Comparative article Slaughterhouse work in Germany and Denmark version 1.3
Paper by Ines Wagner and Bjarke Refslund
Introduction
Increasing international competition as well as a general pressure for liberalisation of labour markets and industrial relations is affecting basically all sectors in the European welfare states. The slaughter house sector in Denmark and Germany is a prime example of this trend. While the wages and working conditions in the slaughterhouse industry in the two countries were almost similar two decades ago (Refslund 2012a; Strandskov, Kristensen, and Kristensen 1996) they are now almost diametrically opposing each other. The aim of this article is to examine how the local institutional context can help to explain different developments in Germany and Denmark against the background of rising international pressures and growing cost competition. Findings are based on a comparative study of the meat industry in Germany and Denmark – two countries known for strong union power and cooperative negotiations over work reorganization (Doellgast and Berg, forthcoming). This approach allows us to examine closely how stakeholders negotiate within the local institutional contexts and how these contexts affects employee interests.
In Germany we observe that working conditions are deteriorating and wages are declining, whereas the Danish industry has seen modest changes in the comparatively very high wages and working conditions despite facing the same general pressures of international competition, liberalisation and Europeanisation. The German slaughter house industry has also seen wide-spread dualisation of the work force as well as increasing flows of labour migration, facilitated by EU integration, in the industry. Labour migrants are often working as posted workers at below average wage rates.We argue that this contrasting outcome is the result of differences in institutional support.
The findings from this article are twofold. First, our analysis points towards the continued importance of diversity in European welfare capitalism (Coates 2005; Hay and Wincott 2012; Esping-Andersen; 1990). Second, the article provides evidence that in times of increasing globalisation the power distribution in the labour market is still highly salient for labour market outcomes (Esping-Andersen and Korpi 1984; Korpi 1978, 1983).
Liberalisation, Convergence or Divergence? Two sides of the same coin
The existing literature provides different accounts on how advanced capitalist countries adapt to the increasing pressures of liberalisation and globalisation. Two dominant theoretical strands try to explain forms of institutional change in relation to pressures related to Europeanization and Globalisation. The diversity of European welfare capitalism literature (Esping-Andersen 1990; Titmuss 1974; Hay and Wincott 2012) claims that different political-economic models lead to different outcomes as well as policy outcome despite facing a input convergence (Hay and Wincott 2012). In an increasingly interdependent world the framework regards established institutional settings to absorb convergence pressures in different ways (Esping-Andersen 1990; Thelen 2014). There are institutional complementarities between industrial relations and other sub-systems, such as skill formation and corporate governance and these have a tendency to reinforce each other making a particular set of institutions resistant to change (Hall and Soskice 2001). While changes have occurred in German labour market institutions they are said to adapt according to path-dependency and will eventually not undermine the existing institutional framework (Hall and Soskice, 2001). While the position of unions may be one of "institutional subservience" (Hancké, Rhodes, and Thatcher 2007:22) in a coordinated market economy they remain stable labour institutions. Whether to include a distinctive Nordic model in the typologies have been discussed since Esping-Andersen’s classic work on the three worlds of welfare capitalism. But the findings in this article support the claim that the Nordic models are different especially compared with the German development, with the institutional power of the unions having a paramount impact.
Another strand of literature (Streeck 2009; Streeck and Thelen 2005; Thelen and Mahoney 2010) regards exogenous changes as transformative. It emphasising the commonalities of the challenges faced by welfare states stemming from a growing pressure for liberalisation of labour markets, industrial relations and social policies (Streeck 2009; Baccaro and Howell 2011; Eichhorst 2014; Glyn 2006). The liberalisation pressure stems from structural but also ideological and political sources. Countries in the European Union face increasing competitive pressure because of the opening of new markets, deindustrialisation, competition from low-wage countries and capital mobility. Moreover, changes in social policies, stemming from an ideological turn towards neo-liberal ideas, have a negative spill-over effect on the labour market and industrial relations (Eichhorst 2014) . Institutional change takes places in small increments over long periods of time (Streeck 2009). Contemporary developments are regarded as a breakdown of the institutional arrangements that have distinguished political-economic systems such as Denmark and Germany, from the UK(Streeck 2009; Glyn 2006; Howell 2003). Following this the labour movement e.g. in Germany is under great strains and has not been able to organize expanding sectors of the economy such as low-wage workers in the service sector or jobs that have been offshored to subcontractors (Flecker 2009)(Streeck 2001?).
The slaughter house industry is highly influenced by the increasing international integration and competition (Refslund 2012a). However, the industry have adapted very differently to these pressures in Denmark and Germany. While Denmark seems to confirm the theoretical insights of the regime theory framework (Esping-Andersen 1985, 1990; Amable 2003; Hay and Wincott 2012), the findings in the German case study are more in line with the arguments in the liberalisation theory, thus pointing to blind spots of cross-country comparison based on punctuated equilibrium(Streeck 2010). The empirical part of this paper will investigate which institutional conditions can explain the significant differences between the two countries. We ask: what explains the cross-national differences in an industry that in many ways face the same pressure in both Denmark and Germany (and from a similar starting point)? What features and institutional settings are most important in determining the development in the sector? What are the most important explanations of the differences between Denmark and Germany (i.e. structural, political, institutional)? The aim of this article is thus to contribute to the literature on how liberalisation and increasing international competition have different impacted differently on labour markets in European welfare states. In this vein the article contributes by identifying the most important and significant features between the slaughterhouse industry in the two countries studied that leads to the widely different outcomes.
Divergence in labour market outcomes – union strength as the explanatory variable
In line with the arguments in the regime literature one could expect liberalisation to have different impacts in different institutional settings (Esping-Andersen 1990)Häusermann and Schwander 2012; Thelen 2014) despite the input convergence of liberalisation pressures (Hay and Wincott 2012). Trade unions, as argued by various authors, play an ambiguous role in the development of labour market segmentation (Emmeneggeret al., 2012: 310; Palier and Thelen, 2010). While trade unions preferred to resist employer pressure towards dualisation, they have increasingly concentrated on core members due to their weak position (Palier and Thelen, 2010). Therefore they helped allow for organisational measures and reforms protecting insiders, while negatively affecting outsiders (Emmeneggeret al., 2012: 310). Others have related increasing market inequalities to the weakening of trade union power. This loss in power impedes effective resistance, resulting in workers being worse of in the labour market but also in general welfare politics (Korpi 2006; Korpi and Palme 2003). In these accounts, employees’ representatives have been much less involved in the labour market liberalisation processes (Streeck, 2009). In a similar vein employers can be either antagonists or protagonist for social policies (hence labour market policies). They may consent to different types of regulation if their true preferences are not possible to achieve (e.g. less regulation), in order to avoid more far reaching regulation (Korpi 2006). The labour market structure in the meat slaughtering industry in Germany is part of the segmentation process. As opposed to the German experience, we observe in the Danish case employers (Tönnies and DC) consenting on a highly regulated labour market setting with high wages and full collective bargaining coverage at the sectorial level, which is more in line with the Korpian argument that employers are forced in to consenting on the strong labour market regulation.
Empirical part: The European pig meat industry
The European pig meat industry is under great competitive pressure, which result in a strong focus on cost reductions, mainly wage cost reductions leading to centralization and ever larger companies across Europe (Grunert, James, and Moss 2010; Hamann 2010; Refslund 2012). The Danish pig production is very concentrated; 95.6 % of all pigs are in a farm with more than 1000 pigs, while the figure in Germany is 64.5 % and the EU27 average is 73.3 % (LF 2014). In the current climate company centralization and the effort to reduce wage costs is exacerbated by multiple pressures from: 1) growing international competition including from low-cost countries (Czommer 2008) 2) cost reduction pressure from dominant retailers like Lidl and Carrefour that gain growing market shares and thus a stronger bargaining power vis-à-vis the producers (Baud and Durand 2012; Grunert et al. 2010:370–71; Strandskov 2011:731) with a growing share of the products being sold as “private labels” by the large retailers 3) increasing prices of (livestock) pigs? which reflect restricted supply, rising farm costs and rising international commodity prices and 4) customer resistance to higher prices, as modern retail chains resist passing price increases on to consumers who are living in an ongoing recession across much of Europe and finally 5) an general emphasis on increasing profit or share-holder-value in multinational companies (Morgan 2014).
Against this background labour is the first expense of a company operating in the meat sector. Labour costs represent up to eighty two per cent of the net added value and therefore have a direct impact on competitiveness (Mériaux, 2011). Food processing and slaughter house work have traditionally utilised a large share of low-skilled labour in combination with traditional work organisation (Grelle and Knudsen 1995) and this is still the case, despite very significant upgrades in technology in the Danish but also German production sites. As a response slaughter and meat processing companies strategize around reducing wage costs in their cost control process. While the pig meat industry in Denmark and Germany had in many ways very similar working conditions and wage levels 20 years ago (Refslund 2012; Strandskov et al. 1996), the way the companies respond to reducing wage costs today converges. Germany resorts to external flexibilisation measures paired with the opening of the Eastern and Central European labour markets through European economic integration. Temporary agency workers and posted workers are increasingly employed in the German meat industry working for wages between five and seven Euros. In Denmark, the main meat producer Danish Crown has rather resorted to relocate its production from Denmark to Germany, Poland and UK in order to reduce costs (Refslund 2012a, b).
These developments not only caused havoc in the local labour markets but impacted the labour market structure of EU countries more generally. Belgium, France and Austria already accused Germany of unfair competition practices due to employing posted workers under ‘dumping’ wages (EFFAT, 2013). Moreover, French workers took to the streets to protest social dumping practices in the German meat industry because it hurts jobs in France (Blume, 2013). Even though social dumping practices caused havoc across the EU we know very little about the conditions under which trade unions strategize in this sector to counter social dumping practices. If differences between sectors become arguably more important to explain trade union strategies it is necessary to understand how trade unions interact with these labour market developments in the German and Danish meat industry.
But the food industry in general and the pig meat industry in particular is embedded in the national culture (Grunert et al. 2010:410) as well as local agricultural production, which makes it more difficult to offshore than other types of production.
Methods
This article draws on interviews gathered in Germany and Denmark from April 2011 until October 2014 from meat industry case studies. The reasons we focus on these two country cases are several. First, Germany and Denmark have different industrial relations and labour market systems (Crouch 2012). Second, both have a common affiliation with the global meat industry and the EU Single Market as well as a significant meat industry. Thirdly there are firms operating in both countries. We compare how different institutional frameworks mediate the competitive pressures of the international meat industry. In particular we are interested in identifying how firms and trade unions react to similar trends in the meat industry and in how far this affects the labour market and industrial relations structure. We conducted interviews with trade unionists, workers, company management, employers’ organisations, works councillors and policy makers at the industry, national and European level. In Germany a total of 50 and in Denmark 11 interviews were conducted. The interviews were semi-structured and focused on the development of the wage and employment structure, business strategy and the changing competitive environment, personnel and employment practices, work organization, and a range of job quality characteristics. We triangulated the interview data with press reports, union reports and secondary literature when available.
Country case studies
Germany
Germany is the number one pig meat producer in Europe with over 58 million slaughtered pigs annually. It is the second beef and among the top five poultry producers within the EU. Most of the 350 slaughterhouses in Germany are small or medium sized. However, the high number of smaller companies played a minimal role with regards to the overall amount of slaughtered animals. In 2012 fifty-five % of the commercial value of the slaughtering process was allotted to the four biggest slaughtering houses – Danish Crown, Tönnies, Vion and Westfleisch.
In 2012 approximately 28,000 people were employed subject to German social insurance contribution in the slaughtering industry. However, the high fluctuation of employees complicates the exact precision of employee numbers. Since the Eastern enlargement of the European Union (EU) in May 2004 the large German slaughterhouses scaled down the core workforce to a minimum (NGG, 2013). The majority of the meat slaughtering and processing in Germany was (still is at the time of writing) done by posted and temporary workers from Eastern Europe working for an hourly wage of about three to five Euros.
For a decade it was beneficial to employ workers under foreign subcontracting arrangements because of the absence of a German minimum wage agreement. Germany is about to introduce a statutory minimum wage. Moreover, the German meat industry has negotiated a sectorial minimum wage. However, the absence of the statutory and sectorial minimum wage in the meat industry over the last decade has long been the weak link in the German institutional system. The lack thereof increased the attractiveness to insource lower wage labour via subcontracting companies. As a consequence the employment conditions and levels of pay of the meat slaughtering and meat-packaging workers referred to their home country. This created work spaces in which actual ‘home country’ conditions applied to the posted workforce. The wages are calculated according to the nationality of where the firm is based creating “regime competition” (Streeck, 1992) between workers. For example, a Polish based company can legally offer to send its employees to Germany to process a certain amount of meat in a certain amount of time at a German slaughterhouse. Its employees perform their work in the German company, but their wage, and employment rights refer back to the sending country standards.
The low production costs in Germany have become widely known abroad. On the one hand, international meat companies are moving their production to Germany in order to escape from the tighter regulatory frameworks of their countries. For example, the Danish multinational company Danish Crown relocated thousands of workplaces from Denmark to Germany. On the other hand, European countries like Belgium, France and Austria filed a complaint to the European Commission accusing Germany to distort competition due to employing posted workers under ‘dumping’ wages and to undermine traditional forms of worker representation (Die Presse, 2013).
This development resulted in membership loss[1] and political strength of the meat sector union NGG (GewerkschaftNahrungGenussGaststätten) as more jobs are subcontracted to firms with non-unionized employees. The main response from the NGG to increased labour migration to date has been the demand for the introduction of a legally binding minimum wage. Interaction between posted workers and the union does take place in certain cases but the NGG has not developed a particular organising strategy that targets workers that tend to be less organised, such as posted workers (NGG, interview, 2013). In particular, the high labour turnover, language barriers and limited union resources inhibits the development of solidaristic relations between the union and posted workers as well as between works councils and posted workers (Wagner and Lillie, 2014).