The Austrian Way

Top photo: Meeting of social partners and Chancellor Werner Faymann and Ministers Reinhold Mitterlehner, Rudolf Hundstorfer and Hans Jörg Schelling in 2015. BKA/ Andy Wenzel

 

70 Years of Social Partnership in Austria

By Julian Steiner

The Austrian model of Sozialpartnerschaft (social partnership) describes the institutionalized relationship between the government, political parties and certain interest groups in the field of labor, social, and economic policy. While it is widely recognized as a key element in Austrian politics since the end of World War II, social partnership is neither anchored in the Austrian constitution nor laid down in any specific act.

It is rooted in the free will of the players concerned. Although other European countries, such as Sweden or Norway show elements of a similar system, the Austrian model can be seen as unique, as it incorporates federations with monopolistic characteristics and exceptional political clout. One unique characteristic of the Austrian model is its institutional foundation: Social partnership in Austria is based on a “mixture” of compulsory and voluntary membership organizations: Membership in the Kammern, i.e. the Wirtschaftskammer (the Federal Economic Chamber, representing all businesses) and the Arbeiterkammer (the Chamber of Labor, representing workers and employees), is obligatory.

While the roughly 500,000 businesses pay membership dues according to their size, membership dues for the 3.5 million Austrian employees are automatically deducted from the monthly paycheck and amount to 0.5% of their gross income. The other social partners are organized in voluntary associations and unions as it is common in the rest of the world: The most influential ones are the Labor Union Association (Österreichischer Gewerkschaftsbund - ÖGB) on one side and the Association of Industrialists (Industriellenvereinigung – IV) on the other. These umbrella federations of the social partners wield great influence in political opinion- and decision-making, thus their cooperation has often been criticized as a “secondary government.” The political omnipotence often attributed to the social partners has, in fact, never existed as such.

The cooperation and coordination of interests among the federations and with the government have only ever applied to very specific though very prominent and important fields of politics, such as income policies and certain aspects of economic and social policies (e.g. industrial safety regulations, agrarian market legislation, labor market policies and principles of equal treatment).

In these areas, the social partners have substantially contributed to Austria’s economic, social and political stability – evident in economic growth, the rise of employment, the expansion of the welfare state and also in the often quoted “social peace” in the aftermath of World War II. Several avenues for political decision-making are open to the large national federations.

Traditionally, they share a close relationship with one or the other of the long-standing governing parties, the Social Democratic Party (SPÖ) or the Austrian People’s Party (ÖVP). In addition, these interest groups are incorporated, both formally and informally, into the political opinion-forming process of the relevant ministries, as well as through their participation in a number of committees, advisory boards and commissions.

Even at the parliamentary level, involvement of experts from the federations and chambers is a normal practice. Prominent members of the federations often “switch sides” to become members of the government. Today, both Reinhold Mitterlehner, Vice- Chancellor and Minister of Science, Research and Economy, as well as Rudolf Hundstorfer, Minister for Labour, Social Affairs and Consumer Protection used to be leading figures of the chambers and federations.

Historic Development

The roots of the Sozialpartnerschaft we know today lie in Austria’s First Republic of 1918-1934, as the Kammern were already somewhat involved in the political process. It was not until after World War II however, that the Austrian model was shaped in part by the experiences after the Anschluss, when both socialist and conservative politicians faced persecution from the Nazi regime and found themselves “reunited” in the concentration camps. Both sides learnt that lesson well and developed a willingness to overcome the divisions of the inter-war period of the First Republic including even a short civil war in 1934.

This willingness was manifested in a close cooperation mainly between the Labor Union Association (ÖGB), the Kammern, and the political parties during the wage-price adjustments of the late 1940s and 1950s. This process already indicated the model of Austrian social partnership: A multidimensional system of cooperation between the government, political parties and interest groups, who all share a common interest in economic growth. The consent reached, however, was not uncontroversial at the time.

The strike of October 1950 serves as an example for the struggle in the young Second Republic to reach the level of accordance of today’s social partnership model. It also remains one of the few massive strike movements in the history of Austria’s Second Republic. The second half of the 1950s, after the Austrian State treaty was signed, marked the beginning of a number of initiatives to broaden the scope of social partnership. In 1957, the social partners founded the Paritätische Kommission für Lohnund Preisfragen (Parity Commission for Wages and Prices), a commission based on equal representation of employer and employee federations and representatives of the government, debating questions of wages, prices and general economic and social policies.

This institution has been widely recognized – particularly in the comments of foreign observers – as a central institution of the Austrian social partnership. While it was originally planned as a temporary organization, the commission met regularly until the late 1980s and still formally exists in Austria today. It was this institution that, through a number of important accords in the late 1950s to early 1960s, led to a strengthening of the interconnection between the state (i.e. government and public administration) and the dominant interest groups (Labor Union Association, Kammern, etc.) The system was reinforced both in a formal way, through new institutional levels within the Paritätische Kommission, and informally through repeated successful negotiations.

The political stability and the continuity of the newly formed social partnership in the 1960s led to a uniquely strong social partnership system in Austria, which has not been fundamentally challenged since. From the 1980s, however, economic, social and political transitions have become apparent in the Austrian political spectrum, which also affected the social partnership. In light of reduced economic growth, rising budgetary deficits, increasing competition and unemployment, and an expanding rivalry between the political parties, it has become more difficult for the federations to align the different interests of their members to a common denominator. The reduced turnout in elections to the chambers and the general calling into question of compulsory membership are symptoms of change. In addition, it is not only becoming increasingly difficult, but also less frequent, to strike a balance between the social partner’s interests. Time-tested institutions, such as the Paritätische Kommission, have lost their significance.

Social Partnership in the 21st Century

The changes are mainly exhibited in the re-weighting of the influence of the players involved in the political decision-making process; the government has reasserted formative power and influence. In important budgetary, economic and sociopolitical questions, it decides both the procedure and the core contents. Austria’s accession to the European Union (EU) has reinforced this development. Furthermore, EU membership also entailed a loss of terrain for the federations. Decisions on topics such as agricultural, competition and monetary policies are decided at EU level. Here, the influence of the federations is essentially limited to formulating the Austrian position, which is just one out of 28.

Some scholars argue that the influence of social partnership has also significantly decreased due to the domestic political changes in Austria. The system of consensus democracy of the two main parties of the 1950s-1990s has been transformed by the rise of other political groups, such as the FPÖ (Freedom Party of Austria), or the Greens. These new parties have undermined the political relevance of the high level of interconnectivity between the formerly dominant political parties SPÖ and ÖVP and the social partners. All this, however, does not mean that the system of social partnership has come to an end, on the contrary: There are visible signs of continuity. The membership numbers of the federations are still significant. Although the voluntary Labor Union Association counted an all time low of 1.2 million members in 2014, down from 1.7 million Austrians at its high point in the mid 1980s, it still represents roughly one third of Austrian employees.

Thus, the privileged position of the national federations remains unchanged and a balance of interests can still be achieved in the political decisionmaking process. Owing to its stability, the social partnership in Austria has led to the highest level of collective bargained wage agreements in the EU: Almost 100 percent of employees in Austria are employed under a wage agreement, reached by cooperation between the federations involved in social partnership. Especially the comparison to other countries, such as Germany (62 percent) or the U.S. (14 percent) illustrates the unique significance of the social partnership model in Austria. While it is safe to argue that the Austrian social partnership model had reached its high point in the 1960s and 1970s, the past decade has shown that the social partners can still wield significant influence in times of economic crises, adapting to changes in the social, political, and economic context.