Between the lines: Cost of social partnership at work

Finance Minister Michael Cullen tells us that the repeal of the Employment Contracts Act, the occasion of so much controversy here, is no big deal to the investors and banks he has encountered in Europe.

"Our new labour market laws are much less rigid than the Germans are used to, and New Zealand is still a lightly regulated economy by European standards," he said yesterday.

It is a plausible claim.

A New Zealand employer chafing at the new Employment Relations Act should spare a thought for his German counterparts.

Pay and conditions for most employees are still determined by industry-wide national agreements. Works councils monitor employers' compliance with those award-like agreements.

The councils are elected by employees and operate at both workplace and, in the case of large concerns, corporate level.

It is up to employees to set up a works council, the size of which is a function of the number of employees, and it is not unheard of for them not to bother.

But if they do, employers cannot obstruct the process and have to bear the cost of the worker time (including training) and other overheads involved. As well as monitoring their firms' adherence to national collective employment contracts, and to health and safety regulations, works councils have a role in dismissals.

A dismissal is simply not legal if the relevant works council has not been informed. If it is informed and the employee challenges the dismissal in court, having the support of the council will stand him or her in good stead.

Some firms also run job applications past the council, though they have no compulsion to do so.

As an example of this "co-determination" at the corporate level, take the case of multibillion-dollar pharmaceutical company Schering. Its works council's agenda this year includes negotiating a collective agreement on people working part-time before retirement, another providing for more apprenticeships and one on the privacy of personal data in the company's IT system.

In the course of upgrading an agreement on combining work and family life it is having discussions on flexible working hours. And it has been involved in who-gets-what details over a staff share issue.

It is called social partnership.

Whether you see it as insufferable interference in management's right to manage, as a civilised recognition of employees' legitimate stakeholder status, or as a pragmatic mechanism for pre-empting strife under a more adversarial system, is probably a matter of ideological opinion.

Whatever, it has delivered an enviable standard of living for German workers. At the expense of high unemployment? Not necessarily.

National labour market statistics are skewed by the problems of unification of East and West Germany, which after 10 years is very much still a work in progress.

Thus the national unemployment rate of 9.5 per cent in July reflects a rate of 7.7 per cent in western Germany and 17.4 per cent in the east.

Labour productivity is substantially lower in the east and unit labour costs about 25 per cent higher, despite lower wages.

Reflecting those economic realities, workers and companies in the eastern provinces are increasingly opting out of the system of national awards and their minimum wages.

It is not compulsory for companies to belong to their respective industry bodies, which negotiate the national awards.

That most nonetheless do suggests that something more potent than peer pressure is involved.

Maybe, with the evidence of Germany's economic success all around them, they just reckon the system works.

*Brian Fallow recently travelled to Germany as a guest of the Federal Government.