Business in Germany and France. Europe’s workplace revolution

Despite their protests, Germany's workers are starting to accept that they may have to work longer hours. Will their French counterparts be next?

“A VICTORY for common sense,” was how Germany's chancellor, Gerhard Schroder, greeted DaimlerChrysler's deal last week with employees at the Mercedes car plants in southern Germany. Workers agreed to receive lower pay in future, with longer working hours for some, in return for keeping their jobs until 2012. Because of union-led industrial action, this was not quite what Daimler had sought - a move to a 40-hour week, which Siemens, another big company, had won shortly before. Nonetheless, it was indeed further significant evidence of an outbreak of common sense among German workers. And about time too. German firms desperately need some labour market flexibility if their domestic operations are to remain at all competitive.

Germany's standard 35-hour working week - compared with Britain's 37 hours and America's 40 - is the result of negotiations; France's is statutory. Yet France, too, is all a-buzz about the possibility of firms demanding longer hours from workers. Symptomatic of the heightened sensitivity, this week Electricite de France summoned one employee to a disciplinary hearing after she wrote “Bonjour Paresse”, a book celebrating corporate laziness. A feverish debate has been triggered by the French government's declared intention to reconsider the 35-hour-week law soon, as well as by this month's vote by almost all 820 workers at a factory in France of Robert Bosch, a German maker of car parts, to work an extra hour per week for no extra pay so that Bosch does not move their jobs to the Czech Republic.

Is this the moment that the famously inflexible, worker-friendly continental European model of capitalism finally grasps the nettle of reform? Though the rhetoric of the trade unions is as shrill as ever, the attitude of workers has certainly started to change in Germany, even if it is not yet clear by how much. What is going on in France is more difficult to determine.

Work, work, work

The response in Germany to the deals at Daimler and Siemens has been overwhelmingly positive. (Siemens persuaded its employees to increase their working week from 35 to as much as 40 hours without more pay by promising not to relocate to Hungary). One rare dissent came from Heiner Flassbeck, chief economist at the United Nations Conference on Trade and Development, who claimed that the deals cut pay but did not raise productivity. More typically, Holger Schmieding, an economist at Bank of America, called the deals “pure capitalism”. Dirk Schumacher, an economist at Goldman Sachs, attributes a small rise in the expectations part of the Ifo business-confidence index in July to the “glimmer of hope that German labour is getting more competitive”.

Other German firms have been inspired to seek similar deals. KarstadtQuelle, a department store and mail order chain, aims to stretch its work week to 40 hours; so do Continental, a tyre maker, and Thomas Cook, a travel agent. Numerous mid-sized companies are revisiting their labour agreements.

Officially, however, Germany's big unions remain opposed to breaking the 35-hour-week barrier. IG Metall attributes the victory of Siemens to “blackmail”. Workers' representatives at MAN, an engineering group in Augsburg, have warned that the workforce will take action, as the Mercedes workers did with some modest success, against the introduction of a 40-hour week. But the big test of whether there is any bite left to back up the union bark will come in September, when troubled carmaker Volkswagen will seek to negotiate a 30% cut in its personnel costs in Germany.

VW already has some flexible working hours, although the weekly average does not exceed 35 hours. It has also experimented since last year with performance-based working hours. For over a year, workers producing Touran minivans have been paid according to performance, based on a 42-hour week. The project, “Auto 5000”, has drawn its workforce from the unemployed, and pays below the union average wage. VW will not be drawn on whether it sees this as the shape of working hours to come - and IG Metall says it is determined not to accept a clear breach of the 35-hour week. The outcome of these negotiations will say much about where corporate Germany is headed .

Meanwhile, in France, the unions have taken their German counterparts' talk of blackmail further, one union leader calling Bosch's threat to move abroad jobs at its factory near Lyon as “terrorism”. They have also been feeding the press with accusations that various French firms plan to follow Bosch in increasing working hours.

Each of the firms named denies having any such plans. These include Doux, Europe's biggest chicken abattoir, headquartered in Brittany; SEB, Europe's largest maker of small household equipment; and Carrefour, Europe's biggest retailer. SEB says it is only talking with unions about increasing the work week at a factory in the Vosges region from 32 to 35 hours - not introducing a 38-hour week, as reports suggested. In 2000 SEB had introduced the 35-hour week at all its factories except the Vosges site. Carrefour says it has no plans to challenge the 35-hour week, despite reports to the contrary - and points out that it was among the first firms to introduce the 35-hour week and pays workers more than its competitors. Indeed, the contrast between the bold German firms, willing to take on their unions, and their timid French counterparts is striking. So far, despite legal changes in January 2003 that gave them room for manoeuvre, no big French firm has yet dared to challenge the sacrosanct 35-hour week.

Why the big difference, if all is as it appears, between French and German willingness to countenance reform? The German economy is in worse shape than the French, so the need to reform is more urgent. Proximity may have made German workers more aware of the credible threat of jobs going to central and eastern Europe. Many German companies have already relocated some activities and are planning to relocate some more. Bosch already employs 7,400 people in the Czech Republic, where German is widely spoken.

And the relationship between unions and bosses in Germany is traditionally consensual, emphasising that both sides are “social partners”, whereas in France, despite a smaller proportion of the workforce being unionised, it has tended to be highly confrontational. The French unions seem to mean it when they describe plans to tamper with the 35-hour week as the “revenge of the bosses”, whereas the German unions have been willing to strike deals with individual firms provided they are not forced to abandon their rhetorical commitment to the 35-hour week.

So perhaps, somewhere beneath the fiery rhetoric and demonstrations, Germany's bosses and workers have reached an unstated consensus that longer working hours, and greater flexibility, are necessary if the country is to regain its competitive edge. And perhaps it will take a more competitive Germany, thanks to the reforms now under way, to prompt a similar epiphany among the French.

Despite their protests, Germany's workers are starting to accept that they may have to work longer hours. Will their French counterparts be next?

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