Activating Dismissal Protection Legislation in Germany and the US

This article challenges dominant explanations in the comparative political economy literature for why employment security has been uniformly decimated across wealthy democracies, irrespective of institutional variation. While acknowledging the varied and complex paths from manufacturing to services-based production, scholars explain the erosion of social protection institutions via the “liberalization thesis,” which relies on the unfounded assumption that technological change and market conditions create unavoidable political imperatives. Against this view, I argue that the rise of flexible, and hence precarious, employment is due to incremental but transformative changes in economic discourse, namely the rise of neoliberalism, whose principle of market sovereignty enabled employers to reorient conceptual and evidentiary frameworks for interpreting and enforcing labor market institutions. In this article, I rely on archival and legal documents to trace the origins and development of dismissal protection legislation in Germany and the United States to show how neoliberalism’s principle of market sovereignty supported employers’ efforts to inflate the definition of and legal standards for “business necessity.” Expanding the realm of employer behavior exempt from regulation while leaving national institutions formally intact, employers developed and deployed novel discursive strategies to exploit the historical compromises regarding “business necessity” underlying Germany’s Dismissal Protection Act of 1951 and the US’s Civil Rights Act of 1964. Far from an economic imperative of the services sector, precarious employment is the result of employers transforming discursive power into economic power, suggesting that labor can defend employment security by developing effective discursive counter-strategies.