German State's Planned Wage Law Would Cover Just 6.25% of Public Contracts, Raising Alarms
Published on 07/13/2026 at 20:16 | Redaktion boerse-global.de
When North Rhine-Westphalia's legislature began drafting a law to shore up collective bargaining coverage, the goal was to reward contractors that pay union-negotiated wages. Instead, critics say the proposal in its current form would barely make a dent. Economic experts, trade unions and social scientists warned at a parliamentary hearing on Monday that the so-called Tarifentgeltsicherungsgesetz (TESG) would apply to a maximum of 6.25 percent of all public contracts awarded by the state.
The Institute for Economic and Social Sciences (WSI) calculated that figure. The main culprit: excessively high financial thresholds. Under the current draft, the law would only kick in for construction contracts worth at least €100,000 and for service contracts above €50,000. Specialists recommend lowering that to a uniform €25,000. They also fault the bill for restricting itself to 15 sectors and excluding procurement contracts entirely.
A far bigger blind spot is the treatment of municipalities. Cities and counties in NRW place roughly three-quarters of all public orders—some €8.3 billion annually—yet the draft law explicitly exempts them. For context, the entire state lets contracts worth around €13 billion per year.
The broader trend is stark. In the 1990s, more than 80 percent of employees in NRW worked for companies covered by a collective wage agreement. By 2025, that figure had fallen to 51 percent. Among businesses, the rate sits at just 24 percent, according to the WSI. European Union directives require member states to draw up national action plans when union coverage drops below 80 percent. Germany is far short of that mark.
The German Trade Union Federation (DGB) for NRW warned back in late June that the so-called wage-dumping is costing the state an estimated €23.8 billion annually. Without a stronger law, the exodus from collective bargaining will continue.
Separately, a ruling from Germany's Federal Labour Court (Bundesarbeitsgericht) on April 15 (docket number 7 AZR 114/25) clarifies pay for works council members. If a works councillor claims a higher salary based on a hypothetical promotion, the employer must prove that a concrete fictitious position actually existed. Vague career potential is not sufficient.
Meanwhile, the retail sector is bracing for intensified labour unrest. On Monday, employer representatives abruptly cancelled planned negotiations in Berlin-Brandenburg and Rhineland-Palatinate, accusing the Verdi union of undermining a tentative agreement in Baden-Württemberg. Verdi is demanding a 7 percent pay rise over twelve months; employers have offered 3.5 percent over two years. The union has now announced it will expand warning strikes across the sector.
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