The German Employment Relations Model and its distinguishing feature in Co-Determination

In researching employment relations in Germany for this blog entry, I discovered a curious ER model that has its roots deeply entrenched in the aftermath of World War II and the unique conditions of this nation during this period. I found the principles of industrial unionism and unitary unionism of particular interest, however the one aspect of German employment relations that really absorbed me was its distinguishing feature in Co-determination.

Co-determination is a form of employee participation in management based on the idea of industrial democracy and originated in the Weimar Republic. The Works Constitution Act is the legal basis for co-determination at the workplace level and it gives works councils a set of rights relating to specific issues ranging from the right to information to veto rights. Through these rights, work councils are able to influence issues that remain ‘managerial prerogatives’ in other countries. These rights are legally guaranteed and enforceable, and on the basis of these rights, management and works councils negotiate works agreements that regulate issues such as rostering and redundancies. As works councils and management are obliged to cooperate in good faith and work councils are not allowed to strike, negotiations are generally not conflictual (Weiss & Schmidt 2000).

Two interesting journal articles that focus on Co-Determination in Germany’s Employment Relations System are Ellguth, Gerner and Stegmaier’s ‘Wage Effects of Work Councils and Opening Clauses: The German Case’ and ‘Work Councils in Germany: their effect on Establishment Performance’ by Addison, Schnabel and Wagner which both focus on the influence of co-determination and works councils on the German economy. The first of these articles finds evidence that work councils exhibit not only positive wage effects in general but also accomplish the task of safeguarding employees’ demands in challenging times (Ellguth, Gerner & Stegmaier 2012) and the second article supports these findings whilst also suggesting that works councils in Germany reduce labour fluctuation, increase productivity and maintain innovation levels (Addison, Schnabel & Wagner 2001). However, Addison, Schnabel and Wagner’s article also suggested that profitability levels decreased as a result of work councils.

What are your thoughts on Germany’s unique employment relations system and the concept of Co-Determination?

References-

·         Addison, J, Schnabel, C & Wagner, J (2001), ‘Works councils in Germany: their effects on establishment performance’, Oxford Economic Papers, 53, pp. 659-685.

·         Bamber, GJ, Lansbury, RD & Wailes, N (2011) (Eds), International and comparative employment relations: globalisation and change, Allen & Unwin, Sydney. Chapter 8.

·         Ellguth, P, Gerner, H & Stegmaier, J (2012), “Wage effects of works councils and opening clauses: The German case’, Journal of Employment Research, 35, pp.95-113.

·         Weiss, M & Schmidt, M (2000), Labour Law and Industrial Relations in the Federal Republic of Germany (3^rd Ed), Deventer, Kluwer.