Germany’s Labor System Would Be Difficult to Import to U.S.
| le 24 October 2019
Democratic presidential candidates push for elements of Sozialpartnerschaft, but labor experts say it is uniquely German
MUNICH, Germany—Some Democratic presidential candidates want to bring elements of German labor relations to the U.S. While that could appear attractive on the surface, doing so would be difficult and the economic payoff uncertain. Labor unions are much more prevalent in Germany than in the U.S. under a system called Sozialpartnerschaft, or social partnership. It has fans among both corporate leaders and unions here. The system is credited with giving German workers job security and a greater voice in how companies are run. But labor experts view it as a uniquely German system developed when manufacturing giants dominated the economy.
German business associations negotiate labor contracts with unions that apply to multiple employers in an industry, such as metal processing or grocery stores. The result is that even nonunionized businesses often follow the wage structure agreed to in the contract for their industry. In the U.S., such sectoral contracts would require a significant rewrite of labor law, a difficult prospect in a divided Congress. Under current law, U.S. businesses generally can’t work collectively. While unions represent workers at multiple employers, they must negotiate contracts with individual firms. Sectoral contracts discourage employee movement between firms because they are unlikely to receive a raise by taking a job at a competitor. The German labor system deserves some credit for a long period of postwar prosperity, said Thomas Griebe, a Hamburg-based employment attorney at Vangard Littler who represents management. He said that is in part because a close relationship between management and workers has allowed easier concessions during economic slowdowns. But if the works-council system didn’t exist today, he doubts Germans would be clamoring to create it. “The current system is not in line with the modern world of working,” he said. “The system creates more costs for the firms, and the benefits of the system are hard to calculate.” German wages have grown more slowly than U.S. wages since 2000, even though Germany has higher unionization rates. In 2000, German workers earned 109% the average wage of U.S. workers, when adjusting for currency differences. Now they earn 99% of the wage paid to U.S. workers, according to data from the Organization for Economic Cooperation and Development. Comparing total compensation is difficult because German workers receive health care and more generous retirement benefits from the government. While the German system has won praise from some U.S. politicians, unionization rates in Germany have fallen as its economy faces pressures from lower-cost foreign labor and a move toward less-unionized fields, such as information technology. German labor leaders, however, say they their system has clear benefits. “Workers in the U.S. are definitely at risk,” said Frank Bsirske, the recently retired chairman of Germany’s United Services Union. “The level of security, the level of sustainability, the level of working conditions are significantly higher in Germany.” U.S. labor-market fluctuations have downsides for some workers. But the American system has aided in the creation of some of the world’s leading technology firms and supported a decadelong stretch of economic growth, while Europe’s economy has grown in fits and starts. Another challenge to bringing a German-style system to the U.S.: There is a small base of unionized workers to build it on. In the U.S., 12% of U.S. workers were represented by labor unions in 2018, according to the Labor Department. In contrast, 46% of Germans work for employers subject to collective-bargaining agreements negotiated by unions, according to the Institute for Employment Research in Nuremberg. U.S. workers appear to have chosen not to follow in Germany’s footsteps, said Mr. Brossardt of the industry association. “To change traditions, I don’t know if it’s possible if the employees don’t want to take part in a union,” he said.