Analyse the pressures that have confronted the 'German model' of industrial relations in the past 20 years. Has the model been weakened?

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CB501. Industrial Relations and Human Resource Management

Analyse the pressures that have confronted the ‘German model’ of industrial relations in the past 20 years. Has the model been weakened?.

The German industrial relations system has been called the  “social partnership model”  because of the cooperative style and the strong consensus orientation.

However during the 1980s and 1990s the centrally co- coordinated neo-corporatist German model of IR is in a state of Flux. The German model of IR has become well known for the strength of its inclusive unions, the extensive coverage of its sectoral collective bargaining system, and the dual structure of broad employee rights exercised through work’s councils and supervisory boards. The system of industry wide bargaining has come under increasing pressure since 1990, in part because of the challenges posed by German unification. Throughout the 1970s and 1980s, it was frequently regarded as a model case for upmarket restructuring and consensual, long term high trust relationships between capital and labour. The tightly integrated institutional infrastructure characterised by a high degree of regulations and encompassing institutions which imposed a uniform set of institutional constraints on companies. At the same time it provided an incentive structure that forced and enabled companies to compete on a high skills/high productivity/ high value added basis. H.Tuselmann & A.Heise (2000).

 

Up until the early 1990s, the German model of industrial relations impressed many observers by its sturdiness, its potential to provide social cohesion, business competitiveness, a low record of industrial disputes and a high level of training. The German model was based on a complex and differentiated structure of institutions which were mutually supportive and functionally beneficial for all actors of the economy (Hassel and Schulten, 1998). However, in the 1990’s the German model of labour relations, and especially the sectoral system of collective bargaining has come under a great deal of  pressure. Together with heightened international competition, global shifts in production, the problems of German unification and high unemployment the general consensus regarding the advantages of the current system has weakened. Employers demand for more decentralisation and more differentiation in the sectoral agreements, in order to provide a greater scope for company level flexibility and company specific solutions, have led to erosion tendencies  in the German model.

Today, at the end of the 1990s, in spite of the virtues of the German model the pressures on the system to change are overwhelming. Employers increasingly resign from the employers’ confederation or undercut- often illegally- terms and conditions provided by collective agreements. Trade unions strength is declining rapidly. In West Germany as elsewhere in the 1970’s, could be regarded as a decade of the unions. Now it seems that, in turn, the 1980s became the decade of the employers. With the coming of the conservative liberal government, the trade unions have lost their partner in the political arena. With the rise of unemployment their bargaining strength has been weakened. However, their status as a party to collective bargaining has up to now been unchallenged due to the high degree of centralisation and their monopoly like legal privileges in collective bargaining and in calling strikes.

The coverage of collective agreements is shrinking and the heterogeneity of  labour market conditions is increasing. Vocational training is in a crisis due to the reluctance of companies to take on trainees. It seems that an economically highly successful model which enabled a functional integration of social justice and economic competitiveness is coming to the verge of imminent fundamental change. There is now increasing doubt whether the virtuous relationship of workplace co-operation and high quality production can persist.  Many observers argue that institutional inflexibility has been at least in part responsible, and attempts by governments and employers to initiate significant changes in industrial relation practices in turn provoked a much more tenser and more volatile climate than in previous decades.

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The collective bargaining system, which regulates a vast and complex range of issues affecting pay and working conditions is dominated by centrally co-ordinated multi-employer bargaining, conducted primarily at sectoral/ industry level, but is - in certain industries - also quite frequent at national or company level Following the German unification in 1990, the pattern of industry bargaining was extended to the territories of the old German Democratic Republic (East Germany), which had joined the Federal Republic. Collective agreements were negotiated in the two years or so following unification which provided for gradual convergence on pay over a five or ...

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