The Effect of Works Councils on Employment Change

Despite recent changes in the relationship between unionism and various indicators of firm performance, there is one seeming constant in the Anglophone countries: unions at the workplace are associated with reduced employment growth of around ?2.5% a year. Using German data, we examine the impact of the works council—that country's form of workplace representation—on employment change from 1993 to 2001. The German institution appears to have much the same negative effect on employment growth. That said, survival bias seems to play a small role, and works councils do not seem to further slow the tortuous pace of employment adjustment in Germany.