Temp work and minimum income in Germany, 2007

Prol-Position on the extent of casualisation and the legal and contractual status of agency and temporary workers in Germany in 2007.

Temp work expands on a small scale
In mid-2006 about 500,000 people in Germany were employed by temp agencies. During the last decade the temp work sector has had an annual growth of about ten percent. In Germany, compared to other European countries, the share of temp work in relation to total employment is relatively small, about 1.7 per cent. In the UK for example that share is 4.7 per cent. The low number of temp contracts is less due to social conscience of German capitalists, but rather to the existing alternatives to temp work, e.g. temporary limited contracts, state subsidiaries for employing an unemployed person, special union bargained collective contracts which allow the employer to pay only 80 per cent of the wage if they hire a long term unemployed person. The manufacturing sector is the main area where temp work is implemented, and in particular in unskilled work in bigger companies of the electrical goods manufacturing and the metal industry. About one third of all temp workers work is found there, because there the re-structuring process is the most intensive and the wage differences between permanent staff and temps the biggest. The importance of temp-work for the re-structuring of certain industries becomes visible during the ongoing conflict about lay-offs at European Airbus. About 5 to 6,000 temp workers and 12,000 permanents are employed at the Airbus plant in Hamburg. In the manufacturing department the temps account for half of the staff and they are the first victims of the current crisis, March 2007. [see: http://www.wsws.org/articles/­2007/mar2007/airb-m01.shtml]

In general, temp workers might earn 70 per cent of the average annual wage of a permanent worker, in cases such as GM (see reports) it might be slightly more than a third. Only about 2.4 per cent of German companies use temp work, but the usage of temp work differs according to size of the company. About 35 per cent of all companies employing more than 500 people make use of it. In other European countries where temp work is more common, the limitations of such contractual relations already show. For example in 2005 Spain got an official warning by the European Union because the share of temporary contracts was too high.

This warning was justified by the alleged impact of an disproportionate number of temp contracts on the general productivity. Modern industrial production depends on a certain identification of the worker with their workplace and with their future employment prospects. If temp contracts exceed a certain percentage the carrot of achieving a permanent contract seems out of reach. People loose their motivation, the sick leave rate increases, the productivity drops.

Temp workers get more mobile
Apart from the quantitative numbers, the employment biography of temp workers also changed. Particularly after the legal changes in 2003 (see appendix on legal changes), undertaken by the Social Democratic government, the average duration for which a temp worker is employed by the same temp agency decreases, as well as the duration for which the temp workers is hired to the client company. In 2003 only thirteen per cent of the temp workers were employed one year or longer by the same temp agency.

In addition to that the so-called chain contracts increased in numbers, meaning that the temp agency sacks the worker once there is no employment opportunity and re-hires them if necessary. This became possible only after the legal changes in 2003. This resulted in short-term contracts: in 2003 about 43 per cent of the temp workers had been unemployed before they got the temp-job. The average duration for which a temp would stay in one particular client company was 2.1 months in 2003, in 1997 it was 3.1 months. The increased mobility is also expressed in the fact that more often workers tend to be employed not according to their original qualification. In 2003 about two third of all temp workers had a professional qualification, but half of all workers were employed in 'unskilled' jobs.

The official debate on a minimum income is not about improving wages, but about how the low-wage sector will be regulated in future

The conflicting arguments in the German debate on a minimum wage are not about the wage level. Rather they are about how wide the wage gap between the official unemployment money, Arbeitslosengeld II (about 350 Euros plus rent), and the average wage has to be in order to make people take a low paid job and about how to control and enforce this wage difference.

With the Hartz IV reform [see prol-position news no. 1/2005 | 1, no. 1/2005 | 2 and no. 3/2005] the government already replaced income related unemployment money, which was based on the idea of an insurance, by unemployment money which is somehow a guaranteed minimum income which every unemployed person will get after one year of unemployment, regardless of their previous wage. Thus the first step was made towards a generalisation of proletarian income and the towards setting up the state as the official decision maker for the level of this income.

In most of the EU countries (18 of 25 of them have a minimum income) the ruling class expects the state to be the most capable body to regulate and officially enforce low wages in times of aggravated crisis. In Germany this is the center of the current debate on minimum income. The Social Democratic Party, SPD, and the union head-organisation, DGB, agreed in September 2006 on a two-phase plan to introduce the minimum income.

This plan expresses their will to sustain the alliance of government, employers association and unions and the official negotiation process regarding the low wage sector. After the 'political protests' against the Hartz IV-reform and more recently against the CPE in France the ruling class is afraid of 'politicising' the popular anger and of focusing it on the state. Their hope is that the state of the economy and of the workers struggles allows the holy trinity (state, capital, unions) to continue and to present the low wage outcome as a result of social partner-ship. In the first phase of the plan, employers and unions are supposed to negotiate a sector-related minimum income, which would then be legally founded by the state. This has already happened in the construction and cleaning sector. Only if this process fails, is the state supposed to fix a general minimum income.

Test-Tube Temp Work
The different capitalist fractions who participate in the debate about a minimum wage are still undecided whether and how regional or sector-related differences are taken into account when defining the minimum wage. Here the wage differences between east and west Germany still play a major role. The question is whether the advantage of having a collective contract in e.g. the hairdressing trade in Thueringen (East Germany) which allows hourly wages of less than 4 Euros before tax outweighs the advantage of having a state enforced general minimum wage of about 7 Euros or not. There are several union negotiated wages which are below the 7 Euros level, which is debated as a possible minimum wage, but of course there are several sectors and trades which pay more and which might adjust their wage level to the legal minimum.

Like the construction or cleaning sector temp work is a kind of test tube for the debate, given differences between areas and sectors are less distinct and given that the general wage level is very close to the debated level of a possible minimum income. Here the play-fight between the different institutions is the most intensive: after the government accepted the 'equal pay' directive of the EU in 2003 (see appendix on legal changes) the temp work companies reacted using a legal loophole. Basically they negotiated collective contracts with mainly smaller and so far irrelevant unions, exploiting the law that states that if a union agrees to unequal pay between temps and permanents, it is just. Before the legal change there were hardly any collective contracts in the temp work sector, today about 95 per cent of the workers are employed according to a union negotiated contract.

The first contracts were negotiated with the small Christian union PSA-CGZP. At first the main union head-organisation, DGB, refused to negotiate any contracts which would undermine the 'equal pay' directive and questioned the legitimacy of the smaller union to represent workers. After a short time the DGB too signed 'low wage contracts' for temp worker. They justified this step using the usual argumentation that otherwise the smaller union would sign even crappier contracts. Actually the wage difference between small and main union contracts are not that big (see below).

In May 2005 the DGB and the representatives of temp work companies agreed on a collective contract which might be taken on as a general minimum wage for the sector by the state. The main aim, which is to establish a permanent and regulated low wage segment, was achieved: the negotiated wage is only about 45 per cent of the median wage. Median wage means that 50 per cent of all wages are higher and 50 per cent lower. At the end of 2005 about two thirds of all temp workers were said to be paid according to the DGB signed collective contract.

The following numbers show that the wage levels do not really differ much whether they are negotiated or proposed by the little Christian 'bosses' union', the DGB or the state officials. In the west (east) of Germany the Christian unions contract pays 6,80 Euros (5,60) per hour before tax, the DGB contract 7,00 Euros (6,00) and the proposed minimum wage for the sector is 7,15 Euros (6,20). For the individual low-wage worker these differences might not be tangible given that in many cases people can apply for social benefit money which is paid by the state to top up low wages. In September 2005 about 906,000 working people received these social benefits, 280,000 of them worked full-time. In this sense a minimum wage would not change much for most workers in low-wage jobs, it would just change the 'wage transfer' between capital and state.

Appendix: Legal changes in the labour law concerning temp contracts
1994 Temp workers can be employed continually in one client company for nine months instead of six. After this period they have to be made permanent. People who were long term unemployed (more than a year) can now be sacked from the temp agency once the job at the client company is over. In all the other cases employment has to be continued for a certain period, i.e. about 25 per cent of the duration for which the temp worker stayed at the client company.

1997 Temp workers can be employed continually in one client company for twelve months instead of nine, before having to be made permanent. Temp companies are now allowed to give people a series of timely limited contracts in succession.

2002 Temp Workers can be employed continually in one client company for twenty four months instead of twelve, before having to be made permanent.

2003 People can now be employed in the client company for an unlimited period without having to be made permanent. People can now be fired and re-hired by the temp agency. Before the legal change people could not be rehired within the following three months after being sacked. The German government implemented the EU labour law according to which all 'employees are equal'. Theoretically, temp workers could now demand equal pay and conditions. The government left a legal loop-hole, which allows the 'equality law' to be undermine. If employers and union agree on a collective contract then its terms and conditions apply, even if they mean that temp workers earn less and work under worse conditions than permanents. Consequently, nearly all temp-agencies now employ people on a collective contract basis.

[Sources: Dr. Claudia Weinkopf, Mindestbedingungen für die Zeitarbeitsbranche?, Expertise im Auftrag des Interessenverbandes Deutscher Zeitarbeitsunternehmen (iGZ e.V.) (Aktuelle Analysen aus dem Institut für Arbeitsmarkt- und Berufsforschung der Bundesagentur für Arbeit, Ausgabe Nr. 14 / 19.9.2006]

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