Most aspects of economic policy are the government’s responsibility. Collective wage bargaining is an exception: the constitution guarantees employers’ associations and unions autonomy in their collective bargaining over wages and salaries, working hours and other employment conditions.

Collective negotiations often involve bitter arguments over the extent of wage increases and in extreme cases strikes are called. In past decades the two sides of industry have often raised wages by more than was justified by increases in productivity. Only recently have they pursued a moderate wage policy which has improved the international competitiveness of German companies and led to unprecedented growth in employment. This moderate policy is increasingly under threat from newly founded specialised labour unions which are in fierce competition and negotiate high wage increases to attract new members.

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