Who is Ludwig Erhard and what has he got to do with industrial relations in the UK?

Ludwig Erhard became the first Minister of Economy of the newly established Federal Republic of Germany in 1949. He faced an almost impossible situation.  Industrial production was around a third of what it had been in 1938, there were huge shortages of food and other essential consumer goods, the old Reichsmark was losing its value rapidly, nearly a quarter of German housing had been destroyed during the war and there was a massive shortfall of labour because a large number of potential workers had never returned from the front.

Erhard did many difficult things to tackle the problems he faced – currency devaluation, removing price controls and enabling substantial immigration, amongst them – and he undoubtedly played a huge part in the post-war German ‘economic miracle’.  But the fundamental tenet that underpinned his entire approach was that sustainable prosperity and economic growth can only come from increases in productivity.

Lax fiscal policy and unbounded monetary stimulus do not create long-term, sustainable economic growth – quite the opposite. Low taxes, low inflation, monetary rigour and the uninterrupted operation of the free market are essential in order to achieve success.  But prosperity is ultimately, and only ever, a result of increasing productivity.

What has all this got to do with industrial relations in the UK?  Arguably one of the greatest, although perhaps at least partly unintended, consequences of Erhard’s approach, is that German collective bargaining (and individual ‘bargaining’) is underpinned by, and permeated with, a recognition that productivity is king.

Pay negotiations, discussions, awards – call them what you will – are heavily flavoured by a so-called ‘productivity alliance’ where trade-offs between affordable (ideally self-funding) pay increases, productivity levels and job creation (or reduction) are recognised.  Commitment to the firm’s central goals, partly as a result of a greater involvement of workers in strategic decision-making, is usually a given, as is acceptance of the need for profit – as a driver of capital investment, tax revenues and long term job security.

Employee engagement and communication – together with good old-fashioned collaboration, joint working and partnership initiatives – via collective representatives and directly with employees is more systematic, sophisticated and embedded in management process.  This yields long term dividends.

What a far cry from Britain where many, if not all, of the current pay disputes are characterised by ‘re-distributive’ thinking – shareholders and managers are badged as ‘greedy’, profits are ‘dirty’ unless and until a greater share of them is returned to the pockets of the workers in the form of ever-increasing pay demands.  Any attempts to link productivity or other improvements to pay negotiations are met with cries of ‘foul play’ or claims that managers are seeking to undermine pay negotiations.  And the notion that profits fund returns on past investment and provide long term job protection through future investment is barely on the radar.

Too often there is no long-term strategy or plan for employee and/or trade union engagement and to communicate them.  Initiatives are reactive, event or incident driven and there is still a reluctance to work with collective representatives to build their commitment to, and alignment with, organisation objectives.

If you’re looking for an antidote to this, then at Collinson Grant we help clients to tackle these problems and their root causes by:

• reviewing current industrial relations strategies and plans or developing them from scratch. This is particularly topical at the moment as union activity and industrial relations disputes are on the increase
• helping clients to manage trade union relationships where there is a collective agreement in place. This could be ‘behind the scenes’ support or working alongside client staff members with the union representatives or dealing directly and solely with the unions
• supporting all the legal aspects of working with and handling trade unions, disputes, recognition/de-recognition etc as well as training line managers in any of these matters.