Declining Collective Bargaining Coverage 130 billion euros stolen! The exodus from collective bargaining agreements

Employees without a collective bargaining agreement earn an average of 3,022 euros less net per year. This is due to lower wages, but also to the fact that they often receive no vacation pay or Christmas bonus, and allowances and other special payments are usually lower or nonexistent. However, employees aren’t the only ones suffering from declining collective bargaining coverage: The government and the general population lose a total of 130 billion euros each year due to the lack of collective bargaining agreements. The DGB has now calculated this figure based on a special analysis by the Federal Statistical Office.

But how exactly is this enormous sum calculated? Due to lower wages and salaries resulting from the absence of strong collective bargaining agreements, the government loses approximately 43 billion euros annually in social security contributions. Social security contributions, such as health insurance or pension insurance, are calculated as a percentage of gross wages. If these wages are lower, the government consequently loses funds that could otherwise be redistributed to the community based on need.
 

Then there is the reduced tax revenue resulting from the failure to adhere to collective bargaining agreements. This amounts to 27 billion euros per year. The third decisive factor is the decline in purchasing power caused by low wages and salaries. If collective bargaining agreements were universally applied, employees would have approximately 60 billion euros more in their bank accounts and could reinvest this money into the local economy through consumption and investment.

Politicians must take action—pass the Collective Bargaining Compliance Act now!

Significant regional differences are evident. Looking at eastern Germany in terms of lost social security contributions, lower tax revenues, and declining purchasing power due to lower wages and salaries, the total shortfall here amounts to more than 31 billion euros. In the west, the total shortfall is as high as 99 billion euros.

The unions are fighting every day for greater adherence to collective bargaining agreements. Currently, IG Metall is fighting alongside the employees of the ride-hailing service Moia —a wholly owned VW subsidiary—to move away from dumping wages just barely above the minimum wage and toward a collective bargaining agreement. At another startup, employees and IG Metall have just achieved success: The 1,300 employees of bicycle manufacturer Canyon have not only secured a new collective bargaining agreement with significantly better wages plus Christmas and vacation bonuses, but their workweek will also be reduced to 37.5 hours in the future.

Unions alone will not be able to win the fight against collective bargaining evasion. Politicians must take action. The DGB is calling for public funds and subsidies to go only to companies that adhere to collective bargaining agreements. The current government has included the so-called Collective Bargaining Compliance Act in its coalition agreement. The law is intended to implement the unions’ demand that government contracts and subsidies be awarded only to companies that pay according to collective bargaining agreements. The law has not yet been enacted. Federal Labor Minister Hubertus Heil announced at the IG Metall union convention in late October that the bill would be introduced before the end of this year. The DGB further demands that it must become easier to declare a sector’s collective bargaining agreements generally binding on all companies.