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Dualization as Destiny? The Political Economy of the German Minimum Wage Reform

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  • Paul Marx
  • Peter Starke

Abstract

Germany is widely seen as a “dualized†economy driven by a powerful and stable “insider†coalition in the manufacturing sectors. In this article, that picture is challenged. An examination of the political economy of the outsider-friendly 2014 Minimum Wage Act, using public opinion data, document analysis, and qualitative interviews, shows how earlier dualizing reforms led to unintended negative feedback effects: First, public opinion reacted negatively to increasing inequality in the years preceding the introduction of the minimum wage. Second, a remarkable shift is found among trade unions toward support of a minimum wage, even in manufacturing. Although the threat of low-wage competition and flexibilization did play a role, trade union solidarity was at least as important. Those endogenous dynamics came together in a self-undermining process unfolding over a relatively short period of time. Potential alternative explanations are explored, including classical partisan politics, party competition, and employer preferences.

Suggested Citation

  • Paul Marx & Peter Starke, 2017. "Dualization as Destiny? The Political Economy of the German Minimum Wage Reform," Politics & Society, , vol. 45(4), pages 559-584, December.
  • Handle: RePEc:sae:polsoc:v:45:y:2017:i:4:p:559-584
    DOI: 10.1177/0032329217726793
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    Cited by:

    1. Werner Eichhorst & Paul Marx, 2021. "How stable is labour market dualism? Reforms of employment protection in nine European countries," European Journal of Industrial Relations, , vol. 27(1), pages 93-110, March.
    2. David Weisstanner, 2017. "Dualization and inequality revisited: Temporary employment regulation and middle-class incomes," LIS Working papers 720, LIS Cross-National Data Center in Luxembourg.
    3. Benassi, Chiara & Dorigatti, Lisa & Pannini, Elisa, 2018. "Explaining divergent bargaining outcomes for agency workers: the role of labour divides and labour market reforms," LSE Research Online Documents on Economics 89371, London School of Economics and Political Science, LSE Library.

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