Seminar ‚Coordination of collective bargaining in the EMCEF sectors‘ Elewijt, 25-27 September 2009

1. Collective bargaining in the chemical sector against the background of the economic crisis – The EMCEF CB Report 2009 Seminar ‚Coordination of collective bargaining in the EMCEF sectors‘ Elewijt, 25-27 September 2009 Béla Galgóczi and Vera Glassner ETUI bgalgoczi@etui.org & vglassner@etui.org

2. Structure of presentation • The macroeconomic background with view to the crisis • Basic facts and prognoses on the downturn in Europe • Is the crisis over now? • The performance of the relevant manufacturing sub-sectors (output, orders, employment, productivity) • Snapshot picture in crisis vs longer term trends • Some employment policy tools • EMCEF template results 2009 • The controversity of the productivity based wage formula at the time of the crisis • What does this mean for collective bargaining in the sector • Conclusions

3. The nature of the crisis The financial crisis developed into a full scale global economic crisis and in a wider sense a `systemic crisis` • as the financial sector had become disconnected from economic fundamentals and developed instruments through financial innovations that started to function in a virtual reality • The current crisis manifests itself as a severe `demand shock` • The fundamentals underlying the spread of the crisis, however, were chronic imbalances in the world economy, within the Euro area and within the national economies of many member states.

4. Europe in full grip of the economic crisis • The ‘hard landing’ that is visible in the next graph refers mostly to those economies with unsustainable past growth strategies, characterised as ‘bubble growth’ in the previous section. • The most dramatic downturn is to be seen in Latvia, where above 10% GDP growth in 2007 is likely to turn into a decrease of 13 % by 2009. Previous high-growth economies, such as Estonia, Lithuania and Ireland, are also expected to be hit hard, with a projected drop in GDP of 9-11% in 2009. • Other major economies are expected to experience a downturn of around 4-5%, with the Euroarea GDP set to fall by 4% and the EU27by 4 % in 2009 (European Commission 2009). The 5.4% likely downturn in Germany is a huge drag on whole Europe.

5. Gross domestic product in 2008 and prognosis for 2009 (annual growth) Data Source: European Commission (2009).

6. Facts on the downturn in I.Q. 2009 – an even bleaker picture • The downturn in the first quarter of 2009 was 18.6 % in Latvia, Estonia suffered a 16% drop and Lithuania 11%. • Only Poland has managed limited growth in the I.Q – showing also that the region is not equally effected • Lithuania already published its II.Q. GDP figure: with a 22.4% drop (year-on-year) this is the largest GDP fall ever measured in peacetime Europe • Indeed a dramatic picture for the whole of Europe • Employment shows a mixed picture across countries, dramatic deterioration in Spain and the Baltic states, relative stability in DE, NL, AT…

7. Gross domestic product in IV. Q 2008 and in I. Q. 2009 (year on year basis) Data Source: European Commission (2009).

8. Unemployment rate

9. Is the `crisis` over now? Fragile and sporadic signs of an upturn in the Summer of 2009 • Not only in terms of business sentiment and consumer confidence indicators (as IFO index for DE, Philadelphia index for US) • But in terms of new orders • and factual data GDP growth in Q2 on previous quarter in DE (+0.3%), FR (+0.3%), still a -5.9% in DE year/on/year • DE industrial output Q2 2009 +2% on Q1, BUT still -23% year/on/year • Definite signs of an upward turn as a snapshot picture, but the trend is still downward and it is uncertain bottom has been reached – SUSTAINABLE?? or just effect of stimulus packages?

10. Relative performance of the manufacturing sector to the whole economy under the current crisis Manufacturing had been hit exceptionally hard, not just because it is cyclical but because of the nature of the current financial crisis At the same time employees in manufacturing industry are better protected and have more tools than elsewhere in economy (e.g services) The result: productivity drop much beyond that of the whole economy Still the longer term trend of the higher performance of the manufacturing industry remains

11. EU27 Industry new orders (compared to corresponding period of previous year)

12. EU27 Industry new orders (compared to corresponding period of previous year)

13. Output growth

14. Employment growth in selected sectors

15. Relative performance of the chemical sector to the whole industry under the current crisis In general chemical industry is hit hard but to a somewhat lesser extent than manufacturing as a whole and substantially less that metal and automobile sectors There is also a phase delay in the downturn compared to metal and automobile (question if chemical sub-sectors would still reach the depth the metal and automobile sectors saw in the first quarter Employment effects seem to be also more moderate sofar, with the great exception of the pharmaceutical industry: even output growth, but huge employment loss (!)

16. Output and employment: cushioning effect While manufacturing output fell by 19% in the first Q of 2009, employment fell by 6% In chemical industry output down by 20% in Q1, employment by 4.2%, in paper output down by 15%, employment by 3.9% This is a positive sign for employment protection, shows the effect of short working time schemes and labour hoarding practices of enterprises At the same time shows a dramatic decrease of productivity (with the exception of pharmaceuticals (!) Important however, this is a short term trend (moment picture), longer term productivity trend still positive

17. Longer term trend of productivity (before crisis)

18. Wage formula at the time of the crisis • To make the picture complete, we show the elements of the wage formula (wages > inflation+productivity) below • We should be aware that under these extraordinary times (especially in manufacturing), this has limited relevance • After a long period of wage moderation during the boom, what we see now at the light of the current figures (2009) – is the opposite: • Over 3% nominal wage inrease forecast in EA16 (Commission) • 0.45% expected inflation • 0.75% fall of productivity for total economy (EA16) • This shows a substantial overperformance of the wage formula in 2009...

19. Nominal labour costs 2005-2008, 2009 forecast Source: AMECO 2009

20. Inflation (HCPI), 2005-2008, 2009 forecast Source: AMECO

21. Productivity growth, total economy Source: AMECO

22. What does this mean for collective bargaining • We need to stress, thesee are short term trends and extraodinary times • Still, this is the first year after a long period, when wages would grow more than inflation + productivity (with a substantial real wage increase) • The productivity slump is the immediate consequence of the crisis and will remain temporary (hopefully not at the detriment of employment but through the fast recovery of output) • Manufacturing (as shown before) has a larger drop in productivity then total economy – there the wage formula is even more `over-performed` • We also showed the longer term trends (from 1999) and the higher productivity growth in manufacturing is still true for this time horizon

23. EMCEF Eucob@n – up-dating the CB database Collective agreements concluded between June 2008 and June 2009 have been considered in the survey! New agreements have been reported in the following countries: Austria, Belgium, the Czech Republic, Finland and Germany in the period under consideration. Further considered: Agreements affecting wage formation in the period June 2008 – June 2009 in the following countries: Netherlands, Italy, Norway and Sweden;

25. Qualitative Issues: • Working time: 8 agreements • Pensions: 8 agreements • Training: 5 agreements • Employability/workability: 4 agreements • Health and safety: 2 agreements • Equal opportunities/ gender policy: 2 agreements • Flexibilisation of labour markets & employment: – • Other issues: 1 agreement

26. Conclusions on the bargaining climate • Even if the sporadic signs of an upturn get manifested in the rest of the year, the whole year will still show a dramatic decrease of economic performance (GDP for the EA16 cca at -4%, in many countries however much deeper) • Manufacturing is hit much more dramatically that the total economy The wage formula has lost its relevance in the short-term • All these make the CB climate very unfavourable • Efferts should be concentrated on stabilising employment and maintaining the purchasing power of workers • This is also a precondition for recovery and the interest of all players as consumer demand is key in overcoming the crisis! • Crucial is the CB timetable and the duration of agreements now!