Skip to content

Germany as a Model for American Labor?

by on December 2, 2013

            American history is filled with triumphant stories of workers’ rights being fought for tooth and nail so as to gain their share of production from the years of toiling they endured, and numerous movies have been produced that celebrate the accomplishments of the labor movement that occurred in the earlier parts of the 20th century.  There was a time where these accomplishments were seen as part of the American dream and its ideals, but it seems those times have passed for our country as many of these accomplishments have been taken away piece by piece.  While other countries took our lead to give more power to workers and laborers, and have continued to strengthen our previous ideals, here in America we have decided to reduce the power of laborers and workers and as a result we have diminished the strengths that our country was once idolized for.  It will be shown that an economic ideology had gained strength during the 1960’s and 1970’s, called neo-liberalism, and has taken control of most policy decisions at nearly every level of our government, thus shifting power away from workers and laborers and into capital and profit.  This is an important area of concern for me and many Americans because it hurts the ability of any employee to retain current rights and wages, while also further obtaining more rights and wages.  Therefore a reversal of many neoliberal policies, particularly the diminishing of labor unions, is needed in order to bring about more employee rights and higher wages. 

Neoliberalism is an economic philosophy which is defined as:  “a modern politico-economic theory favoring free trade, privatization, minimal government intervention in business, reduced public expenditure on social services, etc.”  (Collins Dictionary)  It is a school of thought that took roots in the 1960’s and has since gained so much strength that it permeates all levels of government in the U.S.  Since 1985 the U.S. has entered into 14 free trade agreements with other countries that have led to an increase in exports of U.S. goods, which is touted as a positive, but the negative side of the free trade agreements has been staggering.  While it is true that exporting more can increase jobs here, then it must also be true that importing goods would decrease jobs since they displace goods that would otherwise have been purchased in the U.S.  Since these free trade agreements have been enacted the U.S. has been on the deficit side of this trade balance, which means they have been bleeding jobs to other countries for the sake of cheaper goods and fair trade.  But ask yourself this important question, “what is the point of cheaper goods if one no longer has the income from a job to purchase these goods?”  The answer is a net job loss that has been estimated to be near 1 million jobs.  (Economic Policy Institute)  Another negative impact from free trade agreements has been its effect on wages, the average worker displaced from manufacturing went from earning $40,154 to $32,123 when re-employed, a 20% drop. (Brookings Institute) Not only are Americans experiencing a decrease in jobs from trade agreements, even if they do find a job they do not obtain an equal salary in return.

There is also evidence that the decrease in labor unions has a large effect on wages in this country.  In sectors of the economy where labor unions have declined we have seen a decline in labor’s compensation and an increase in corporate profits. (New York Times)  This kind of evidence cannot be ignored and should be addressed as a way to regain compensation back to the working class. As shown in fig1, there is awareness from the political spectrum that there are certain groups that are trying to squash the power of labor unions.  This pressure to destroy unions is coming primarily from conservatives who think that unions are hurting American competitiveness overseas and domestically as well.  What is really being hurt is not American competitiveness, but the share of wages that labor is capturing.  Labors share of national income is at its lowest point since the postwar period.  (Brookings) 

The problem with using unions to regain economic control is problematic because Americans view of labor unions is at a 75 year low, with just 52% of Americans approving of labor unions, down from 75% in 1954, according to Gallup polls. I was also curious to see how true those numbers were and asked my friends, via Facebok, what their take on labor unions were.  And surprising it almost matched Gallups poll exactly at only 55% of respondents relating positive feelings with labor unions.  This indicates that labor unions in the United States may be seeing their power wane, not only from neoliberal agendas, but from their own ability to keep a positive relationship with Americans in general.

There were times in American pop-culture where American labor unions were a celebrated achievement for the working class.  From movies like Norma Rae and Gung Ho, we gained much respect for the plight of union workers and walked away from those movies feeling as if unions were a part of America’s greatness.  When trying to find positive references of unions in movies these days it seems to be almost non-existent, now I am not suggesting Hollywood is to blame for not creating positive propaganda for unions, but perhaps that growing American resentment of unions is perhaps to blame for the lack of positive pop culture references to unions.

Norma Rae is a story that you just don’t hear about anymore and is actually based off of a true story.  In the movie was a woman in South Carolina, working at minimum wage, who after hearing a speech by a New York union organizer gets inspired to do the same at her textile factory.  After threats of being fired and even being arrested she ends up winning and it results in an election to unionize the factory.  The movie Gung Ho is another example where a Japanese company buys out an American car factory and threatens to shut it down if the Americans don’t produce more cars for them.  After weeks and months of the American workers and Japanese management try to figure each other out culturally it results in the workers and management coming to an agreement on how many cars are to be produced and at what wages they will earn at that level of production.  This seems directly in line with an example of how German “workers councils” operates.

In trying to regain more balance towards workers rights and higher wages and a more positive attitude towards unions it is perhaps necessary to create ways in which workers can gain more bargaining power in preventing the decline in their rights and wages, while trying to maintain a positive image.  Germany could be an example of how the United States can implement laws to give more power back to its working class and be a positive force.  In Germany it is required by law that any company with over 2000 workers use a practice called co-determination, where half of a company’s supervisory boards be made up of representatives of workers.  It is a law that has great support amongst Germans and with the involvement of workers in management it creates higher productivity, while better pay and conditions are achieved for employees.  With this the involvement of unions and the use of strikes as a way to get demands met become obsolete.  It is also not only the companies over 2000 employees that have a system like this in Germany, but it is also done at the local firm level with a program called “works councils”.  These are smaller councils, usually not part of a union, that mimic national agreements so there is uniform laws, wages, and regulations throughout.  These councils do the more detailed things like hours a day a business is open, vacation times, what Holidays they are closed, etc.

At the national level labor unions have the responsibility of setting wages and pensions.  They do this by a square mile basis, so that pay is not uniform throughout the country but based on where they live in the country, so that a store in Chicago is not paying the same to someone in a more rural area where the cost of living is cheaper.  That way there is no competition in wages between businesses, wages are set outside of the firm and so there is no friction between management and employees on wages and pensions.

The ironic part about Germany’s success in setting up its labor movement (co-determination) is that it was set up by Americans when they occupied Germany after World War 2 in order to keep watch over businesses who were Hitler supporters.  This is one reason why Germany has a declining welfare system, because most of the gains of welfare are bargained for through wages, pensions and benefits through the unions, works councils, and co-determination boards.  So in essence we subsidize businesses in the U.S. by allowing them to pay people at a standard lower than it costs to afford a basic living.

A big reason for the recent negative attitudes on unions has been their inability to concede when they have to.  While many will blame unions for the downfall of U.S. automobile manufacturing, which is definitely not an accurate statement, they still had to face the reality that because of a drop in sales it did warrant a downsizing of the employment force and perhaps even wages and pensions.  If there had been more employees aiding in making decisions it could have made the transition easier and perhaps made the auto manufacturers more competitive and productive against foreign competitors.  As the American and British auto industry was riddled with work stoppages, the German model just kept on producing and improving its model.

As for public union employees, the issue is not productivity, because teachers are actually increasing productivity through technology, but it is revenue via taxes that are the issue.  While the teachers unions get very bad press at times for not budging on salaries and benefits, there isn’t some high earning CEO to put the blame on for this, so the unions become the scapegoat, even though their wages and benefits have been declining over the years.  Unless drastic changes occur on the state level to increase revenues then the public schools are going to get hammered in the press and with workers rights until the revenue problems are resolved.

To solve the revenue problem for states the federal government needs to step in and take on that financial burden of paying teachers through state subsidies.  If the U.S. were to initiate a policy similar to what Germany has with workers councils for schools in this country it could give the federal government a great way to subsidize schooling based on the needs of each district and each school.  Since the federal government is not revenue dependent they are the only entity that can solve the problem without cutting rights to employees.  In this country we focus on local control of education and it has followed that it also relies on local property taxes to find this system, while many other countries focus more on national spending to fund schools.

The decline in private sector labor unions has been on a steep decline since the early 1960’s.  From 1945 through the mid 1960’s, 30%-35% of non agricultural workers were members of a union.  That number is now below 15% and declining.  At the same time the minimum wage stopped keeping pace with productivity in the early and mid 1960’s.  This is the very thing that labor unions are supposed to prevent so that labor could retain its’ fair share of national income.  Right now there is no ability for an employee to bargain for higher wages or for more benefits; they are at the whim of the employer on whether they value employees over profit.  This correlation is just too precise to be random; the decline in labor unions has, in part, directly caused the decline in wage earnings.

There are also many non-wage type benefits that Americans are missing out on that many in Germany and the rest of Europe get to enjoy.  Most European countries offer universal health care, several weeks of required paid vacation, paid maternity leave, free education, and a few other smaller benefits that are unheard of in this country.  As a country that used to pride itself on being the leader of the free world and for furthering equality, we have certainly lost that track and lag most industrialized nations who took our lead and improved upon it.  We used to be a country that reveled in progress and moving forward, and we have somehow convinced ourselves that going in reverse will somehow bring upon more equality and more opportunities.  We have done this for thirty plus years now and it is showing as inequality has grown to levels we haven’t seen in decades.  It is time we start to propose changes that aren’t the good old American way and to start learning from European countries on how to best model out social institutions.

Annotated Works Cited

Bartlett, Bruce.  “Labor’s declining Share is an International Problem.”  New York Times.  Web.

5. Nov.,         2013.  The article goes over how labor’s share of income is declining and corporate profits are increasing.

Brainard, Leonard., Robert E. Litan, and Nicholas Warren.  “Insuring America’s Workers in a

New Era of Offshoring.”  Brookings  Web.  1 Nov., 2013.  The study gives a great run down on how wages are effected by off shoring jobs.

Facebook.  Survey.  I asked a question of my Facebook friends on how they felt about unions in

the United States.  I asked them to give a one word answer of “negative” or “positive”.

Fernandez, Didimo C., and Martha Otis.  “Hegemony and the U.S. Labor Model.”  Latin

American Perspectives 34 (Jan. 2007): 64-72.  JSTOR.  Web. 10 Nov. 2013.  The paper on the U.S. labor model shows how the free trade agreements the U.S. has, has eliminated millions of jobs, and has put downward pressure on wages for labor.

Geoghegan, Thomas.  Were you Born on the Wrong Continent?  New York: The New Press,

2011.  Print.  Europe has many more rights and better conditions for employees to work in.  While enjoying more free time and possibly better wages.  The book asks the case if we would be happier if we had more free time.

“Koch Brothers.” Cartoon. Web. 7 Nov. 2013.  The cartoon shows a

giant shoe with Koch Brothers written on it, and it is about to squash a bunch of people who represent the California Labor Unions.

“Neoliberalism.”  Collins Web. 1 Nov. 2013.  The only other source that had a

definition was Wikipedia, so I was stuck with using this as the definition which fits what most economists believe is neoliberalism.

Scott, Robert E.  “Costly Trade with China.”  Economic Policy Institute.  Web.  1 Nov., 2013.

The study shows how we have lost millions of jobs because of trade agreements with China.

  1. Very good blog you have here but I was wondering if you knew of any discussion boards that cover the same topics talked about here? I’d really love to be a part of group where I can get feed-back from other experienced people that share the same interest. If you have any suggestions, please let me know. Appreciate it!

Trackbacks & Pingbacks

  1. Must read links for 12/6/13 | Heretical Druthers

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google+ photo

You are commenting using your Google+ account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )


Connecting to %s

%d bloggers like this: