Thursday, June 27, 2013
C2.17 (Oudemanhuispoort)
The German industrial relations system has changed a lot in the past 30 years and has become much more flexible. Most of the change has been incremental. However, there has also been a clear turning point represented by Agenda 2010 and the labor market reforms of the early 2000s. The end result of this process of change has been a softening of industrial relations institutions. All observers agree on this point. However, interpretations of events differ. For some, the German economy has reached a new state of equilibrium built around the coalition between large, export-oriented firms and core workers. The main features of the new German model according to this interpretation are: status quo in the core sector and liberalization in the periphery. There is much to commend in this interpretation of events. However, in this paper we argue that it does not go far enough. The softening of the German industrial relations institutions affects the core as well, as suggested by the diffusion in the manufacturing sector of opt-out clauses, the application of service sector collective agreements to workers previously covered by metal or chemical agreements, trends in subcontracting relations, and patterns of substitution of typical with atypical workers in the manufacturing sector. The softening of industrial relations institutions has important consequences for the German growth model. The German economy has always been export-oriented, but has never been solely dependent on exports for growth. IR institutions ensured ‘balanced growth.’ Productivity was mostly generated in the manufacturing sector but was then distributed to other sectors as well. Pattern bargaining ensured that wage growth in the non-exposed sector grew in line with average productivity increases. This fed domestic demand. With the softening of industrial relations institutions the German growth model is now entirely dependent of exports. The growth of domestic demand plays virtually no role anymore. This generates competitiveness imbalances and is one of the causes of the current Euro crisis. In addition, Germany’s overwhelming reliance on export-led growth contributes to explain the German response to the crisis, and especially its insistence on monetary and fiscal conservatism.
