A Driving Force of Productivity Development in Germany: Industrial Relations

This section's focus lies in Germany's system of industrial relations and its resulting institutions. It can be argued that the country's industrial relations are based on four pillars—collective bargaining, works councils, opening clauses, and company-level pacts for employment—and that the combination of these four pillars is a driving force of stable development in Germany. More importantly, though, it has been pointed out that the behaviour of the social partners has 'strengthened... adjustment possibilities when facing a slump' (Moller, 2010b: 325). Indeed, Dustmann et al. (2014: 168) argue that it is not the Hartz IV Reforms or the trade balance in the Eurozone that enabled Germany to transform itself from the 'sick man' of Europe to an 'economic superstar', but rather that the 'specific governance structure of the German labour market institutions allowed... [Germany] to react flexibly in a time of extraordinary economic circumstances, and that this distinctive characteristic of its labour market institutions has been the main reason for Germany's economic success over the last decade'. Carlin and Soskice (2009: 68) argue in a similar direction and point out that 'Germany's coordinated economy model, including unions, works councils and blockholder owners' explains the country's strong economic performance since the 1990s. The authors expand their argument by highlighting that the restructuring of the labour system was mainly carried out by private sector agents, that is unions, employers' associations, firms and works councils, while the government only played a minor role. Moreover, the restructuring led to an increased consensus-based decision-making process and a greater alignment of firm and employee interests.