1.25 business management
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Lecture6_HRMG3203_Germany_.pptxGermany
Convergence Vs Divergence?
Godspower Onah
Lecturer, International HRM
Leicester Business School, DMU
HRMG 3203
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Learning Outcomes
By the end of the lecture students should be able to:
•To understand continuity and changes in the employment system in Germany
•To explore the German model from the perspective of convergence and divergence
Germany: Essential Reading
Beardwell, J. and Thompson, A. (2017) Human Resource Management: A Contemporary Approach. Harlow: Pearson Education Limited. Chapter 15 Comparative HRM in the context of financialisation, financial crisis and Brexit – see section on Germany
Bamber, G., Lansbury, R., Wailes, N. and Wright, C. (eds.) (2016) International and Comparative Employment Relations. London: Sage. Chapter 8 Employment Relations in Germany
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Germany: Cultural Approaches
Germany – Hofstede Insights:
Long-term orientation: 83%
Uncertainty Avoidance: 65%
Individualism vs Collectivism?
How does Germany compare to the USA?
Does national culture provide a sufficient explanation of convergence or divergence?
Let’s look closely at institutional approaches to Germany: convergence and divergence?
Varieties of Capitalism (VoC)
| LME | CME e.g Germany | |
| Corporate governance | Shareholders and ‘Outsiders’ | Stakeholders and ‘Insiders’ |
| Role of the state | Weak | Strong – supports social dialogue |
| Industrial Relations | Weak trade unions and employer associations adversarial relationships | Strong trade unions and employer associations collaborative relationships |
| Vocational education and training (VET) | Weak, firm-specific, general education | Strong, sector-specific, collaborative |
| Inter firm relations | Competitive, arm’s- length relationships | Cooperative relationships |
Comparative HRM: Models
Varities of Capitalism: CME vs LME
Amable (2003): 5 types of capitalism:
Market-based model (Anglo-Saxon)
Social-democratic model (Nordic: e.g. Sweden)
Continental European model (e.g. Germany, Belgium)
Mediterranean model (e.g. Italy, Spain, Greece)
Asian model (Japan, Korea)
Ebbinghaus (1999): 4 European Socio-Economic Models; European in comparison to Japan and US
Anglo-Saxon, Nordic, Centre, Southern
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Institutional framework
Enabling State: Publicly enabled associations
Socially regulated Markets
Firms as social institutions
V E Training
Social partnership
Coordinated market economy
Corporate governance: Firms as social institutions
Stakeholder principle
Shares and firms do not often change hand
Networks of banks and companies: concentrated ownership
Long-term bank credit; banks monitor firms
Fewer hostile takeovers than in market-based model
Focus on long-term growth and investment in research and HR that lead to high productivity and supports high wages and good working conditions
Lower rate of hostile takeovers
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Corporate governance: Firms as social institutions
Corporate governance Employment Relations
Employers willing to balance ‘profit with social justice’
Negotiated decisions between capital and labour
Collective bargaining at national & industry level
Co-determination at workplace: labour valued and up-skilled, rather than ’hire and fire’
Change: Shift to shareholder principle and effect on employment relations?
Lower rate of hostile takeovers
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Vocational education and training system (VET)
Broad based occupational training e.g., engineer, baker
3-year apprenticeship: classroom and practical training in firms
Funded by state, employers and trainees (accept low wages)
Competence over a wide range of jobs, transferable skills (not firm specific skills)
Basis of workplace cooperation:
Highly regarded
Workers, supervisors, managers all trained
Respect for superior’s skills
State: Enabling
Less intervention by the state: neither statist (France) nor liberal-market (US)
System of legal regulation of employment upheld by the state and enforced through courts
State support to civil society institutions with statutory rights, but no direct intervention
Depoliticised unions, employer associations: Allows them to develop long-term and stable relationships
Negotiate with the state on economic and social policies
Support to economy: high investment in research and social protection
Labour market regulation
Workers and employers regulate with little direct intervention by state
Laws on collective agreements; and co-determination/involvement: works councils (>5 employees); worker representation on supervisory boards (>500)
Stronger institutional regulation with less flex for HR managers (e.g., working hours, adjustments)
Dual structure
Collective bargaining
between employer associations and trade unions organised by industry/region (basic terms of employment, e.g., hours)
- legally binding, and ‘social partnership’ traditionally
Co-determination at the workplace: works council (employee rep)
Cooperation: right of information, consultation and co-determination
2 are separate legal entities, with distinct functions and areas, but overlap
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Encompassing organisations
More inclusive wage-setting than in Anglo-Saxon model:
Unions and employers’ associations represent not just their own members
Works councils represent all in workplace
Collective agreements: coverage rates higher than union density
e.g. coverage estimated at 59% in West Germany in 2015; (Ellguth & Kohaut, 2015), but around 90% in 1990s
Union density at ca. 18% in 2010s (Eurofound, 2017: online), down from ca. 35% in 1990s
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Capital Labour Relationship: Social partnership
Labour management cooperation supported by the state
3-way partnership between employers, trade unions and the state at national level on social and economic policy (adjustment to market pressure through wage restraint, working hours, etc.)
Regional level: unions as mediators between employers and employees
Workplace level: works councils cooperate
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Overall: Socially regulated markets
Competitive capitalist markets but organised and regulated by variety of institutions (unlike US)
Social welfare state: health, education and social insurance not governed by market
Small firms protected from the competition of large ones
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Economic culture
Traditional preference for quality
High saving rate (high uncertainty avoidance, cf. Hofstede)
Long-term, not short-term
Security, not speculation
Redistributive tax system
Emphasis on knowledge and skill
Vocational training systems
Dual system: state ‘off site’; firms ‘on job’; less pay for trainees
Work organisation
Competitive advantage comes from: Quality-competitive, not price-competitive
Continuous up gradation of products
And of skills
High trust: cooperation and works councils
High autonomy/involvement
Flexible working across production process
Higher wages
Lower levels of control than in market—based model
Thus, high quality, high technology engineering market based on high R&D (cf. Sorge & Streeck, 2016: diversified quality production)
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Changes in employment system
From stakeholder to shareholder principle
Ownership still concentrated and codetermination still strong (compared to US Anglo-Saxon)
Hostile takeovers not as common as in market-based
Changes to employment law to increase labour market flexibility
Gradual and limited; dismissal still a last resort
Non-interventionist state, e.g., limited minimum wages
Declining wage equality: rise of low-wage work sector
Change in Employment Relations: Still a CME?
Weakening associations and flexible labour markets
Decentralisation of collective bargaining: company level
Loopholes: employers exit collective bargaining agreements and associations (cf. Almond et al., 2005 on US MNC in Germany; Doellgast, 2009 in telcoms)
US < Germany < France (exclusive wage setting – low-wage)
Inclusive e.g., in France and Austria (state/extension of cb)
Increasing importance of works councils for flexible adjustments (e.g., hours): Codetermination rights strong
TUs retain considerable influence in some companies and continued VET (e.g., Doellgast, 2009 Deutsche Telekom)
Possibilities…3 views
Move towards shareholder capitalism and unregulated liberal markets: firms and employment relations driven by market with unions, works councils and cb losing influence
Continued divergence: employers continue to rely on cooperation; importance of co-determination for flexible adjustment and thus of survival of model
Dualisation: Social partnership only in core industries and for core workers (e.g., Marsden, 2015) - But weakening (Doellgast, 2009; low wage share higher than UK at 23%)
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Alternative: Dualisation
Convergence at industry level
Industry-differences and occupation/wage group
Within economy: high-trust model for core workers, and one low-trust model for peripheral workers (e.g., engineers vs. call centre workers)
Within countries: larger variety of employment systems and HR hybridisation
Across countries: convergence in peripheral industries and precarious work
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Alternative Institutions: Dualisation
Increasing convergence in spread of informality and precarious work in ‘knowledge and service economies’ (gig economy, agency, temps) and in occupations/activities not regarded as core strategic (e.g., call centres in bank for customer support; nursing/teaching assistants)
Power of MNCs and ‘loopholes’/exit options in institutions
Affects CMEs and Mediterranean countries the strongest (Rueda, 2014), but also spread in Asia, e.g., China
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US MNCs in Germany (Almond & Ferner 2006): Drivers of dualisation?
Political influence of US
Post-war; Marshall plan
US MNCs as HRM ‘innovators’ (Dominance)
GM, Ford, IBM practices
Challenge institutions, e.g., from employers' associations to company level bargaining
Changes in employment practices
US MNCs opt out of sector-level collective bargaining (exit options/loopholes and labour market dualisation)
Performance or profit related pay
But, MNCs also adapt, e.g., strongest training in Germany with some adaptation of works councils (cf. S2)
VoC: CME employers have stake in national institutions
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German MNCs abroad
Weaker home country/country-of-origin effect of German MNCs abroad (compared to US MNCs), convergence
Access to cheaper labour and weaker regulation, e.g., Air Berlin UK listed
Complementarity with German institutions, esp. training, missing to implement high-quality production systems and HR models, e.g., failures of BMW-Rover
Access to best practice in Anglo-Saxon, e.g., Airbus-EADS, VW, BMW
Hybrids, e.g., Mercedes in US export training
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Conclusion
To understand continuity and changes in the employment system in Germany
• To explore the German model from the perspective of convergence and divergence
