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The Perceived Fairness of Layoffs in Germany: Participation, Compensation, or Avoidance?

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  • Christian Pfeifer

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Abstract

This study analyses to what extend and under what circumstances layoffs are accepted in Germany. Principles of distributive justice and rules of procedural justice form the theoretical framework of the analysis. Based on this, hypotheses are generated, which are tested empirically in a telephone survey conducted between East and West Germans in 2004 (n = 3036). The empirical analysis accounts for the different points of views of implicated stakeholders and impartial spectators. Key findings are: (1) The management of a company can increase the acceptance of layoffs if the employees get some participation rights. (2) For impartial spectators generous compensation for those made redundant leads to a higher degree of perceived fairness. But job alliances are not even preferred to layoffs without measures to soften the blow of job loss. (3) Implicated stakeholders accept job alliances and perceive wage cuts as more fair than layoffs. However, compensation does not have the expected impact. Copyright Springer Science+Business Media, Inc. 2007

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Bibliographic Info

Article provided by Springer in its journal Journal of Business Ethics.

Volume (Year): 74 (2007)
Issue (Month): 1 (August)
Pages: 25-36

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Handle: RePEc:kap:jbuset:v:74:y:2007:i:1:p:25-36

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Web page: http://www.springerlink.com/link.asp?id=100281

Related research

Keywords: distributive justice; downsizing; fairness; job alliance; layoffs; procedural justice; severance pay; works councils; D63; J63; M12; M51;

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References

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  1. Charness, Gary B & Levine, David I. I., 1999. "Changes In The Employment Contract? Evidence From A Quasi-Experiment," University of California at Santa Barbara, Economics Working Paper Series qt5jz354m3, Department of Economics, UC Santa Barbara.
  2. Kahneman, Daniel & Knetsch, Jack L & Thaler, Richard, 1986. "Fairness as a Constraint on Profit Seeking: Entitlements in the Market," American Economic Review, American Economic Association, vol. 76(4), pages 728-41, September.
  3. James Konow, 2003. "Which Is the Fairest One of All? A Positive Analysis of Justice Theories," Journal of Economic Literature, American Economic Association, vol. 41(4), pages 1188-1239, December.
  4. Akerlof, George A, 1982. "Labor Contracts as Partial Gift Exchange," The Quarterly Journal of Economics, MIT Press, vol. 97(4), pages 543-69, November.
  5. Matthew Rabin., 1992. "Incorporating Fairness into Game Theory and Economics," Economics Working Papers 92-199, University of California at Berkeley.
  6. Bergemann, Annette & Mertens, Antje, 2004. "Job Stability Trends, Layoffs and Transitions to Unemployment - An Empirical Analysis for West Germany," CEPR Discussion Papers 4792, C.E.P.R. Discussion Papers.
  7. Rabin, Mathew, 2002. "A Perspective on Psychology and Economics," Department of Economics, Working Paper Series qt4z78n1r9, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
  8. von Krogh, Georg & Kameny, Marla, 2002. "Leap Before You Layoff:: Look For Creative Alternatives," European Management Journal, Elsevier, vol. 20(6), pages 664-670, December.
  9. Matthew Rabin, 1998. "Psychology and Economics," Journal of Economic Literature, American Economic Association, vol. 36(1), pages 11-46, March.
  10. Gary Charness & David I. Levine, 1999. "When are layoffs acceptable? Evidence from a quasi-experiment," Economics Working Papers 369, Department of Economics and Business, Universitat Pompeu Fabra.
  11. Konow, James, 2001. "Fair and square: the four sides of distributive justice," Journal of Economic Behavior & Organization, Elsevier, vol. 46(2), pages 137-164, October.
  12. Wolfgang Franz & Friedhelm Pfeiffer, 2003. "Zur ökonomischen Rationalität von Lohnrigiditäten aus der Sicht von Unternehmen," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), Justus-Liebig University Giessen, Department of Statistics and Economics, vol. 223(1), pages 23-57.
  13. Pfeifer, Christian, 2005. "Fairness and the labour market; A theoretical and empirical analysis of layoffs in Germany," Hannover Economic Papers (HEP) dp-328, Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät.
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Cited by:
  1. Majid Ghorbani & Yuan Liao & Sinan Çayköylü & Masud Chand, 2013. "Guilt, Shame, and Reparative Behavior: The Effect of Psychological Proximity," Journal of Business Ethics, Springer, vol. 114(2), pages 311-323, May.
  2. Evelien Croonen, 2010. "Trust and Fairness During Strategic Change Processes in Franchise Systems," Journal of Business Ethics, Springer, vol. 95(2), pages 191-209, August.

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