Works Councils and Flexible Collective Bargaining Agreements
Posted: 21 Mar 2012
Date Written: November 4, 2011
Based on the article by Hübler and Jirjahn (2003), I analyse the interaction effects of works councils and collective bargaining agreements (CBAs) on productivity and wages in German plants. In contrast to previous literature, newer developments in the system of industrial relations could countervail the moderating effects of collective bargaining on works council behaviour. Increased decentralisation and flexibility of collective bargaining at the plant level induced by opening clauses and company-level pacts for employment require works councils to negotiate over wages, which is usually forbidden in the Works Constitution Act. This could dampen their efforts on fostering productivity-enhancing measures. Contrary, the empirical results show that in plants with opening clauses works councils actually increase productivity by a larger magnitude compared to plants without opening clauses, while wages stay the same. However, the existence of company-level pacts for employment does not produce different works council behaviour. Our results suggest that there are no adverse effects of CBA decentralisation on works council behaviour.
Keywords: works councils, collective bargaining, employment pacts, opening clauses, wages, productivity
JEL Classification: J53, J31
Suggested Citation: Suggested Citation