The erosion of union membership in Germany: determinants, densities, decompositions

Unionization in Germany has declined considerably during the last two decades. We estimate the impact of socioeconomic and workplace-related variables on union membership by means of Chamberlain-Mundlak correlated random effects probit models, using data from the German Socio-Economic Panel. Drawing on the estimates, we project net union densities (NUD) and analyze the differences between East and West Germany, as well as the corresponding changes in NUD over time. Nonlinear Blinder-Oaxaca-type decompositions show that changes in the composition of the work force have only played a minor role for the deunionization trends in West and East Germany. In West-East comparison, differences in the characteristics of the work force reflect a lower quality of membership matches in East Germany right after German unification.     

Innovation and Sectoral Employment: A Trade–off between Compensation Mechanisms

The question whether technological progress displaces employment or whether technological advance is beneficial for the level of employment has been at the core of economic debate for over two centuries. The beneficial effect might be achieved by several compensation mechanisms within the economic system. In this paper we categorize these compensation mechanisms into two basic categories that reflect the different nature of the ideas ruling the compensation. We discriminate the mechanisms of employment despite innovation from employment via innovation. In the context of new innovation economics we model an artificial industry implementing both compensation mechanisms. Simulation analysis is used to examine both the short–run and long–run properties of the model. There we focus on the influence of wage restraint policy on the functioning of the compensation mechanism.     

Co-determination and Personnel Turnover: The German Experience

ABSTRACT: It has often been argued, that within the German system of co-determination the works council has an unparalleled participative role, which goes well beyond any voice function of trade unions in the Anglo Saxon tradition. Nevertheless, there is surprisingly little empirical evidence, whether and to what extent works councils influence employers’dismissal and employees’quit decisions. Analyzing a representative sample of private sector firms that have to obey the Dismissal Protection Act of 1969 and the Works Constitution Act of 1972, the paper finds that firms with a works council have an annual dismissal rate which is 1.6 percentage points lower than the one experienced by firms wthout a plant-level interest representation. At the same time, firms with a works council have a quit rate which is 1.5 percentage points lower than the one in firms without such interest representation. Union density, on the other hand, has no statistically significant influence on either the dismissal or the quit rate. Apparently, it is the works councils that in both cases act as a collective “voice institution”, serving as a direct channel of communication between workers and management. Although it is difficult to reach a safe conclusion about the net economic impact of works councils on the employment behavior of firms, the findings lend some support to the following assumption: since hiring and training costs are usually higher than firing costs, firms on average benefit from the presence of a works council with regard to their user costs of labor: the “savings” due to avoided voluntary quits apparently more than compensate for the additional spendings for severance payments and the costs of co-determination.