Wage-setting in a System of Self-Regulation through Collective Private Autonomy

Abstract

The German system of wage-setting is based on the idea that workers bargain in a field of balanced powers through exercising collectively their freedom of contract. Works councils play an important role for enforcement and with concern to distribution of salaries in the plant. However, they cannot bargain wages. Parliament also refrains from wage setting on its own or influencing the wage setting process of the bargaining parties since both sides of industry set the labour standards autonomously. Nevertheless, according to the case law of the Federal Labour Court, the employer has to treat his employees equally. Moreover, for the purpose to overcome the structural imparity in the Labour relations, the State provides a collective bargaining system. On top of that, a Minimum wage legislation has been introduced in order to support the wage setting system, which is in the first place a system of self-regulation of collective labour organisations. Minimum wages, however, shall be only additional parts. They surely have to protect workers who are not protected by collective agreements.