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Wage effects of works councils and opening clauses: The German case

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  • Peter Ellguth
  • Hans-Dieter Gerner
  • Jens Stegmaier

Abstract

German employment relations are characterized by a distinct dual system. First, working conditions and wages are determined by industry-level collective bargaining agreements. Second, on the establishment-level, the works council is responsible for employer–employee negotiations. However, since the mid-1980s, an increasing number of areas of regulation have been transferred from the industry- to the establishment-level using so-called opening clauses. The analysis in this article relies on rich German establishment data and reveals new insights into the institutional machinery of wage bargaining. While the existence of such clauses is related to higher wages, their application results in wage cuts of roughly the same size. The results also suggest that works councils, on average, are able to prevent the negative wage effects of opening clauses.

Suggested Citation

  • Peter Ellguth & Hans-Dieter Gerner & Jens Stegmaier, 2014. "Wage effects of works councils and opening clauses: The German case," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 35(1), pages 95-113, February.
    • Handle: RePEc:sae:ecoind:v:35:y:2014:i:1:p:95-113
    DOI: 10.1177/0143831X12463171
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    References listed on IDEAS

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    Cited by:

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    2. Steffen Müller & Jens Stegmaier, 2020. "Why is there resistance to works councils in Germany? An economic perspective," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 41(3), pages 540-561, August.
    3. John T Addison & Paulino Teixeira & André Pahnke & Lutz Bellmann, 2017. "The demise of a model? The state of collective bargaining and worker representation in Germany," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 38(2), pages 193-234, May.
    4. Lutz Bellmann & Mario Bossler & Hans-Dieter Gerner & Olaf Hübler, 2021. "Collective bargaining coverage, works councils and the new German minimum wage," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 42(2), pages 269-288, May.
    5. Laszlo Goerke & Sabrina Jeworrek, 2021. "Paid vacation use: The role of works councils," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 42(3), pages 473-503, August.

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