President of the Association of German Employers Hundt at ZEW: Planned Revision of the Works Constitution Undermines Competitiveness of Businesses

The "Alliance for Jobs, Education and Competitiveness" has not only contributed to a more moderate wage policy but also to the rejection of exorbitant demands such as lowering the pension age to 60, and, indeed, to the improvement of the labour market. In his speech at the Centre for European Economic Research (ZEW) in Mannheim, the President of the Association of German Employers e.V. (BDA), Dr Dieter Hundt, argued, however, that instead of breaking down existing barriers to employment by further deregulation, the government was now planning laws which would introduce new restrictions in the labour market.

In particular, the plans to tighten regulations concerning the works constitution was setting alarm bells ringing among businesses. Rather than promoting flexibility, acceleration and deregulation when it comes to the works constitution, the reforms would increase regulation, bureaucracy and operational narrowing by introducing new legal constraints. Hundt argued that works council elections would have to take place on a democratic basis and must not be imposed on the workforce against their will. Furthermore, he voiced fundamental economic concerns against any extension of worker participation rights, since Germany already had the highest level of worker participation worldwide. The extension of worker participation rights, especially with regard to changes in workflow and labour organisation, would weaken Germany's economic position in the global market. Hundt further argued that the works constitution would have to be designed in order that it does not become increasingly bureaucratic, cumbersome, nor expensive. It would rather be necessary to strengthen entrepreneurial decision-making powers and to grant a greater organisational scope to the employer and the works council. The BDA therefore requested that the alliance put the works constitution on the alliance's agenda.

According to Hundt, the proposed legislation for temporary and part-time employment would further restrict the already tightly regulated German labour market. He went on to claim that the planned measures for fixed-term employment would be damaging to employment, and particularly stressed the detrimental effects of granting workers the legal right to reduce their contractually agreed working hours at any time. He also considered the limited possibilities for concluding fixed-term contracts as a major drawback, as this would restrict the necessary leeway of companies in the field of personnel policy. Hundt claimed that they would prevent the securing and creation of jobs and undermine the competitiveness of businesses by substantial extra costs. Likewise, the proposed commitment to advertise vacancies as both full-time and part-time jobs would be a barrier for creating new jobs.

According to Hundt, the alliance had helped to reduce unemployment in collective bargaining. Most of this year's sector agreements were below the aggregate productivity increase, for the longer term and, above all, employment-oriented. Unit labour costs would fall considerably in 2000, supporting economic upturn and creating planning security for businesses.

The modernisation of wage policy would have to continue in the future, said Hundt. Above all, a greater differentiation between the individual industries and sectors would be desirable. He also argued that the course of an employment-oriented and long-term wage policy should be continued in 2002. Last but not least, progress would have to be made in the reform of sectoral collective bargaining by extending operational and practical regulations.

In Hundt's opinion, education policy had so far been neglected by the alliance. The German education system would only offer second-rate education with too many schools and universities remaining mediocre. The future sustainability of the German economy depended heavily on excellent education and training. Particularly in view of the prevailing shortage of skilled workers, the federal government must no longer sit back and wait.

Hundt stressed that the alliance will remain an important institution, where important issues, which are of particular relevance to the labour market, would have to be discussed. These included more flexible working hours with lifelong and annual working time accounts, flexible, performance-based wage structures, and education.

Contact

Katrin Voss, E-mail: voss@zew.de