The Reform of the German Works Constitution Act: A Critical Assessment

Since 1920, the thrust of German law on workplace codetermination has changed on a number of occasions. We describe the latest swing of the legislative pendulum—favoring works council formation and competence—and evaluate the case for it. We provide new information on the extent of works councils before reviewing the evidence on their economic effects, focusing on some new results from matched-plant data. If the former evidence points to a codetermination deficit, this shortfall does not appear to have negative consequences for workplace productivity, profitability, and employment.     

On the Determinants of Mandatory Works Councils in Germany

German works councils are often thought of as operating in all firms that exceed the basic size threshold (of five permanent employees) established under law. Drawing on a new large-scale, representative German data set, we report that only one-fifth of firms in our sample have works councils even if such firms do account for almost three-fourths of employment. The principal factors behind works council presence emerge as fairly conventional: firm size, firm age, branch plant status, the gender composition of the work force, and certain working arrangements. There are also signs of a close relation between workplace union density and council presence. However, some controversial causal links suggested in an earlier econometric literature receive little support.     

Liberalization Only at the Margins? Analysing the Growth of Temporary Work in German Core Manufacturing Sectors

Drawing on workers’ surveys and workplace interviews, this article investigates the growth of temporary work in German manufacturing sectors since the 1980s. Findings partly confirm a ‘dualization’ scenario as workers without industry‐specific vocational training are more likely to be on a temporary contract than skilled workers, and the gap has widened over time. However, also skilled workers have become increasingly vulnerable to casualization due to job routine and the erosion of industrial relations. Evidence confirms the crucial role of institutions in supporting the linkage between specific skills and employment stability, and suggests that the liberalization of the employment relationship has the potential to advance also in the core of the German economy.     

Effects of Works Councils on Firm‐Provided Further Training in Germany

Unions are an important indicator of various measures of firm performance in Anglo‐Saxon countries. The same is true for the German analogue of the workplace union, the works council. Using German establishment data, I examine the impact of works councils on further training. I employ pooled logit and count‐data models to analyse the further training activity and intensity of German firms. Because the treatment variable may suffer from endogeneity, I also adopt linear and nonlinear instrumental variable techniques. The analysis reveals a positive impact of works councils on firm‐provided training and provides slightly weaker evidence for firm‐size differentials in workplace representation. I conclude that enhanced management–employee relations foster the training efforts of firms.     

Rule Enactment in a Pan‐European Labour Market: Transnational Posted Work in the German Construction Sector

This article analyses the micro‐level rule enactment of the posting of workers framework in the German construction sector. I examine how actors draw on different power resources in order to influence policies without formal negotiation within transnational workspaces and thereby initiate institutional change. Drawing on interviews with posted workers, managers, unionists, works councillors and labour inspectors I show how transnational subcontracting allows the emergence of different regulatory spaces at national and workplace level. The article concludes that the informal renegotiation of employment relations in transnational workspaces is likely to destabilize the posting framework negotiated at policy level.     

The relationship between works councils and firms’ further training provision in times of technological change

Participating in further training is strategically important for employees to ensure their employability. Particularly for employees in low-skilled jobs, works councils — firm-level organizations that represent employees — constitute an important employee advocacy instrument in European countries, such as France and Germany. With comprehensive co-determination rights, works councils can influence firms’ hiring policies, job design and career paths (e.g. promotions). Using German firm-level data, we empirically investigate the influence of works councils on firms’ training provision for employees in firms below and above the industry level of technology. The results show that works councils have a positive effect on the percentage of employees in general, and of employees in low-skilled jobs in particular, participating in training, but only for firms below the industry level of technology. These results show the importance of works councils in supporting training in such firms and enhancing the employment prospects of employees in low-skilled jobs. In contrast, firms above the industry level of technology invest in training with or without a works council, indicating that the training interests of employers and employees are aligned.     

A Critical Assessment of the Theoretical and Empirical Research on German Works Councils

The article reviews the existing English- and German-speaking literature on the German works council. Three major research topics are discussed: the ontology and typologies of works councils; their current practice and transformation; and their economic outcomes. Although much research has been conducted on the internal functioning of the works council–management relationship, it is clear that we still know little about the determinants of different workplace relations and their outcomes. The article concludes by advocating a reviving research interest in the link between codetermination and political democracy.     

Family-Friendly Practices and Worker Representation in Germany

The determinants of three employer-provided family-friendly work practices are estimated for German establishments. The presence of a works council stands as a positive determinant of all three practices. When works councils exist in the presence of collective bargaining, their influence tends to reflect the demographics of the workplace. The role of the works council becomes larger when the share of women increases and the share of part-timers decreases. We suggest this is consistent with the voice role of works councils.     

The Introduction of Works Councils in German Establishments — Rent Seeking or Rent Protection?

Some recent empirical studies seem to suggest that German works councils engage in rent-seeking activities rather than in the creation of joint establishment surplus. However, those cross-sectional studies do not address the issue of causation. We address this issue by investigating the factors that influence the employees' decision to introduce a works council in their establishment. Councils are more likely to be adopted in establishments with a very poor sales situation and poor employment growth. They are also more likely to be adopted in establishments where management does not pursue an expansive market strategy. Altogether, our results support the hypothesis that employees introduce works councils to protect the quasi-rents they have created by their efforts and human capital investments.     

Institutional Resilience in a Changing World Economy? The Case of the German Bankking and Chemical Industries

This paper examines whether there has been a transformation towards company-specific and unitarist industrial relations in Germany. On the basis of 25 case studies of employment practices in German and foreign-owned banks and chemical firms as well as industry data, the research found that the German system has so far remained relatively stable. Companies in the two industries studied generally still comply with the labour market institutions of multi-employer collective bargaining, workplace representation and initial vocational training. Pressures have been accommodated by changes within the system rather than by a radical change of the system.     

The Erosion of the German System of Industrial Relations

The paper assesses current trajectories of change in the German system of industrial relations by analysing the co-determination and collective bargaining systems. It argues that two parallel developments undermine the institutional stability of the German model. First, the institutional base of the German industrial relations system, which has served as the pre-condition of its past success, has been shrinking during the last two decades. This is due to a decline in coverage by the two major industrial relations institutions: the works council system and wage agreements. Today fewer than 15 per cent of German plants are covered by both a valid collective agreement and a works council. Second, increasing decentralization pressures within collective bargaining tend to undermine the division of labour between co-determination and collective bargaining. The dynamics of an institutional erosion of the German industrial relations institutions and the decentralization of collective bargaining disturbs the fine-tuning of the mediating process between macroeconomic steering capacity and co-operative workplace industrial relations. This tendency has been aggravated by the effects of German unification. The current institutional developments of the German industrial relations system leave serious doubts about the future of a successful model of co-operative modernization.     

Works Councils,Collective Bargaining,and Apprenticeship Training – Evidence From German Firms

In this paper, we investigate the effects of works councils on apprenticeship training in Germany. The German law attributes works councils substantial information and co‐determination rights to training‐related issues. Thus, works councils may also have an impact on the cost‐benefit relation of workplace training. Using detailed firm‐level data containing information on the costs and benefits of apprenticeship training, we find that firms with works councils make a significantly higher net investment in training compared to firms without such an institution. We also find that the fraction of former trainees still employed with the same firm 5 years after training is significantly higher in the presence of works councils, thus enabling firms to recoup training investments over a longer time horizon. Furthermore, all works council effects are much more pronounced for firms covered by collective bargaining agreements.     

Path Dependency and Comparative Industrial Relations: The Case of Conflict Resolution Systems in Ireland and Sweden

This article uses the theory of path dependency to explain the evolution of employment conflict resolution systems in Ireland and Sweden. It argues that the traditional ‘voluntarist’ conflict management path followed in Ireland has fragmented as a result of a series of internal developments that have reduced trade union density, increased the importance of employment law in the settlement of workplace disputes and established social partnership as the main wage‐setting mechanism. By contrast, the Swedish system has experienced reform within the boundaries of the established conflict management path, which is largely attributable to the still powerful role played by trade unions within the country. Thus, while the operating rules of the system have changed, its core underlying principles — collectivism and self‐regulation — remain intact.     

Unions and Employment Growth: The One Constant?

Sequential analyses of the major workplace data sets available to British researchers—the cross-sectional Workplace Industrial/Employee Relations Surveys (WIRS/WERS)—have revealed shifts in some previously well-established associations between union presence and firm performance, so much so in fact that it has become conventional to speak of a pronounced reduction in the "disadvantages of British unionism." One finding that seems to have persisted in cross section, however, is the negative effect of unions on employment growth. Following on a recent study in this Journal, we reexamine the issue using employment data from a panel of firms surveyed at two points in time rather than a single cross section. We report similar evidence of employment retardation in union regimes. On the other hand, the new data also suggest that some other unfavorable union effects may be longer-standing than previously reported.     

Workplace gender segregation in standard and non-standard employment regimes in the US labour market

This study provides a comprehensive analysis of workplace gender segregation in non-standard employment in the United States. It compares segregation in standard and three non-standard work arrangements paying special attention to independent contracting – a segment of contingent employment representing novel and consequential developments in work organization. In line with the prediction that inequality is lower in more marketized sectors of the labour market, my analyses based on a representative sample of the contemporary US workforce reveal that workplace gender segregation is lower in non-standard employment. I further find that the degree of segregation corresponds to the degree of attachment to the employer and that segregation is lower in segments of the economy with higher market competition. Overall, my analyses indicate that a shift towards alternative work arrangements can reduce overall workplace segregation but does not lead to uniform desegregation across occupations, and that institutions of employment and market pressures faced by employers play significant roles in the effect of alternative work arrangements on workplace segregation.     

Collective Bargaining and Innovation in Germany: A Case of Cooperative Industrial Relations?

At the level of theory, the effect of collective bargaining on innovation is contested. The large proponderance of the U.S. evidence clearly points to adverse effects, but other‐country experience suggests that certain industrial‐relations systems, or the wider regulatory apparatus, might even tip the balance in favor of unions. Our pooled cross‐ section and difference‐in‐differences estimates provide some weak evidence that German collective bargaining inhibits innovation. However, in conjunction with workplace representation, there is the suggestion that it might actually foster innovative activity.     

Managerial Perceptions of Works Councils’ Effectiveness in the Netherlands

Although works councils have, by and large, equally extensive legal rights in Germany and the Netherlands, this is the first econometric analysis that investigates the influence of Dutch works councils on firm performance. We use a nationwide Dutch dataset with information on management’s perceptions of the works council’s impact on their establishments’ efficiency and innovation. Inspired by the German study of Jirjahn and Smith (2006, Industrial Relations 45:650–80), we analyze which determinants influence management’s attitude toward employee participation in the Netherlands. Owing to the specifics of our data, we are able to additionally include variables that measure the interaction between management and worker representatives. We establish a preponderant influence emanating from the works council’s role attitude and management’s leadership style.     

False Self‐Employment,Autonomy and Regulating for Decent Work: Improving Working Conditions in the UK Stripping Industry

A large‐scale study of working conditions in UK‐based strip dancing clubs reveals that dancers are against de facto self‐employment as it is defined and practised by management, but in favour of de jure self‐employment that ensures sufficient levels of autonomy and control in the workplace. While dancers could potentially seek ‘worker’ or ‘employee’ status within the existing legal framework, their strong identification with the label ‘self‐employed’ and their desire for autonomy will likely inhibit these labour rights claims. We propose an alternative avenue for improving dancers’ working conditions, whereby self‐employed dancers articulate their grievances as a demand for decent work, pursued through licensing agreements between clubs and local authorities and facilitated by collective organization.     

How Workers Fare When Employers Innovate

Complementing existing work on firm organizational structure and productivity, this article examines the impact of organizational change on workers. We find evidence that employers do appear to compensate at least some of their workers for engaging in high-performance workplace practices. We also find a significant association between high-performance workplace practices and increased wage inequality. Finally, we examine the relationship between organizational structure and employment changes and find that some practices, such as self-managed teams, are associated with greater employment reductions, whereas other practices, such as the percentage of workers involved in job rotation, are associated with lower employment reductions.     

The War on Europe’s Waterfront — Repertoires of Power in the Port Transport Industry

When the European Commission proposed a Directive On Market Access to Port Services in February 2001, the International Transport Workers’ Federation (ITF) issued a declaration of war on Europe’s waterfront. To protect established terms and conditions of employment in the port transport industry, the ITF developed a strategy of internationalization that required dock workers to engage in a new politics of scale wrought by globalization. A new repertoire of collective action — based on more effective union articulation (i.e. stronger interrelationships between the workplace, national and international levels of organization) combined with the activities of new labour networks that connected port workers at the trans‐national corporation, port range and pan‐European levels — enabled dockers to sink the Directive in the European Parliament in November 2003. The dockers’ victory will not be lost on other European unions or indeed other global union federations, although their success will doubtless prove more difficult for other occupational groups to emulate.