By Eric Morath
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.
"A model like Sozialpartnerschaft that has grown over decades is
based on many economic, cultural and social aspects," said Solveigh
Hieronimus, a McKinsey & Co. partner in Munich who advises on
labor-market strategies. "It is probably not easily transferable to
other countries."
The German system has two main features that separate it from
the U.S.
One is works councils -- employee representatives who have a say
in company management. In large German firms, these workers hold
half the seats on corporate boards, to which the chief executive
reports. Sen. Elizabeth Warren (D., Mass.), a Democratic
presidential candidate, has proposed legislation that would require
large U.S. companies to have labor representatives on corporate
boards, saying that would hold firms more accountable to employees
and communities where they operate.
Such councils have been criticized by business groups for
drawing out decision making around reorganizations or adoption of
new technology at a time when German companies are facing
competition from Asia and the U.S.
"There's a big contradiction between the needs of the union and
the needs of the company," said Bertram Brossardt, chief executive
of the Bavarian Industry Association.
The other key feature of the German system is sectorwide
contracts. Sen. Bernie Sanders (I., Vt.), another candidate for the
Democratic presidential nomination, has supported this with the aim
of extending the better pay and benefits received by union members
to more U.S. workers.
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.
Write to Eric Morath at eric.morath@wsj.com
(END) Dow Jones Newswires
October 20, 2019 10:14 ET (14:14 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.