Difficult Negotiations in Construction Industry

March 1998 saw the start of acrimonious negotiations over pay between the social partners in Austria's construction industry. The sector's trade union originally wanted to discuss only wage rates but later indicated that it might be willing to concede minor points on issues prioritised by employers, including some related to working time. A conclusion seemed likely before the 1 May deadline.

The collective agreement on wages in the Austrian construction industry proper covers 130,000 workers out of a total of about 200,000 in the construction industry in a broader sense. There are three parties to the negotiations: the Union of Construction and Wood Workers (Gewerkschaft Bau-Holz, GBH); the Association of Industrial Employers; and the Guild of Crafts Employers. The construction industry did surprisingly well in 1997, partly owing to the mild weather in the autumn, but pressures to rationalize the structure of the sector remain. Mergers have resulted in a greater concentration as well as clarification of ownership of the leading enterprises and are likely to be followed by further mergers in the future. At the same time the large firms are internationalizing, mostly into the markets of Germany and Hungary, which enables them to compare costs and to subcontract more. Under pressure to rely less on the unemployment insurance system, a collective agreement was concluded in 1996 reducing overtime during the summer in favour of paid time off in lieu at less busy times of the year. Time off carries a premium of only 10% instead of the 50% that applies to overtime.

Negotiations over a new agreement formally started on 5 March with an exchange of demands and offers. The employers clearly wanted to achieve a reduction in wage costs. They had outraged the trade union in January 1998 by suggesting an increase in the upper limit of normal weekly flexible working hours from 45 to 55 or 60. At the same time they announced their wish for more restrictive regulations on the compensation payable to weekly commuters - who are widespread in the industry - based on the distance they travel. The employers also wanted to revise pay scales to ensure higher starting pay and reduce the value placed on length of service. The main points of the employers' demands were:

• maximum weekly working hours to be raised from 45 to 60 and maximum daily hours from nine to 10;
• the 10% time premium on time off in lieu to be scrapped
• entitlement to holidays only after 52 weeks of employment, instead of 46
• the first day of any period of sickness to be counted as holiday;
• abolition of 24 December and 31 December as paid days off;
• "distance compensation" for commuters to be paid only for days actually worked - that is, not for days off in a short week/long week shift cycle or for time off in lieu;
• Christmas bonus to be reduced;
• "working at heights" premium rate of pay to be scrapped;
• remuneration of apprentices to be reduced by 5%
• exclusion of apprentices from bad weather compensation; and
• termination of the one-third financing of apprentices' training college costs by employers

The trade union, GBH, estimated that the whole employers' package would cost the average construction worker ATS 40,000 a year. ATS 13,500 of this would result from the proposed changes in holiday regulations; ATS 13,000 from changes in the structure of working time; ATS 6,500 from reducing the Christmas bonus; ATS 5,000 from the amended distance compensation; and ATS 2,000 from abolishing the two December holidays. In return, GBH calculated, they were being offered an average rise of 1.3% or ATS 3,500 per year, while another 1.3% on offer constituted only a shift from gross to net income. The figures were disputed but served to motivate the trade union, on 24 March, to announce a campaign of information and action entitled, "Scene of the crime: construction site". While nothing was ruled out, it consisted in practice of public meetings in five places in Vienna and in 11 other towns across the country between 26 and 28 March. GBH stated that it would negotiate only an increase in wage rates and nothing else, and that it wanted a 2.7% increase in gross wage rates.

On 31 March, at the first genuine negotiating session, nothing happened. Subsequently GBH issued threats of stronger action. The next session, on 8 April in the afternoon, was marked by renewed public meetings of activists. Afterwards, the employers described their offer as a 2.7% rise in gross wages compensating for inflation and productivity growth, and for amendments to the annual working time model, vacation and Christmas payments, and vacation and holiday entitlements. They protested against the union's actions and threatened to discontinue the negotiations. The union acknowledged that progress had been made.

More progress was made on 15 April, when it was agreed to drop the points most resisted by GBH. What remained were: the apprenticeship issues; the height premium; the day on which compensatory time-off falls due as overtime; two minor working time issues; and one small issue of wage scales. Employers offered a rise of 1.9% in return for assent by the trade union to the six points. The trade union estimated that this would still result in real income losses for the average worker, maintaining that a 2.4% increase in nominal wages will be necessary for concessions on some of the six points. It is now clear that wage rates will be increased somewhere between 1.1% and 2.4%, depending on the concessions the union is prepared to make. Negotiations were due to resume on 21 April. For the moment, no further industrial action is threatened.

There was disagreement on the further fate of the dropped issues. The employers' representatives said that they would be negotiated in a working group before the end of 1998, but the union issued a statement saying that these issues had been dropped for good. Provided that there was a collective agreement by 1 May, there would be a working group, but its remit was to evaluate the framework agreement for the construction industry in a cost- and income-neutral way and to modernize it.

GBH has a history of militancy, in Austrian terms. It organizes 178,000 of the roughly 240,000 wage earners in the construction and wood processing industries. This degree of membership density (70%) is unusually high. Further, given the unexpectedly buoyant development of the industry in 1997 and 1998 on the one hand, and the relatively large number of (seasonally) unemployed workers on the other, the union is in a strong position to argue for a better distribution of working time to boost employment (on annual average) and to demand at least compensation for inflation (1.2% forecast in 1998), if not a share of the productivity gains.

In fact, GBH went onto a broader offensive. It keeps castigating the employers for illicit employment (of immigrants) and it keeps hinting at the possibility it might oppose the eastern enlargement of the European Union if it does not receive adequate concessions from employers. Both of these are strong bargaining chips, not only in 1998 but for years to come.

However, the union's strength is based on a peculiarity of the construction industry, which is its minimal exposure to international competition in the home market. This is likely to have resulted in higher prices which the most important customers - that is, national, provincial and local governments - have been perfectly willing to pay. Furthermore, part of the industry is currently coming under investigation for price rigging and possibly for corruption, though the scope and scale of this is not yet apparent. Should this result in any convictions, the repercussions could be far-reaching, not only for the companies involved but for the whole industry, and by implication for the trade union's strategies.

Unit 5

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