 and G20) and due to the fact that the Chinese economy was more or less still not impressed by this crisis, it was mainly thanks to national features that in Germany it was managed comparatively good. At this point I would like to talk about the role of the trade unions and especially the role of IG Metall:

The way out of the crisis: Politics, Trade Unions and Employers stepped in actively

In the end of 2008 and the beginning of 2009 there was already intensive consultations between IG Metall and the Federal Government, especially on behalf of the Federal Chancellor. For this purpose in November 2008 IG Metall was suggesting measures to fight against the crisis with the help of a position paper, called “no job cuts in 2009”. The talks with the government were concerning both: the salvation of individual company’s (Schäffler/Continental, Opel) and the overall economy.

Both sides agreed to try to keep as many employees as possible in the factories during the crisis. Even if this means government aid, it would be still better (and cheaper) for the society than financing unemployment. After all, there was (among other things) an already existing tool of the German social state reactivated, the so-called short-time work. That means: Employees work shorter and therefore will earn less money. The state pays part of the wage-difference and the social security contributions.

Over all following measures were decided in this period:

• A relief in short-time work and the possibility to connect short time work with phases of qualification (common concept between government and IG Metall). That also includes an extension for 18 months of the salary of short-time work.
• An environmental bonus to scrap old cars when purchasing a new car (common concept between IG Metall and automobile manufacturer and its union)
• A rescue parachute for banks, but also up to 100 billions in bonds and loans for the real economy
• Public investment policy’s, over all concerning short time effective projects like public infrastructure based on a local level.

Result: The companies managed the crisis with little job cuts. After the crisis they had the chance to start up the production/the output fast and with incorporated staff.

Worth mentioning, there was clearly less bankruptcy than in past crises. Usually during any crisis we observe a resistance in consumption, but not in this one. Just the opposite, the consumption was increasing. That was also thanks to the reliable arrangements of government and social partners.

On top of that to mention something else that was special and different compared to the other countries that were affected by this crisis:

Due to some active tariff policy IG Metall was counteracting the results of the crisis in the factories.

This happened on a level of key negotiations and measures as well as within agreements of individual factories.

The tools for all of this were:

• Massive cuts of working-time accounts:

In this area (especially in the automotive industry) there were already arrangements for             the usage of working-time accounts that were useful or extendable

• Surface-labor contract for employment security: The labor contract for metal and electrical industry was made at the end of 2008 (so after the beginning of the financial crisis and during the common economic crisis). Therefore wage increases were arranged, but at the same time it was possible to shift those wage increases within the company.
• Numerous individual operational solutions were made as in Schäffler.

Berthold Huber, 1. chairman of IGM described as followed:

With our politics “no job cuts during crisis” we succeeded to prevent mass layoff. This was possible through tariff policy that was focused on employment security. In famer crises we lost hundreds of thousands jobs. That was different now.

Result…

• Politics was able to act during the crisis
• Strong trade unions are a benefit during the crisis. Staff will stay on board and will be available during recovery.
• Requirement: Trade Unions have to be able to act and have to be negotiable. Such a procedure would not have been possible with weak and fragmental trade unions.
• Quality goods and services require quality work and labor conditions, good payment, participation, training and advanced training, as well as public and private investments in education, research and development. This model has also to survive in times of crises.