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Wage determination in the shadow of the law: The case of works councilors in Germany

Author

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  • Laszlo Goerke

    (Institute for Labor Law and Industrial Relations in the European Union (IAAEU) – Trier University, Germany; IZA, Bonn, Germany; CESifo, Munich, Germany; GLO)

  • Markus Pannenberg

    (Department of Business and Economics, University of Applied Sciences, Bielefeld, Germany; IZA, Bonn, Germany; GLO)

Abstract

The German law on co-determination at the plant level ( Betriebsverfassungsgesetz ) stipulates that works councilors are neither to be financially rewarded nor penalized for their activities. However, lavish payments to works councilors in some large firms have generated a debate about the need to reform the law. This article offers an empirical basis for the discussion and provides representative evidence on wage payments to works councilors for the period 2001–2015. The authors find wage premia of 3–7% in OLS specifications, but observe no wage differentials in linear fixed-effects panel data specifications. Similar results are found for various subgroups of employees and when focusing on employees in particular types of firms. Hence, the results indicate that payments to works councilors are broadly in line with legal regulations.

Suggested Citation

  • Laszlo Goerke & Markus Pannenberg, 2024. "Wage determination in the shadow of the law: The case of works councilors in Germany," Economic and Industrial Democracy, Department of Economic History, Uppsala University, Sweden, vol. 45(1), pages 83-115, February.
    • Handle: RePEc:sae:ecoind:v:45:y:2024:i:1:p:83-115
    DOI: 10.1177/0143831X221139331
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    References listed on IDEAS

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    Cited by:

    1. Goerke, Laszlo & Huang, Yue, 2022. "Job satisfaction and trade union membership in Germany," Labour Economics, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    Co-determination; labor law; Socio-Economic Panel (SOEP); wages; works councils;
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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