Volume 239, Issue 1 - Special Issue: Industrial Relations: Worker Codetermination Collective Wage Bargaining, Guest Editors: Steffen Müller and Claus Schnabel

Using data from the representative IAB Establishment Panel, this paper charts changes in the two main pillars of the German IR model over the last 20 years. It shows that collective bargaining coverage and worker representation via works councils have substantially fallen outside the public sector. Less formalized and weaker institutions such as voluntary orientation of uncovered firms towards sectoral agreements and alternative forms of employee representation at the work-place have partly attenuated the overall erosion in coverage. Multivariate analyses indicate that the traditional German IR model (with both collective agreements and works councils) is more likely found in larger and older plants, and it is less likely in plants managed by the owner, in single and foreign-owned plants, in individually-owned firms or partnerships, and in exporting plants. In contrast, more than 60 % of German plants did not exhibit bargaining coverage or orientation or any kind of worker representation in 2015. Such an absence of the main institutional features of the German IR model is mainly found in small and medium-sized plants, in particular in the service sector and in eastern Germany, and its extent is increasing dramatically.

In the last 20 years there is a sharp decline in collective bargaining coverage in Germany. Research on the determinants of collective bargaining shows: subscribing to a sectoral bargaining system depends on several structural factors, like firm size, branch affiliation, owner-ship, firm age and work force composition. Parameter that – at least partly - were subject to considerable changes in the last two decades. With data of the IAB establishment panel we want to determine which part of the decline in collective bargaining coverage is due to structural change. We use a decomposition technique (Fairlie 2005) to break down the differences in coverage between 1998 and 2016. Further-more we take a look at distinct subgroups of establishments (along firm size). Our findings show that there is some influence of structural factors on the decline of collective bargaining coverage in the long run. And there are considerable differences between small and large firms with the decisions of the latter being more dependent on structural change.

Most of the literature on the effects of German works councils does not deal with the issue of potential endogeneity of works council existence. Exploiting exogenous variation in works council authority stemming from a 2001 reform of the German Works Constitution Act, I apply a regression difference-in-difference using establishment panel data. I find that increasing works council size and the introduction of one full-time councilor causally reduces the number of voluntary quits by about 30 %. This decline is driven entirely by collective voice effects and there is no evidence for monopoly effects in place. Similar to the findings of previous research, the effect is significant only in establishments which are subject to a collective agreement. The results suggest that the effectiveness of works councils either heavily relies on the support of unions, or that works councils mainly serve as a guardian of collective agreements.

Using cross-country data from the European Company Survey, we investigate the relationship between workplace employee representation and management perceptions of the climate of industrial relations, sickness/absenteeism, employee motivation, and staff retention. For a considerably reduced subset of the data, a fifth indicator – strike activity – is also considered alongside the other behavioral outcomes. From one perspective, the expression of collective voice through works council-type entities may be construed as largely beneficial, especially when compared with their counterpart union agencies either operating alone or in a dominant position. However, if heightened distributional struggles explain these differential outcomes in workplace employee representation, it should not go unremarked that the influence of formal collective bargaining is seemingly positive.