No 1/2015. CLR News. Wages and employment, disintegration or transformation CLR. European Institute for Construction Labour Research.

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1 No 1/2015 CLR News Wages and employment, disintegration or transformation CLR European Institute for Construction Labour Research

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3 Contents Note from the Editor 4 Subject articles 7 Jörn Janssen: Instead of an introduction: the transformation of employment in construction. 7 Phillip Toner, Mike Rafferty: Financialisation of the construction industry and collective bargaining. 12 Ernst-Ludwig Laux: Statutory minimum wage in Germany. 23 Thorsten Schulten: On the expansion of minimum wages in Europe. 31 Hans Baumann, Andreas Rieger: The struggle for Swiss minimum wages goes on. 37 Discussion: 41 Vasco Pedrina: Equal rights and wages for migrant workers: the example of the battles in Switzerland. 41 Reports: 54 Holcim-Lafarge merger. (Rolf Beyeler) 54 Social identity cards in the European construction industry. (Werner Buelen) 55 Employment law after the elections in Great Britain. IER 11/02/ (Jörn Janssen) 56 Building with 3-D printers in Amsterdam. (Ernst-Ludwig Laux) 57 Reviews: 58 Olivier Fahrni (2014) Heavy metal. (Hans Baumann) 58 Jeremy Rifkin (2014) The zero marginal cost society: the Internet of things, the collaborative (Ernst-Ludwig Laux) 60 ILO Wage Report 2015/15. (Hans Baumann) 61 New Projects: 64 University of Westminster: Thames Tideway, Women in Construction. 64 York University of Toronto and University of Westminster: Climate change and work. 65 Events: 68 CLR AGM and Seminar. 68 CLR News 1/2015 3

4 Note from the editor Jan Cremers, In this editorial I have to talk about a topical issue related to a ruling of the European Court of Justice. In my editorial I wrote: The basic principle of the European social model as formulated by the founders of the European Economic Community was the respect for the well-balanced regulatory framework for social policy, including social security and labour standards that existed in the member states. I added that this was also the guiding principle for the rules that were formulated in the Posting of Workers Directive (PWD). But, already in our 2004 book The free movement of workers in the European Union (CLR-Studies 4 by Cremers & Donders) we had to conclude that the possibility to verify, legally and in practice, whether a worker was correctly posted and fell under the scope of the PWD was one of the Achilles' heels of the enforcement of the correct use of cross-border recruited labour in the frame of the provision of services. The competence to decide about liability in cases of fake selfemployment and/or fake posting was blurred by ECJrulings about home versus host country responsibilities. The ECJ tended to describe mandatory basic control in a host country as a barrier for the free provision of services. Along the same lines, and again referring to the primacy of economic freedom, the competence to define who was deemed to be the real and genuine employer and who could be held liable in cases of fake posting by letterbox companies was located by the ECJ with the (often nonexisting) home country of these establishments. Thus, the correlation with economic freedom, notably the freedom of establishment and the free provision of services, obstructed fundamental legal and political solutions. As mentioned before, after the launch of the Internal Market project, the Commission and the ECJ, not hindered by EU member states, often gave primacy to the free provision of services over the lex loci laboris principles of the posting rules. It took quite some time before the member states 4 CLR News 1/2015

5 Note from the editor reacted; even those member states envisaged by the different ECJ-cases refrained from pushing forward the problems in the EPSCO Council that brings together ministers responsible for employment, social affairs, health and consumer policy from all EU member states. In this Council - in fact the principal legislator - the advocates of a liberalised labour market characterised by deliberate competition in the field of working conditions and pay clashed with representatives from countries that were in favour of the creation of a level-playing-field based on the existing national regulatory framework (the Rhineland or social model). The main driver for change was the European Parliament, which forced the EC president Barroso during the debates for his second term to come up with the promise of an initiative for the enforcement of the PWD-principles. We will certainly come back to the resulting Enforcement Directive in the very near future and assess the enforcement principles formulated in that Directive. In recent months not only the European legislator but also the ECJ seem to have realised what negative effects blunt economic reasoning can have on the functioning of the PWD. In a Finnish case of Polish workers being underpaid (C-396/13), the ECJ underlines that the terms and conditions of employment guaranteed to posted workers are to be defined by the law of the host member state (as long as these conditions are declared universally applicable, binding and transparent ). In this case the foreign subcontractor contested that the trade unions in the host country had standing to bring proceedings to the court, given that the employment relationship was based on the law of the home country. Thus, the ECJ had to decide on the question of whether the right to an effective remedy, as laid down by the Charter of Fundamental Rights, of claims assigned by the PWD could be blocked by the rule of the home country (that prohibited the assignment of claims arising from the employment relationship). The ECJ ruled that the trade union in the host country was eligible, as its standing was governed by Finnish procedural law and as the PWD makes it clear that questions concerning minimum rates of pay are governed, whatever the law applicable to the employment relationship, by the law of the host country. This new issue of CLR-News does not focus on this item, but some of the contributions can be read from CLR News 1/2015 5

6 Note from the editor this perspective. The sub-editors Hans Baumann and Jörn Janssen have collected analyses of wage bargaining perspectives for the construction industry. The contributions range from two specific country reports on minimum wages to a broader European overview and two articles that examine the transformation of the building industries (in Europe and Australia). The included reports and reviews partially deal with the same subject, partially are taken on board for topical reasons. We trust that the issue will find resonance among our readers. BATTLE-SITES - A call for funding by Jakob Mathiassen The book Battle-sites (Kamppladser) was published in Denmark in March The book tells the story of the labour movement's struggle against social dumping in the Danish construction sector from 2004 to Accompanied by analyses and statistics, the book describes the most spectacular struggles that took place on six specific construction sites. We, the authors of Battle-sites are not impartial historians, but on the contrary, active participants in the struggles. I am a concrete worker and rank and file member of the trade union 3F, and I have been taking part in the struggle since My co-writer, Klaus Buster Jensen, is a journalist for 3F's trade journal, where he has exposed and reported on social dumping in Denmark's construction trade. Today, one year after the publication, we are trying to get the book translated into English and German. The goal in translating the book is, first and foremost, to share the Danish experience with the EU's eastern expansion and the struggle against social dumping. We hope that the Danish experience, successes and failures, will be useful to those involved in the fight against social dumping in other countries. Translating and publishing a book is an expensive project. So we have put the project on a crowed funding page. We hope that all interested parties together can finance the project. Support the translation directly on: Reed more about the book and the translation on: 6 CLR News 1/2015

7 Subject articles INSTEAD OF AN INTRODUCTION: THE TRANSFORMATION OF EMPLOYMENT IN CONSTRUCTION Dedicated to my international umbrella organisation, the Building and Woodworkers International (BWI) Jörn Janssen, Standard or typical as opposed to precarious nonstandard or atypical employment relationships tend to be referred to as a desirable option, with the assumption that everybody knows which standard or type is invoked and often unspecific of national or occupational peculiarities. Usually, in this context it is also taken for granted that the standard ought to be maintained for the future. In reality such a standard is almost always a fiction made up in hindsight and covering a multiplicity of widely varying relationships in a permanent process of transformation. We ought to keep in mind as well that employees and their capacity of labour power tend to push for improvements in their working conditions. They were and are the core agents of change, not always successful but never simply defending existing standard conditions. We should, therefore, direct our attention to this process of change and regard the future as an object of strategic thinking. Moreover, referring to a standard raises an unavoidable obstacle to any attempt to grasp a process of transformation at present. Inevitably, our categories of perception have been formed through experience from the past and, therefore, tend to misrepresent things in the present. For instance, have we adjusted to the normality that the owner of a large company is an anonymous financial entity in a permanent process of transformation? Shouldn t we call this property relationship precarious? And after all, who is the employer of wage earners? These questions demonstrate that we are still far from having adopted adequate categories for the common discourse and scientific analysis of the present reality. CLR News 1/2015 7

8 Subject articles Another problem in any analysis of transformation is the choice of the time span in which it is perceived. The changes in the object of observation, in this case the form of the employment of labour, appears substantially different whether we relate the present day to, for instance, the 2008 financial crisis, to the rise of the neo-liberal economic regime in the 1970s, or to early capitalism associated with the French Revolution of The post-crisis state austerity regime has been a blow to the low-wage strata of workers and exacerbated social disparities. Under neo-liberalism wage growth has been lagging behind productivity development whilst social provisions have been relatively improved. Looking at capitalism from its beginnings, one might assess financialisation as the last breath of a dying regime of labour exploitation through property. Thus, changes which come to the fore from a longer-term perspective may not be distinguishable in a short-term study and vice versa. It needs also to be kept in mind that social transformation is in no way a linear or uniform process according to an abstract logic. Different stages may coexist side by side and development may take place in leaps and bounds. Given these uncertainties and dynamics of changing social relationships, it is not surprising that standards are perceived as an anchor of safety preferably identified with generally valued past achievements. From the present point of view, within the long-term transformation of wage-labour employment relations, this past was the stage of widely accepted collective bargaining between employee and employer organisations concluding agreements on dominant wages and working conditions in Western Europe. Wages were raised ideally in step with labour productivity gains, employment contracts were open-ended, and a great majority 8 CLR News 1/2015

9 Subject articles of employees were covered by collective rates backed up by social benefits for unemployment, sickness and old age. This regime, variably, culminated around 1970 and started disintegrating substantially at the latest after the collapse of the Warsaw Pact states. Fixed-term labour contracts, bogusself-employment, agency labour and more recently zero-hour contracts are typically associated with this process which was embedded in a number of conditions: Membership rates declined consistently in employee as well as employer organisations; the integrity of corporations became increasingly unstable as a result of more frequent adaptations of enterprise structures to productive segments with a general tendency of dispersion; ownership of corporations became increasingly anonymous and volatile with the financialisation of capital 1. Generally speaking, the framework of that standard employment disintegrated on both sides, of labour as well as of property. In a newly typical employment relation, employees are faced with employers represented by employees of different status. In the construction industry this transformation is particularly evident and advanced. Project contracts are often awarded to management contractors who subcontract productive work to a tree network of subcontractors, labour agencies and selfemployed workers. In this network work contracts, piecework, self-employment and all forms of informal or illegal labour relations are almost indistinguishable. Under these conditions the borderline between contracting and employing as well as employer and employee is inherently blurred. In this productive interaction property relations are consistently being replaced by contract relations at all levels. As a result, in the productive construction process the standard employment relationship becomes marginalised. The case of the scandalous conditions on the building sites for the world football championship in Qatar has demonstrated how this evolution is a global phenomenon. This is not 1. See Dick Bryan, Michael Rafferty, Phil Toner and Sally Wright in this issue. CLR News 1/2015 9

10 Subject articles surprising as the large management contractors of the construction industry are acting world-wide. How should the employment of labour be developed for the future? The classical capitalist wage relationship confronted labour with property. In the centre of the dispute between these opposed components of the production process was the distribution of the social product generally and of the surplus in production between profit for property and wages/salaries for labour in particular. Since property is hardly represented any more in the environment of production, the distribution of the social product between profit and wages is in limbo. The distribution of the social product has shifted into the world of financial transaction. This is how, outside the reach of social partners, the inequality of wealth has reached astronomical dimensions whilst no institution for regulating or forum for negotiating the distribution of the social product exists any more. As a result, collective wage negotiations are excluded from their object of dispute and cover only a shrinking segment of wage earners. In this vacuum of former collective wage regulation, the statutory minimum wage has gradually been introduced as a means to fill the gap, covering those workers who lack any form of collective protection 2. Another way to replace or complement collectively agreed wages are statutory social benefits. Both minimum wages and social benefits under statutory regulation represent a growing share of income or means of subsistence and serve as replacement or underpinning of collective rates. Thus we are witnessing a secular shift from collectively agreed wages to statutory income regulation. Taking into account this transformation in employment relations, what might be conceived as a labour strategy for the future? Is it possible under prevailing wider socioeconomic conditions to restore forms of traditional employment relations? These questions will not be answered 2. See Ernst-Ludwig Laux, Statutory Minimum Wages in Germany in this issue. 10 CLR News 1/2015

11 Subject articles in this paper. But the disintegration of the standard employment relationship may have been just the organic concomitant of a process of transformation. If we examine its position in a wider historical context, this process may show quite different and even positive aspects. Initially the submission of labour under capital was a liberation of the unfree peasant from bondage, hence the term free wage labour as a relationship between legally equal partners. The collective organisation of wage earners was a step to contain the continuing economic inequality between capital and labour, then between employers and employees 3. Statutory underpinning and extension of wages through social benefits was another step in the liberation of employees from economic dependence on employers. In fact wage earning has gradually turned into a civil status rather than employment relationship 4. Looking at the transformation process through different glasses made for short-, medium- and long-term distances may help our understanding of the dynamics at work at the present day: Since the recent and continuing - financial crisis, private property has lost its grip on productive assets. The rise of the neo-liberal regime has dismantled capital s direct command over the employment of labour. Since the French Revolution early capitalism wage earning has developed to become the universal form of social status. Private property has been pushed out of productive relations surviving on a lifeline in a fictitious world of financial constructs. 3. According to the Oxford Dictionary the term employee emerged in On the civil status of labour see Bernard Friot (2014) Émanciper le travail. La Dispute, Paris. CLR News 1/

12 Subject articles Strategies for the regulation of working conditions and the distribution of the social product, based on these - admittedly simplified - pictures of the dynamics we are living in, will necessarily have to envisage the future as a space of freedom under civil rights rather than depending on employers. In hindsight, from a not too distant future, the status of employee may already now be outdated. The universal development of minimum wages may be a first step towards internationally coordinated statutory wage scales. This is a perspective situated in the framework of universal human rights, which should not stop anybody from pursuing it simultaneously at national level and within the existing bodies of labour organisation. The construction industry may be at the frontline within this process of transformation. Dick Bryan, Michael Rafferty, Phil Toner and Sally Wright RISKING IT ALL - FINANCIALISATION AND LABOUR IN THE CONSTRUCTION INDUSTRY 1 Introduction The concept of profit within the building industry context is inextricably linked to the notion of risk building contracts in all their forms have been designed with the specific purpose of identifying, allocating and pricing risk between the various parties. John Crittall, Master Builder s Association of Australia The growth over three decades of several Australian construction companies (notably Multiplex, Lend Lease, Grocon, and Leighton Holdings) from specialist regional builders to national and then (parts of) global property services firms has been nothing short of astonishing. Over the same period, we have also seen a number of important changes to the construction labour process and forms of 1. This is an abbreviated version of a paper on risk and finance in construction under preparation, Financialisation and Labour in the Australian Construction Industry. 12 CLR News 1/2015

13 Subject articles contracting, such that workers are now increasingly treated as (often a sham) small business operators. One link between the two developments is the notion of financial risk. While financialisation and financial risk have become the latest buzzwords, the connections (if any) between finance and labour are not very well developed analytically, or empirically. This article develops the proposition that we can see finance and risk playing out in construction both institutionally and in increasingly explicit modes of financial calculation organising the building value chain. We find that financial innovation in construction and property services is at the frontier of financialisation. In addressing the institutional and calculative embedded dimensions of finance and construction, we seek to open up the politics of labour in a financialised construction industry. Institutionally, finance and the construction industry in Australia became integrated through the expansion of building companies across the construction value chain that is, via the integration of formerly specialist builders into development, financing and property management. This transformation has been blurring boundaries between construction, financing and property services, formerly discrete functions within the value chain. With these changing institutional relations the industry is also seeing the logic and language of finance (notably the calculative techniques and methods of risk management) as a driving force in the building process in the way that main contractors organize building sites. One of those calculative dimensions is the process of risk shifting onto labour. Extensive sub-contracting relationships have always been partly about allocating risk in the construction industry in Australia, as elsewhere. But with new financial and organisational models, the industry has developed techniques including a much more extensive contractual pyramid to transfer risks down towards individual workers, who are CLR News 1/

14 Subject articles increasingly expected to manage a range of risks themselves, including income protection, superannuation, workers compensation and the provision of tools and equipment. Builders become property and financial services companies Thirty years ago in Australia head contractor companies in commercial construction (building offices, hotels, shopping centres and large residential buildings) were largely specialist, regionally-based organisations. Multiplex, for instance, was a commercial head contracting company that grew to dominate this sector in the Western Australian capital city of Perth, partly on the basis of its special relations with unions and state governments there. Its move to the eastern states was initially mainly an attempt to extend that business to the larger states in Australia. Grollo Construction, likewise, was a dominant head contractor in the Victorian capital city of Melbourne, a city defined again by distinct unionmanagement relations. Its expansion outside of Melbourne was also largely initially an attempt to spread its head contracting business to other states. Until the early 1990s, therefore, these head contracting companies were defined largely by their role within the increasingly nationally organised construction value chain. The business of head contractor was managing labour and sub-contractors on-site and ensuring the timely supply of buildings on a range of contractual terms. These companies typically undertook work commissioned by governments, large corporations and insurance companies (who typically bought and owned the buildings for direct occupancy or as an investment for long term ownership). But a number of global and sectoral transformations in the last thirty years have changed the relations between property development and head contracting, between head contractors and sub-contractors, and between property development and financing. One of the most important developments here is that several head contractors have not 14 CLR News 1/2015

15 Subject articles only become national and then international in their scope (Multiplex famously nearly risked and lost it all when they built the new Wembley Stadium, but since then, and along with Lend Lease, Leightons and Grocon, they have established significant operations in Western Europe and the Americas). Just as significantly, they have also extended their activities directly into property development, property management and even financing. When we look at these modern construction companies, two things stand out: 1. Increasingly what construction companies do off-site (and outside of supervising the actual building work per se) is as important to their success and thinking as what happens on-site. 2. Construction companies today are as much about investment banking and risk trading as putting up buildings. We will consider each of these developments in turn. Before doing so, it is important to note one of the key global developments in capital markets and financial institutions that has produced a growing separation between tenants and property ownership the evolution of commercial property into an asset class. The cityscape becomes an asset class From the 1980s, an increasing determinant of what buildings were put up and where (and the pricing of those developments) could be found in the decisions made in global capital markets. Part of that process involved a reorientation of corporations and governments away from commissioning buildings to own and occupy, and for financial institutions to develop securitised investment vehicles like Real Estate Investment Trusts (REITs) to become the owners of property developments. This financial innovation meant that investors could buy into the income streams on buildings without the need to own the bricks and mortar. It gave property a new globalized liquidity and helped make commercial property into an asset class for global investors. CLR News 1/

16 Subject articles Further, financial institutions found ways of profiting from providing financial services to the property sector, rather than necessarily owning the property itself, and as governments looked to reduce the book value of their debts by selling fixed assets like buildings, new opportunities opened up for property developers. As this process grew, there was less need for former large owners like governments and insurance companies to be part of the construction process as managing clients. As the then Property Council of Australia CEO Peter Verwer astutely noted, it was not just that asset ownership was separated from occupancy: The...property sector has been very much integrated into the capital markets sector over the past decade. It thinks like the capital markets sector, and the main questions it asks itself are: where should we invest this money, and what risks are attached to it? The clients (owners) in the property sector have a different role than they did even a few years ago, and it is a more distant role from the construction sector than had previously existed in the past the clients used to be part of the manufacturing process that was the construction industrythey were deeply embedded in the food chain (and) all had chief engineers, big construction departments and all the rest of it. They do not do that anymore; in fact, those positions do not exist at all Verwer (cited in Coates and Toner 2006). In a strange way this meant that, with property developers increasingly interested in building developments to sell into securitised vehicles, the balance of power between client and the head contractor tilted toward head contractors, if for no other reason than the fact that, in a highly contractual environment, technical knowledge about the qualities, capacities and applications of a building, and its likely revenue-generating capacity is effectively financial power. This was occurring just as head contractors realised that in such an environment of property-as-asset class they too could become property developers. 16 CLR News 1/2015

17 Subject articles Construction companies become risk traders As property development and finance merged in new ways, forms and spaces, there were opportunities for head contractors to transform themselves into players in financial markets as well. They not only build, they started also to organize finance, manage financial risks, and to manage the property trusts that were becoming the ultimate owners of the buildings. Gradually, head contractors started to develop their own buildings, organise the financing for such developments and to manage the property trusts that became the ultimate owners of these buildings. It was not, of course, pre-ordained that it would be those firms that provided the most direct institutional expression of the growing integration between construction and finance. Indeed, Multiplex was later bought out by a property service conglomerate. But, as the John Crittall epigraph emphasises, it was perhaps because the head contractors were at the intersection of so many points of contractual negotiation and risk management that their capacities for negotiating around and managing risk had already become a key to profitable head contracting. Indeed, it might be conjectured that, in dealing with the militant and organised workplaces in Australia that confronted them over the last thirty years, head contractors were educated by labour in managing risks on-site. We know this militancy meant that Australian construction sites were innovative (the tower crane), safer than their counterparts in Britain and the US, and productive. Militant and organised labour put a premium on managerial expertise. Out of these processes head contractors now began increasingly to deploy those capacities in novel ways. One was to use their advantage in risk calculation and its relocation to profit from (in financial terms to arbitrage ) their position against both clients and sub-contractors. Using financial risk terms, here is how a former senior manager at one of the CLR News 1/

18 Subject articles leading construction companies put it: I believe there s an arbitrage of knowledge between clients and head contractors, and head contractors and subcontractors, and the arbitrage is unreasonably leveraged to the benefit of the head contractors almost all the time (cited in Rafferty et.al 2011) This statement identifies sub-contractors as a key target for arbitrage within the building process, and we know that midtier sub-contractors have to regularly confront very competitive tendering and re-tendering in ways that often pre-determine shifting risk further down the contracting hierarchy. We will have more to say about the critical role of labour in that risk shifting shortly. But for now we emphasise that the head contractor use of intensive contracting to shift risk extends also to the offsite service providers like architects and engineers. In a report on commercial construction here is how one professional engineering association noted its experience of contractual risk shifting: Relationships between client and consultant have become more contractual and adversarial, rather than co-operative. Most clients select a consultant on the low bid The low-bid environment corrodes professional ethics and professional standards among those operating in that environment. Compromising ethics and standards allows underprizing of the necessary work to win the job. The consultant s input is then limited by price, with an increasing likelihood of searching documents for loophole opportunities Queensland Engineers Association (cited in Rafferty et.al. 2010) In summary, a clear change in corporate organisation and logic is that key skills of senior management now lie not just in engineering and building but in finance and financial risk management. In organisations that think in terms of risk management and trading senior management in the modern construction company comes less from on-site project management and engineering and increasingly from financial markets. This can be seen explicitly in the expertise and careers of the corporate boards of the companies of which 18 CLR News 1/2015

19 Subject articles the head contractors have become part. Having established one of the key institutional expressions of finance in construction in the vertical integration of head contractors, and the increasing role of finance and risk in organising in their activities, we have set the scene for the role of labour in this process. Financialisation and labour We have already noted how contractualism has been the leading embedded form in which financial risk shifting occurs in construction. The form in which workers are engaged in the construction industry is also increasingly via contractual forms like those of sub-contractors. Thirty years ago, head contractors engaged a part of the on-site workforce directly, and had a small number of sub-contracting packages on any build. Today, head contractors employ very few onsite workers and instead manage a growing range of sub-contracting packages, which are often then re-contracted downward all the way often to individual workers. This means that workers are now usually engaged on contracts and paid for work based on task and output rather than time (metreage rates for plastering is one example). These contracts also often specifically allocate many risks previously borne by head and sub-contractors (as employers) onto labour (the requirement to self-insure around income security, workers compensation etc.). They often shift attributes of the employment relationship between several parties (such as labour hire arrangements). And they often re-situate workers from employees to de facto small businesses (so-called selfemployed, labour-only sub-contractors). Despite the fact that many people are working in virtually the same labour process as wage workers, their contractual status, while often varied, generally contrives them legally to be a separate, arm s length business. This process can be seen as a form of regulatory arbitrage: using legal re-framings to shift risks (and hence costs) without a substantive change in role. CLR News 1/

20 Subject articles This arbitraging of labour law is now pervasive, and includes a significant proportion of construction workers engaged under what has been described as sham contracts : contracts for labour only services deliberately constructed to avoid the obligations of employment law. While there are debates about the exact size of sham contracting, few doubt its scale or its cost significance for building construction. Not only is the construction industry the largest sector for independent contracting, it is the largest sector for sham contracting as well. According to one of Australia s leading labour law academics, this process is becoming standard practice: The reality is that any competent lawyer can take almost any form of employment relationship and reconstruct it as something that the common law would treat as a relationship between principal and contractor (or contractor and subcontractor), thereby avoiding the effect of much industrial legislation. Establishing or reviewing the terms for such arrangements is routine work in any commercial practice. (Andrew Stewart 2005) What is clear, then, is that pyramid contracting and the financial logic of risk shifting and arbitrage have, in combination, given head contractors the incentive and opportunity to drive risks down the contracting pyramid, with direct implications for labour, but not only labour. In cases where labour is organised or powerful, and can resist these pressures, it is often mid and lower tier subcontractors that are squeezed. But the whole process of risk shifting in construction is ubiquitous, contractualism is an important form it is taking, and that process is conflict-laden. Indeed, one of Australia s leading building management academics refers to this as an: All pervasive subcontracting model, which has fragmented the construction industry, leading to a multitude of problems which include abuses of human rights, corruption, underinvestments in people and knowledge development and a confrontational culture of risk transfer where there is little incentive to innovate and where risk is passed to the point of least resistance and lowest capability (Loosemore 2015f). 20 CLR News 1/2015

21 Subject articles Summary This contribution has attempted to engage with the twin issues of finance and construction, and finance and construction labour. It has established that we can see finance and construction s growing integration, both institutionally in, for instance, the vertical integration of the property value chain, and in a growing risk calculus organising the construction labour process. While there has been considerable and justifiable concern about the deleterious effects of the growing scale of sham contracting in the industry, we have sought to show that it is a development that cannot be addressed in isolation. It is directly tied into broader and deeper developments in construction and the property services industry. As Toner and Coates noted several years ago...what appears on the surface as simply short-term competitive advantage through the use of non-standard labour has foundations in a deeper competitive process, as labour markets, firms and financial assets are thrown together into constant competition across industries and locations. (Toner and Coates 2006:106) Since 2006, we can see an acceleration in these dynamics. The construction companies are increasingly global in their scope, either directly by expanding their offshore activities, or indirectly by being absorbed into larger corporate groups, notably Multiplex s takeover by the global asset management group Brookfields. The link to labour here is the increasingly explicit discipline of globally-competitive rates of return entering building. So we have the ultimate liquidity (i.e. global mobility of investment) confronting the ultimate fixity (buildings are erected in a specific location), so that the risks of fixity have to be shifted, especially onto labour. But not just onto labour, but also onto security buyers, who of course include workers too as superannuation savers. This puts the construction industry as a leading industry in finance, risk, labour and securitization. CLR News 1/

22 Subject articles The issue of sham contracting therefore needs to be understood as just one (albeit important) aspect of a significant and wider process of risk shifting occurring up and down the construction contracting supply chain (and beyond). To extend the risk/finance metaphor, sham contracting of labour can be thought of as exploiting (or arbitraging) the regulatory gaps between contracts of and contracts for service present everywhere but especially in pyramid contracting production systems. This raises the issue of how labour at the point of production can challenge and perhaps change the momentum of these developments? This contribution suggests that the processes driving downward pressure at the site level are occurring not so much, or just, from dodgy sub-contractors, but as systematic processes of risk shifting. There are unlikely to be easy answers to the question, but identifying and naming the new ways that firms in construction think and organise is an important first step in that process. References Crittall, J (1997), Industrial relations risk in the construction industry - a contractual perspective, in T Bramble, B Harley, R Hall & G Whitehouse (eds.) (1997), Research in Industrial Relations: Proceedings of the 11th AIRAANZ Conference, Brisbane, 30 January-1 February, Association of Industrial Relations Academics of Australia and New Zealand: Brisbane, Loosemore M (2015f) Innovation, Strategy and Risk in Construction Turning Serendipity into Capability, Routledge, London Rafferty, M., Wright, S., Chan, S., Fattore, T. and Schutz, H. (2011) Contracting arrangements in the Queensland Construction Industry: Exploring Factors That May Give Rise to Sham Contracting, commissioned report to Industry Reference Group on Sham Contracting, 2011, Workplace Health and Safety, Queensland, Brisbane, August. Stewart, A (2005) Submission on Independent Contracting and Labour Hire, to the House of Representatives Standing Committee on Employment Workplace Relations and Workforce Participation, Canberra, April. Toner, P and Coates, N (2006) Competition and the Growth of Non- Standard Employment: The Case of the Australian Construction Industry, Labour and Industry, Vol. 17, No. 2, December, CLR News 1/2015

23 Subject articles STATUTORY MINIMUM WAGE IN GERMANY, A CRITICAL ACCOUNT AND EVENTUAL IMPACTS ON THE CONSTRUCTION INDUSTRY Ernst-Ludwig Laux Since 1st January 2015 a statutory minimum wage of 8.50 per working hour has been in force. If everything is carried out in good order, about 5 million employees will receive substantially higher wages. If, however, all the many breaches occur to the minimum wage, about which in recent weeks much information has been published in the German media, it will be fewer who benefit from increases up to the minimum wage. The law is in force now. Some specific exceptions have been formulated - young people, trainees, long-term unemployed, newspaper-deliverers but a number of open questions remain, probably until a legal clarification at the court of justice. Direct effects on employees need to be kept under observation. The minimum wage law is a great achievement for employees on mini wages. But the law may also be a challenge for the autonomy of collective bargaining and the many agreements concluded with trade unions. Many questions are still open that can be assessed only through developments and careful observation. The discussion in recent years For nearly 20 years there has been a debate in Germany in all political parties, trade unions and employers federations, as well as churches and social institutions, about the introduction of a statutory minimum wage or a generally binding minimum wage to be negotiated for individual sectors between trade unions and employers federations. In this debate different stages can be discerned in recent years. Over decennia the statutory minimum wage was not a CLR News 1/

24 Subject articles great subject in the environment of collective bargaining, in trade unions and social policy. Collectively agreed and paid rates were recognised in companies and governments as minimum wages. Since the fall of the Wall and the removal of the borders between East and West Germany in 1989, however, the subject of wage and social dumping in Germany has been increasingly on the political agenda. Through the freedom of movement of workers as well as services in Europe and the permanently rising number of people working across the borders predominantly from low-wage to high-wage countries, the subject has taken a new explosive force. As a consequence, the European as well as German legislators enacted the Posting Directive in 1996 in particular for the construction industry which regulates that collective agreements and legal regulations at the place of work are in force also for employees from low-wage countries. Since 1997 the industrial partners of the construction industry have concluded agreements for East and West Germany which have subsequently been declared generally binding. Since the enactment of the legal regulations of the so-called Agenda 2010 by the red-green Federal Government in 2003, the subject of a statutory minimum wage has been permanently high up in the socio-political discussion as the flexibilisation of working conditions and the increase in precarious employment wage dumping have become great problems in the country. The governing (CDU/CSU and FDP, Christian and Liberal) parties decided in their coalition agreement that existing minimum wage agreements were to be scientifically examined in order to obtain a basis for deciding whether regional or additional sectoral minimum wages could be introduced. The results of various studies were partly contradictory. At any rate, up to 2013 no legal decisions were made by the coalition government. Following the demands of the Social Democrats, the new large coalition between Christian and Social Democrats (CDU/CSU and SPD) wrote the introduction of a statutory minimum wage of 8.50 into the coalition agreement. The law was enacted by 24 CLR News 1/2015

25 Subject articles Parliament and came into force from 1st January It is worth noting that the majority of all European states have had regulated statutory minimum wages and conditions for many years and Germany has been rather the exception to date. Wage policy and minimum wages Since 1949, when the autonomy of collective wage bargaining for all sectors was enacted by the German Constitution, sectoral trade unions and the respective employers federations have concluded wage, framework and special agreements which were binding for a defined space of time. Wage agreements have been normally concluded for 12 months, sometimes also 2 years, framework agreements on working time, holidays, extra-pay, time of notification, etc. often for 4 years. The negotiations have been held autonomously. Diverse industrial actions, strikes and lockouts could be applied to achieve a result. The state has not been allowed to intervene in these autonomous negotiations. It is only within a process of conciliation that politicians function as mediators. According to the Act on Collective Agreements ( Tarifvertragsgesetz ), working conditions regulated by collective agreement are directly binding for the trade union as well as employers federation memberships and can be claimed at labour courts. Thus for decennia the collective rate has been at the same time the minimum wage in firms that has to be paid to employees according to their respective level of qualification. Almost all employers have been paying collective rates in order not to drive unorganised employees into the arms of the trade unions. The Act on Collective Agreements also regulates that individual sectors, if they are organised above 50% in their respective employers federation, can apply for generally binding terms to the Federal Government, which means that the existing collective agreements can be extended to all employers and companies that are not organised. This has been used by only a few sectors over the CLR News 1/

26 Subject articles last 65 years. Wages and salaries have only minimally been under generally binding terms, working time, holidays, extrapay and hard-work bonus however very frequently. Collective bargaining policy in the construction sector Very early on, from 1954, the construction industry has been using generally binding terms in particular in order to conclude special agreements for work dependent on weather conditions, seasonal changes, for holiday pay and supplementary pensions in the whole sector and to make them applicable to all companies. As a consequence, based on these collective agreements, social funds for the construction industry have been set up in order to guarantee the implementation of collective agreements. In both the main and secondary construction industry there exist some special conditions, such as a smallfirm structure, mobile workplaces as well as weather dependency, to mention only a few specificities, which also made generally-binding terms attractive already at an early stage to the construction trade union. Almost all other sectoral trade unions have rejected this instrument for decennia and called it an expression of weakness in social conflict and collective bargaining policy. Trade unions in public administration and services, in the metal and chemical industries as well as mining managed to build up trade union pressure to achieve good collective agreements and to enforce the implementation of collective regulations, also and above all through organised works councillors at the workplace. In particular through the opening of the border 1989 in Germany and the freedom of movement in the European Union in 1993, wage and social dumping at the workplace was increasingly observed in the small-enterprise segment of the construction industry. Construction enterprises of the new federal states in East Germany, of southern Europe and also Great Britain took advantage of low wages in these regions in order to obtain 26 CLR News 1/2015

27 Subject articles construction contracts at dumping conditions in West Germany. Construction workers from all those so-called lowwage regions brought their wage and working conditions soto-speak in their rucksacks onto German sites and formed islands of foreign rights, as it was often called by lawyers. The stipulation of trade unions since the mid-19th century, equal wage for equal work at the same place was evaded by social dumping and new regulations needed to be developed. After active lobbying of the European construction unions, the Posting of Workers Directive was enacted for the European Union and the Posting Act was passed in Germany by a conservative-liberal government. This Act regulated that national minimum wages could be agreed by the industrial partners and all the other generally binding regulations were enforceable also upon foreign enterprises. This was the hour of birth of a sectoral minimum wage by agreement in Germany, which was enforceable and also controlled by the legislator upon all employees irrespective of the country of origin. Unfortunately, in this Posting Act only the construction industry and construction-related services are cited. Why was it that other sectors were not also included in this Act? According to my opinion, this fact ought to be explored thoroughly, but I think that other sectors and above all also the respective trade unions could not or did not want to think that at one time also their sector might be affected by wage and social dumping. In many consultations with wage experts of the individual unions of the trade union federation (DGB) and above all in the wage policy committee, this opinion was dominant. In hindsight from the present day, it may be that since those days (1995) the environment of collective bargaining has changed enormously. Wage and working conditions for employees have deteriorated. CLR News 1/

28 Subject articles Minimum wages agreed for 2015 with the construction union (IG BAU): Main Trades West Germany unskilled Main Trades West Germany semi-skilled Main Trades East Germany unskilled Roofer Germany Scaffolder Germany Mason West Germany Mason East Germany Painter West Germany 9.90 Painter East Germany 9.90 Statutory Minimum wage for all from 1st January 2015 Since the mid-1990s, working relations and therefore working conditions have been eroded; precarious employment and low-wage work have increased substantially. Neo-liberal economic political thinking has substantially contributed to this. The employers federations have changed and ceased to regard wage policy as an important issue. Their rate of organisation has dropped noticeably. Through the Agenda 2010 of the red-green Federal Government from 2003, the deregulation of the labour market was initiated, leading to a noticeable weakening of the trade unions. In some sectors collective agreement were not respected and new ones could no longer be concluded. Self-employment, bogus self-employment, illegal employment, task work, black work, part-time work, underemployment, work without counting working hours, many other examples can be mentioned, are increasing more and more, even immoral wages of 2.50 according to some court 28 CLR News 1/2015

29 Subject articles decisions are not even a rare occurrence in some regions and sectors. The coverage rate of collective agreements has also dropped to an historic low for Germany of under 60 percent. The Social-democratic Party (SPD), under whose coresponsibility many of these developments have taken place, have come to an agreement with the Christian-Democrats (CDU/CSU) after long and heated discussions. Of course there are many exceptions and every day since 1st January new exceptions are being demanded. This will certainly continue in the future, but more important will be the observation on the spot: how will the minimum wage be implemented in reality and will the employees receive at least 8.50 per hour? Only in a few months time will we be able to take stock because a basic understanding of a statutory minimum wage has first of all to take root in Germany. In other European countries this has lasted for years, sometimes even decennia, if we think back to, for example the SMIC in France. Nonprofit institutions, charities and sports clubs are already arguing so fiercely against the minimum wage that further exceptions cannot be excluded. Repercussions of the statutory minimum wage on sectoral minimum wages and collective agreements What will be the impact of the new minimum wage in Germany on collective bargaining, collective wages, the income of employees, and on the strategy of trade unions and employers federations? This question has hardly been raised yet and is also difficult to answer at the present time. Research results from other European countries are also hardly available because there statutory minimum wages were introduced many years ago and are part of an uncontested practice in the work environment. Anyway, in many European neighbouring states, collective agreements are generally binding and have the same effect as a statutory minimum wage. At present the general pleasure about the minimum wage is great among employees, trade unions and CLR News 1/

30 Subject articles the Social-Democrats, but, as a construction trade unionist who in a position of responsibility has observed the problems on construction sites, I know that control, especially also of working time, is the essential condition for compliance. According to the Posting Act, besides the minimum wages all other core components of generally binding collective agreements have to be respected, including working time, holiday pay, regulations on travelling time, hard-work bonus etc. This is not regulated by the Minimum Wage Act and I fear that employers will try to pay the minimum wage but include other income components, in the short or middle term, which is hardly controllable by outsiders. However, if the minimum wage is implemented in all sectors, this may produce the effect that collective rates have to be raised in order to make the distance between the minimum and the wage for qualified work again noticeable. From a trade union point of view, this has to be assessed positively as leading to a rise in the wage level. But if, like in the construction industry, minimum wages are relatively high, the question arises, if and how they can be improved in future collective bargaining. Statutory minimum wage: chances and risks As the statutory minimum wage in Germany has been in force for only a few weeks, possible positive and negative effects shall be highlighted through a few scenarios: Chance: The present basic morale is very good and has to be taken advantage of. Payment of less than 8.50 is denounced as illegal and immoral. This enforces a certain social control. Risk: After two months, reports in the media and networks are increasingly frequent that wages of e.g have not been raised to Chance: Some positive examples are publicly presented and trigger collective trade union activities in enterprises in which the minimum wage is not paid. 30 CLR News 1/2015

31 Subject articles Risk: The minimum wage of 8.50 is being paid but x-mas or additional holiday pay is being scrapped. Afraid to lose their jobs, those affected do not defend themselves. Chance: State control is reinforced and works more efficiently. Risk: The control institutions keep being short of staff and work as before without a satisfactory success rate. Chance: From 2017 the minimum wage will be considerably raised. Risk: The economic development worsens; the minimum wage is not raised over years or even cut, such as happened in Greece, Spain and Portugal. Chance: Collective wage rates above the statutory minimum wage can be raised by trade unions in order to restore the differential between simple and qualified labour. Risk: Hitherto existing higher sectoral minimum wages in the construction industry are not raised any further because the employers argue that there can only be one minimum wage for all. Many more examples could be presented, but I shall leave it for the time being. In succeeding CLR-News there will be more information about the social experiment of the statutory minimum wage in Germany. CURRENT STATUS OF MINIMUM WAGES IN EUROPE 2015 Thorsten Schulten With the introduction of a statutory minimum wage in Germany in January 2015, there are now 22 out 28 EU member states that have a legally binding national wage floor. The six remaining countries with no national minimum wages are the Nordic states - Denmark, Finland and Sweden - plus Austria, Cyprus and Italy. Austria and the Nordic states, CLR News 1/

32 Subject articles however, still have rather high collective bargaining coverage, so that minimum wages are largely guaranteed by collective agreements (Schulten 2014a, 2014b). Italy is now heavily debating the issue and might become the next country in Europe to introduce a national minimum wage 1. Absolute minimum wage levels Considering the absolute minimum wage levels measured in Euro, there are huge differences between the EU countries (Figure 1). In principle, one can distinguish three different groups: the first, with relatively high minimum wages, encompasses seven states from western Europe, headed by Luxembourg, with a minimum wage of Euro per hour, followed by three countries with minimum wages above 9 Euro including France (9.61 Euro), the Netherlands (9.21 Euro) and Belgium (9.10 Euro) and three further countries with minimum wages between 8 and 9 Euros, including Ireland (8.56 Euro), Germany (8.50 Euro) and the UK (8.06 Euro). In the case of the UK the minimum wage level measured in Euro is somewhat misleading since it is heavily influenced by the current exchange rate between the Pound and the Euro. Taking into consideration the exchange rate of the year 1999 when the UK minimum wage was introduced, the level would today stand at 9,87 Euro per hour (Schulten 2015). A second group comprises mainly countries from Southern Europe plus Slovenia. Here the absolute minimum wage levels vary between 4.57 Euro in Slovenia and 3.04 Euro in Portugal. Finally, a third group, where minimum wages are below 3 Euros, is composed of ten countries coming exclusively from Central and Eastern Europe. Here the range is from 2.42 Euro in Poland down to 1.06 Euro in Bulgaria. Because of the lack of national minimum wages, the minimum wage level in countries with sectoral minimum wage regimes can be determined only by analysing the lowest 1. On the Italian debate see the various contributions in Quaderni rassegna sindacale No. 4/ CLR News 1/2015

33 Subject articles wages laid down in collective agreements. The few recent studies on this indicate that two groups of countries have to be distinguished (Eldring and Alsos 2012; Kampelmann et al. 2014). On the one hand, there are the Nordic countries as well as Italy, whose minimum wages laid down in collective agreements are substantially above national minimum wages in the other EU states. On the other hand there are countries, such as Austria and Cyprus, in which collective agreements sometimes include rather low wage grades which might be below national minimum wages in comparable western European countries. Figure 1: National Minimum Wages in the EU 2015*(per hour, in Euro) *Effective: 1 January 2015, calculation in Euro with the average exchange rate of Source: WSI Minimum Wage Database, Online available under CLR News 1/

34 Subject articles Relative minimum wage levels A comparison of minimum wage levels in Euro, however, has its limitations as it neither considers the different cost of living nor the different wage levels between the various countries. The latter is considered by the so-called Kaitz index, which determines the relative minimum wage level measured by the minimum wage as a percentage of the national median wage 2. The available data on this, which are published regularly by the OECD, are based, however, on nonharmonised national data sources and can thus be regarded only as approximate values. According to OECD figures, the relative minimum wages in 2013 varied between 61 per cent in France and Slovenia and 36 per cent in the Czech Republic with the majority of countries having a value of between 40 and 50 per cent (Figure 2). In Germany, a minimum wage of 8.50 euros per hour in 2013 would have represented 50 per cent of the German median wage. In the Scandinavian countries, which have a strong tradition of a solidary wage policy with particular support for low wage groups, as well as in Italy, the Kaitz index for minimum wages laid down in collective agreements is generally over 60 per cent and thus well above the level of countries with universal minimum wage regimes (Eldring and Alsos 2012; Kampelmann et al. 2014). Measured in terms of respective national wage structures, statutory minimum wages in Europe are often at a relatively low level. All of them lie below the so-called low-wage threshold, which by international convention stands at twothirds of the median wage. In conformity with the poverty threshold used in international poverty research, one can call a wage that lies below 50 per cent of the median wage a poverty wage. In many EU countries, accordingly, the statutory minimum wages are not above the poverty wage level. 2. The median wage is the wage between that half of all employees who earn more and that half of all employees who earn less. It must be distinguished from the average wage, which is calculated as the arithmetical mean of all wages. 34 CLR News 1/2015

35 Subject articles Figure 2: Minimum wage as a percentage of the median wage for full-time employees, 2013 * On the basis of a fictive minimum wage of 8.50 Euro per hour - Source: OECD, for Germany: calculations of the WSI based on data from the Federal Employment Agency. A European minimum wage standard? After the new President of the European Commission, Jean- Claude Juncker, repeatedly announcing his sympathy for a European approach on minimum wages, the debate on a possible European minimum wage standard returned to both the political as well as the trade union agenda (Brischoux et.al. 2014; ETUC 2014; Schulten 2014b). There are both normative and economic arguments to justify a European minimum wage policy. It can first of all be seen as an approach to tackle the often rather low levels of minimum CLR News 1/

36 Subject articles wages in Europe, which do not fulfil the criteria of fair or equitable wages as laid down, for example, in the Council of Europe s European Social Charter (Schulten 2014b). Moreover, as minimum wages have a strong influence on overall wage developments in many European countries, they are an important instrument to prevent downward wage competition with its negative effects for growth and employment. Considering the large economic differences within Europe, it is obvious that a European minimum wage standard could not be based on the absolute but only on the relative minimum wage level. A broadly-debated suggestion is, for example, to increase all minimum wages up to 60 per cent of the respective national median wages. According to a study by Eurofound, such a European minimum wage standard would benefit about 28 million workers, representing about 16 per cent of all workers in the EU (Aumayr -Pintar et.al. 2014). References: Aumayr-Pintar, C., J. Cabrita, E. Fernández-Macías and C. Vacas-Soriano Pay in Europe in the 21st century, Dublin: Eurofound. Brischoux, M., A. Jaubertie, C. Gouardo, P. Lossot, T. Lellouch and A. Sode (2014): Mapping out the options for a European minimum wage standard, Trésor-Economics No Eldring, L. and K. Alsos (2012): European Minimum Wage: A Nordic Outlook, Fafo-Report No.16. Online at: rapp/20243/20243.pdf. ETUC (2014): Discussion Note on Minimum wages in Europe, Paper for the ETUC Collective Bargaining Committee Seminar in Warsaw October 2014, 20NOTE%20WARSAW%20CONFERENCE%20final%20EN_0.pdf Kampelmann, S., A. Garnero and F. Rycx (2014). Minimum wages in Europe: does the diversity of systems lead to a diversity of outcomes? European Journal of Industrial Relations. DOI: / Schulten, T. (2014a): Minimum Wage Regimes in Europe and What Germany Can Learn from Them, Friedrich Ebert-Stiftung. Berlin. Online at 36 CLR News 1/2015

37 Subject articles Schulten, T. (2014a): Contours of a European Minimum Wage Policy, Friedrich Ebert-Stiftung. Berlin. Online at Schulten, T. (2015): WSI Mindestlohnbericht 2014 stagnierende Mindestlöhne, WSI-Mitteilungen Vol. 68 (2), forthcoming On the Italian debate see the various contributions in Quaderni rassegna sindacale No. 4/2014. The median wage is the wage between that half of all employees who earn more and that half of all employees who earn less. It must be distinguished from the average wage, which is calculated as the arithmetical mean of all wages. THE STRUGGLE FOR SWISS MINIMUM WAGES GOES ON Hans Baumann, Andreas Rieger Last year, Swiss voters clearly rejected the popular initiative for the introduction of a statutory national minimum wage of CHF 4000 (3300 euro) per month, respectively CHF 22 (18 euro) per hour 1. The initiative was launched by the Swiss Trade Union Confederation (SGB-USS) which collected enough signatures to force the government and parliament to hold a binding popular ballot on its proposal. The proposition was branded, somewhat disingenuously, as a call for the world s highest minimum wage. In fact, however, it would have lifted Switzerland s low income earners only to a level of 60% of the country s median income. In addition, the proposed amount also appears bigger than it really is, if one considers the exceptional strength of the Swiss Franc as well as the country s extremely high living costs. Swiss consumer prices are 58% above the EU average, including 55% above the price level of neighbouring Germany. Switzerland s trade unions were therefore very disappointed about the voters rejection of the minimum wage initiative. 1. For the exchange rate CHF/Euro we are using the old rate before the Januarydecision of the Swiss national bank to float the currency. The old exchange rate is closer to the purchasing power. CLR News 1/

38 Subject articles The opportunity to abolish low wages in rich Switzerland and put a stop to wage dumping was missed. Thanks to the popular initiative, however, the trade unions have succeeded in setting CHF 4000 as a benchmark for a fair minimum wage. Progress in low wage sectors The proposition for a statutory minimum wage was the peak of a trade union campaign for minimum wages, going on for many years. In the construction sector, collectively agreed minimum wages have a long tradition and have for several years reached a level clearly above the initiative s level. The actual minimum wage for an unskilled construction worker is more than CHF 4800 (4100 euro) per month. In many other sectors of the economy, this is not the case. Vast low wage sectors with wages clearly below CHF 2500 existed up to the turn of the 21th century. That s why the Swiss trade unions in 1998 launched a campaign no wages below CHF This campaign was supported by large sectors of society and received much sympathy. As a result, the minimum earnings in low wage sectors like the hotel industry or retail increased significantly between 2000 and While there was significant progress in sectors covered by collective agreements including minimum wages, the problem remains that in many branches and companies collective agreements do not exist. The coverage by collective agreements in Switzerland is comparatively low. The trade unions have succeeded in increasing the coverage rate from about 45 to 50% in the last 10 years. But this still means that half of those employed are not protected by collective wage agreements. Such is the situation, for example, in small and medium retail trade enterprises, in horticulture and in the transport industry. This was one important reason behind the proposition for a statutory national minimum wage. Historical agreement in the machine industry Although the referendum on the statutory minimum wage was lost, the campaign for this project had a positive impact 38 CLR News 1/2015

39 Subject articles on the on-going negotiations on collective wage rates over the past few years. One important example is the collective agreement in the machine, electrical and metal industry 2. In this key industry, there has for 75 years been a collective agreement, initially also called peace agreement, which since first being concluded and despite numerous revisions and improvements, has never contained standard or minimum wage rates. Annual negotiations on raising employee earnings took place at workplace level between the workers representatives and the individual employers. The trade unions may be called upon in the event of a dispute. But this Swiss model of social partnership seems now to be history. For many years, the trade union Unia has been demanding that pay provisions be included in these agreements a historic breakthrough was achieved. The parties agreed on minimum pay rates for qualified and unqualified workers, which vary according to qualifications and regions. For unqualified workers, the minimum wage is just about at the level contained in the minimum wage initiative (CHF 4,000 with 12 monthly wages). Only for some border regions, where wage levels are significantly lower, was a slightly lower minimum wage agreed with longer transition periods. A large number of companies in other sectors have also raised minimum wages to the level demanded by the initiative. They include hard-nosed discounters such as Aldi and Lidl as well as fashion & shoe retail chains (H+M, Bata) and florists and bakers associations. These increases would not have been possible without the initiative, and thanks to the initiative thousands will enjoy a wage increase. Statutory minimum wages at regional levels Some trade unions and left parties are following the path of minimum wages at the regional level of the Swiss cantons. As a first canton, the canton of Neuchâtel has introduced a 2. With more than 100,000 employees, the machine industry is more important for the Swiss economy than is the financial and banking sector. That applies also to its share of added value. CLR News 1/

40 Subject articles statutory minimum wage of CHF 3640 from 1st January 2015, taking in account the lower level of wages in this region. In the canton of Jura the statutory minimum wage has passed parliament and will be introduced soon. Other cantons will probably follow. All trade unions will now continue to do their utmost to fight against low wages and wage dumping through collective agreements. The bone of contention was not so much the entitlement to a minimum wage of CHF 4000, but its enshrinement in national law. So the No to the initiative should not be interpreted as a No to fair pay per se. During the campaign, representatives of companies, employers associations and even the minister of Economics repeatedly sang the praises of the proven social partnership, citing it as the appropriate channel for fixing minimum wages. The unions will hold them to their word. They will intervene in cases where companies and associations have not yet signed any collective employment agreement and urge them to launch negotiations without delay. In sectors that do not recognise any contractual minimum wage, such as the hospitality, cleaning and industrial sectors, the unions will work to ensure that they raise the minimum wage to CHF 4000 or more. References: Baumann, Hans (2013): Redistribute! Several people s initiatives are responding to unequal distribution in Switzerland. In: CLR News, No 3/2013. Baumann, Beat, Rieger, Andreas (2014): Gesetzliche Mindestlöhne in der Schweiz eine junge Idee braucht Zeit. In: Denknetz Jahrbuch Fahrni, Oliver (2014: Heavy Metall. Wie sich eine Gewerkschaft in der Industrie neu erfindet. Zürich. Rieger, Andreas (2014): After the Swiss Minimum Wage Referendum. In: socialeurope.eu/2014/05/swiss-minimum-wage-referendum/ 40 CLR News 1/2015

41 Discussion EQUAL RIGHTS AND WAGES FOR MIGRANT WORKERS: THE EXAMPLE OF THE BATTLES IN SWITZERLAND Vasco Pedrina* To understand the Swiss trade union experience of migrant workers organising and mobilising, it is first necessary to describe the context. Behind only Luxembourg, Switzerland s migrant density is the second highest in Europe: 24% of a total population of eight million - that is twice as high as in Germany, Italy and Austria or four times as high as in France. More than a third of the hours worked in the country are performed by migrant workers. Entire branches of the economy could not operate without them. All this is due also to highly restrictive naturalisation policies. Role of migrant workers in the economy and evolution of migration policy At the end of the 19th century, Switzerland was still a country of emigration. But since the end of the Second World War, hardly any Swiss has had to emigrate out of necessity. Thanks to its still intact industry, Switzerland s growth in the 30 years of post-war-prosperity was such that the country had an ever more massive recourse to immigrant labour. At the end of the war, there were large reserves of job-seeking workers in Southern Europe. As a result, successive waves of hundreds of thousands of Italians, then Spaniards and Turks, and still later, Yugoslavs and Portuguese came to work in Switzerland. The Swiss authorities policies to regulate immigration have gone through different phases. After the democratic revolution of 1848 and until the early 20th century, a period marked by the country s industrial take-off, official *) Central secretary, then president of the building and wood workers union from 1988 to 1992; president of the building and industry union from 1992 to 2004; copresident of the trade union Unia from 2004 to 2006 ( From 1994 to 1998 he was also co-president of the Swiss Federation of Trade Unions ( and from 2006 to 2013 vice-president of the Building and Wood Workers International. At present, he is a member of the foundation board of the Global Labour Institute. CLR News 1/

42 Discussion immigration policy was characterised by openness. Switzerland was at the time a country of refuge for many of the trade union activists and political refugees who marked the history of the labour movement. The policy of restricting immigration by quotas began during the First World War and continued after it under the influence of unemployment, conservative movements, and Nazism-Fascism. A return to an open immigration policy, at least in relation to the citizens of the European Union (EU), coincided with the entry into force in 2000 of the bilateral agreements between Switzerland and the EU. As a result of a popular initiative launched by the populist and xenophobic right, the Swiss people decided in a vote on 9 February 2014 to call into question the Switzerland- EU agreement on the free movement of persons, not without provoking a crisis in the country s relations with the EU, whose outcome is still uncertain. In the period of large-scale immigration during the 1950s and 1960s, not only xenophobic forces called on the Swiss authorities to implement a more restrictive immigration policy, but also trade unions, under pressure from their national base. National workers regarded the new labour force from outside the country as a threat to wages and jobs, and were receptive to the lure of xenophobic voices. In any capitalist system, some employers have no qualms about using migrant workers to put downward pressure on wages. There are two ways to resist that pressure: either a common, national-immigrant struggle against wage and social dumping, or a demand for quotas in the hope that the shortage of labour thus created will automatically lead to an upward pressure on wages. History has proven the second path to be a dead end. For one thing, any quota system is inevitably accompanied by a discriminatory status for migrant workers. And discriminatory situations lead to deteriorated wages and working conditions in a wage dumping dynamic. Moreover, in economic booms, employers circumvent the quota system in order to hire undocumented migrant workers under deplorable conditions. Lastly, such discrimination is a 42 CLR News 1/2015

43 Discussion source of division among workers, undermining the capacity for trade union struggle and bargaining. One of the main goals of the quota system, with its discriminatory rules, was to do everything possible to prevent a majority of the migrant workers from staying permanently in the country. The status supposed to best serve the purpose of realising the principle of a constant rotation of migrants was that of the seasonal worker. In its first phase, seasonal workers were throughout their lives unable to acquire even an annual residence permit. From a human rights perspective, the seasonal workers status was a disgrace for Switzerland: demeaning border medical examinations, prohibition to change jobs, inhumane prohibition of family re-unification, tens of thousands of hidden children. In sum, a system that is reminiscent of yesterday s South African apartheid or the kafala system for migrant workers in today s Qatar! Organising migrant workers into Swiss trade unions in the 1960s The history of the international trade union movement shows that, more often than not, national unions have missed the boat of integrating migrant workers into their ranks. Yet the Swiss trade union movement was among the forerunners in this endeavour, and among those that have been most successful in it. Among the key factors was the foresight both of a number of open-minded national trade union leaders and of politically mature migrant workers. That foresight lay not just in the conviction that only in unity is there strength, but also in the recognition - against the conventional wisdom - that labour immigration was not a passing phenomenon and that, despite all the discriminatory rules to impose rotation, even seasonal workers would one day be able to stay in the country with their families In fact a part of seasonal workers could after a few years change their status into a stable resident permit. See V. Alleva, V. Pedrina: Personenfreizügigkeit und sozialer Schutz, in Widerspruch No. 65, CLR News 1/

44 Discussion Although of moderate Social Democratic outlook, the leaders of the building and wood workers union already made the strategic choice to actively organise migrant workers in the mid-1960s, given the huge growth in immigrant labour on building sites. They did that despite the risk of there being Italian or Spanish communist party activists among the migrants. For their part, those parties made their contribution by calling on their members to join the Swiss unions. It must be said this was far from being possible in all the country s unions because, in the midst of the Cold War, the red, Stalinist scare was deeply rooted among some of them. As a result, other unions opened their doors to migrants only 10 to 15 years later than the building workers did. This was not without consequences. Today, immigrants are underrepresented in some of those unions. By contrast, 20 years later, the membership of the building workers union, thanks to its immigrant members, has exceeded that of the metal workers' union to make it Switzerland s largest trade union 2. The foresight mentioned earlier related also, and especially, to the modalities applied to achieve the organisation of migrant workers and to ensure that the trade union would truly become their organisation, their new homeland! Two key elements of the chosen strategy proved decisive in achieving the desired breakthrough. The first of these was the decision to appoint, as union officials, nationals of the countries of origin for the tasks of member recruitment and worker organising. A great advantage was that in the pool of newcomers there were many socialist and communist party activists with experience in social struggles. The second element was the decision to create within the union special structures for migrant workers, allowing them to organise themselves into interest groups, either according to nationality, language or on an intercultural basis. 2. Schweizerischer Gewerkschaftsbund: Organisationen im Umbruch, Dossier No. 51. Bern CLR News 1/2015

45 Discussion By recruiting Italian, and then Spanish, Turkish, Portuguese and Yugoslav migrants as union officials, the trade union resolved, first of all, the problem of communicating with the newcomers. Moreover, it was made much easier for the migrant workers to establish relations of confidence and identification with the union. And the creation of the interest groups made it possible for the migrants to operate together in their own culture and thereby to articulate their demands without insurmountable obstacles. History has vindicated those who dared to leave the beaten path of structural conservatism, which is widely rooted in trade union traditions and in other European countries and has to this day often prevented the large-scale organisation of migrant workers. By the end of the 1980s, the building and wood workers union had 130,000 members, of whom twothirds were immigrants 3!... and the organisation of migrant workers in today s trade union structures Before looking at the trade union policy issues, it is useful to outline the present union organisation of immigrants, on the basis of the example of the country s largest trade union, Unia. The union was created through the merger in 2004 of four private sector unions, including the building and metal workers unions. It organises some 200,000 workers, half of whom are of immigrant origin 4. Their nationalities vary according to the successive cycles of immigration, and their total share of the union s membership increases year by year. 3. R. Fluder, H. Ruf, W. Schöni, M. Wicki: Gewerkschaften und Angestelltenverbände in der schweizerischen Privatwirtschaft. Zürich S. 419 ff. 4. Schweizerischer Gewerkschaftsbund: Organisationen im Umbruch, Dossier No. 51. Bern 2007 CLR News 1/

46 Discussion The graph illustrates migrant workers organisation into interest groups (IGs) within the union: Language-based IGs now exist only in the German-speaking part of Switzerland on a local basis. Elsewhere, the IGs are structured more regionally and on an intercultural basis, which does not prevent them from occasionally holding special meetings in order to address an issue that concerns a single nationality. The IGs are statutory bodies, with representation rights at the levels of the sectoral, regional and national committees. They naturally have the right to present proposals at assembly and congress meetings. Immigrant union members receive in addition to the services and benefits offered to all members - a range of specific services. Information is disseminated in several languages. Depending on requirements, leaflets can be translated into seven or eight languages and distributed in workplaces and neighbourhoods, or at meetings of immigrant associations. 46 CLR News 1/2015