Stop the splinter unions
There are some things that Germany's unions can be rightly praised for. Although they got carried away with excessive compensation claims in the 1970s and 80s, leading to almost uncontrollable mass unemployment that turned Germany into the sick man of Europe, they subsequently contributed to the turnaround with Agenda 2010 – when, by exercising wage restraint, they helped Germany to achieve new prosperity and low unemployment.
While 85 and 306 working days per employee were lost in France and Italy respectively between 1980 and 2007 due to strikes or lockouts, the figure in Germany was just 15 working days. This shows that, on the whole, the social partnership has been effective.
The German wage model has certainly been undermined by devastating strikes by so-called splinter unions in recent years. These unions represent small groups of employees that perform a specific function within a company. Some splinter unions, in particular those representing workers who perform an operationally critical activity, such as air traffic controllers or pilots, have demanded extremely high wage increases – and obtained them. They were granted new powers thanks to a decision taken by the German Federal Labour Court in 2010, which removed the pressure to achieve wage unity within companies. 2011 saw strikes by train drivers that quickly got out of hand, and now they are again on strike. The Deutsche Bahn railway company, which had started running late following its privatisation and was visibly neglecting its infrastructure, is again being attacked from a particularly aggressive trade union that has repeatedly paralysed vast swathes of the economy with its long strikes. The State only narrowly manages to avert disaster by loaning Deutsche Bahn pre-privatisation train drivers with civil servant status, who may not go on strike, to keep the trains rolling.
Then in 2012 the flight controllers at Frankfurt airport brought flight traffic to a standstill with a series of strikes and could only be pacified by wage increases of up to 70 percent. Up until the tragic crash of the Germanwings airplane there were also massive strikes at Lufthansa.
If this development continues, Germany may well suffer the fate of England in the post-World War II era. At that time a system of splinter unions emerged there. Companies now had to deal with several trade unions, which only represented special individual professions. These trade unions drove English companies into a lasting crisis with their high wage claims, with British firms steadily losing ground to their German counterparts.
In the mid-1970s British per capita economic output was a mere half of Germany's. That did not change until Margaret Thatcher came to power in 1977 and crushed the trade unions during her term as prime minister. Britain subsequently experienced an unprecedented economic upturn, and its per capita gross domestic product is now at virtually the same level as Germany's.
From an economic point of view the aggressiveness of the splinter unions stems from the commons problem. The common land, or village green, which belongs to everyone, will be overgrazed if every farmer is allowed to independently decide how many cows he wants to let graze there.
In the end, the destruction of the turf means that the meadow produces less grass that if it were only controlled by one farmer. Sticking with this metaphor, trade unions that only negotiate for certain professions "overgraze" companies and undermine their competitiveness. Although wages per employee may be higher than if a single, overarching trade union had conducted the negotiations, the overall payroll may be smaller because jobs are cut.
Since the single trade union by definition aims to achieve a result that is optimal for employees on the whole, the aggressive wage politics of splinter unions can only overshoot the mark.
Splinter unions not only harm employers and a company's customers, but also ultimately damage the employees that work for that company. Therefore, from an economic point of view, they do not deserve to exist – regardless of what any legal system has to say about this.
But splinter unions are currently legal in Germany, so politicians need to change the system without delay. This is exactly what they are now doing, in the nick of time, with a new law on wage unity, which German Federal Minister of Labour Andrea Nahles, a social democrat, got the cabinet to approve in December.
The law, which splinter unions unsurprisingly plan to challenge legally, was first debated in the Bundestag on 5 March and subsequently referred to the committees. It is scheduled to take effect as of summer 2015.
At that point greater wage tranquillity will hopefully return to the companies concerned.