Uwe Jirjahn

Works Councils and Collective Bargaining in Germany: The Impact on Productivity and Wages

This paper investigates the interaction between establishment-level codetermination and industry-level collective bargaining in Germany. Based on a simple bargaining model we derive our main hypothesis: In establishments covered by collective bargaining agreements works councils are more likely to be engaged in productivity enhancing activities and less engaged in rent seeking activities than their counterparts in uncovered firms. Using data from German manufacturing establishments, our empirical analysis confirms this hypothesis. The presence of works councils exerts a positive impact on productivity within the covered industrial relations regime but not within the uncovered industrial relations regime. In contrast, the presence of works councils has a positive effect on wages within the uncovered industrial relations regime but not to the same degree within the covered industrial relations regime.

Payment Schemes and Gender in Germany

The authors estimate the determinants of five types of variable payment schemes using panel data on German establishments in 1994 and 1996. Women were disproportionately included in schemes based on individual productivity and on profit-sharing, but not in those based on work group productivity. This pattern seems inconsistent with the claim that women are sorted due to their shorter expected tenure. Instead, the authors argue, the critical issue may be that women have a greater need for flexibility between work and home than men do. Collective bargaining coverage and other industrial relations variables are shown to be influential determinants interacting with gender.

Variable Payment Schemes and Industrial Relations: Evidence from Germany

This paper examines the empirical determinants of piece rates and profit sharing schemes. Establishment data from Germany confirm the importance of industrial relations climate. The presence of collective agreements makes profit sharing less likely. Yet, the presence of works councils makes both piece rates and profit sharing more likely within the sector covered by collective agreements. The use of teams makes piece rates more likely within the uncovered sector. Additional hypotheses regarding expected tenure, production technology, and firm strategy are confirmed. The results from Germany are explicitly compared with those from several other countries. Copyright 1998 by WWZ and Helbing & Lichtenhahn Verlag AG

Performance Pay, Risk Attitudes and Job Satisfaction

We present a model in which workers with greater ability and greater risk tolerance move into performance pay jobs to capture rents and contrast it with the classic agency model. Estimates from the German Socio-Economic Panel confirm testable implications drawn from our model. First, before controlling for earnings, workers in performance pay jobs have higher job satisfaction, a proxy for on-the-job utility. Second, after controlling for earnings, workers in jobs with performance pay have the same job satisfaction as those not in such jobs. Third, those workers in performance pay jobs who have greater risk tolerance routinely report greater job satisfaction. While these findings support models in which workers capture rent, they would not be suggested by the classic agency model.

What Factors Lead Management to Support or Oppose Employee Participation—With and Without Works Councils? Hypotheses and Evidence from Germany

This paper provides the first econometric analysis to distinguish between works councils in establishments where managers have a positive or negative view toward employee involvement in decision making. We similarly distinguish between establishments where no council is present in which management supports or does not support worker participation. We stress the potential role of works councils and participation in motivating employees. Our theoretical analysis and empirical results from German manufacturing establishment data show that the structure of the workforce, principal-agent problems between owners and managers, collective bargaining, direct employee involvement, human resource management practices, and market strategy and innovativeness all play important roles. Some conflicting conclusions in the works council literature may be due to the failure to distinguish among industrial relations participation regimes characterized by cooperative or uncooperative relationships between works councils and management.

Intra-Firm Wage Dispersion and Firm Performance - Is There a Uniform Relationship?

Empirical studies examining the impact of intra-firm wage dispersion on firm performance report extremely mixed results. Yet, almost all of the studies implicitly assume that there is a uniform relationship between wage dispersion and firm performance across all types of firms. In contrast, we argue that the effects of wage dispersion depend on the industrial relations regime and the type of incentive scheme employed. Using data on a sample of manufacturing establishments in Germany, our findings confirm that wage dispersion interacts with internal promotions, individual and group piece rates, works council presence and collective bargaining coverage. This strongly supports the notion that moderating factors play an important role in the relationship between intra-firm wage dispersion and productivity. Copyright 2007 Blackwell Publishing Ltd..

Works Councils and Learning: On the Dynamic Dimension of Codetermination

This study provides the first econometric analysis on the dynamic dimension of establishment-level codetermination in Germany. We hypothesize that learning implies a change in the nature and scope of codetermination over time. Using unique data from small- and medium-sized establishments, our empirical analysis provides strong evidence that learning indeed plays a crucial role in the functioning of works councils. First, the probability of an adversarial relationship between management and works council is decreasing in the age of the council. Second, the council’s age is positively associated with the probability that the council has an influence even on decisions where it has no legal powers. Third, productivity is increasing in the age of the council. Fourth, the quit rate is decreasing in the age of the council. However, the estimates also provide evidence of a codetermination life cycle.

Family-Friendly Practices and Worker Representation in Germany

The determinants of three employer-provided family-friendly work practices are estimated for German establishments. The presence of a works council stands as a positive determinant of all three practices. When works councils exist in the presence of collective bargaining, their influence tends to reflect the demographics of the workplace. The role of the works council becomes larger when the share of women increases and the share of part-timers decreases. We suggest this is consistent with the voice role of works councils.

Do Spillovers Stimulate Incremental or Drastic Product Innovations? Evidence from German Establishment Data*

Despite the generally recognized importance of knowledge spillovers, the empirical literature is essentially silent on the type of innovation stimulated by spillovers. We estimate the determinants of product innovations differing in their degree of newness to the adopting firm. Knowledge spillovers from rivals have a positive impact on incremental innovations. This impact is largely independent of participation in R&D cooperation. Spillovers exert no such independent influence on drastic innovation activities. The results support the hypothesis that establishments face difficulties in using knowledge that comes from areas they are not familiar with. Establishments exploit spillovers for incremental innovations rather than for drastic innovations. To some degree R&D cooperation can help to overcome the difficulties in using spillovers for drastic innovations. Furthermore, our estimates provide evidence that the firms own R&D effort and the use of outside information are substitutes.

On the Determinants of Shift Work and Overtime Work: Evidence from German Establishment Data

Using data from German manufacturing establishments, this article examines the empirical determinants of shift work and overtime. Technology and the organization of work, the managerial environment, the structure of the workforce and industrial relations are important determinants. Despite the similarities in the role of some determinants, a series of important differences exists between the estimations for overtime and shift work. Moreover, using an instrumental variables probit model, the estimates indicate a negative relationship between shift work and overtime.