Do German Works Councils Counter or Foster the Implementation of Digital Technologies?

Abstract

As works councils’ information, consultation and co-determination rights affect the decision process of the management, works councils play a key role in the implementation of digital technologies in establishments. However, previous research focuses on the potential of digital technologies to substitute for labor and its impact on labor market outcomes of workers. This paper adds the role of industrial relations to the existing literature by analyzing the impact of works councils on the implementation of digital technologies. Theoretically, the role of works councils in the digital transformation is ambiguous. Using establishment data from the IAB Establishment Survey of 2016 combined with individual employee data from the Federal Employment Agency and occupational level data about the physical job exposure, empirical evidence indicates an ambivalent position of works councils towards digital technologies. The sole existence of works councils is associated with statistically significant lower equipment levels with digital technologies. However, works councils seem to foster the equipment with digital technologies in those establishments, which employ a high share of workers who are conducting physical demanding job activities. Thus, this study highlights the importance of establishment-level workforce representation for the digital adoption process within Germany.

Digging into the Digital Divide: Workers' Exposure to Digitalization and its Consequences for Individual Employment

“…German employers are restricted in their decision to lay off workers by several hurdles, such as the Employment Protection Act, collective agreements, and institutionalized forms of employee representation as works councils. In Germany, works councils voluntarily elected by an establishment's workforce are an important mediator helping to exploit the benefits of digitization for specific subgroups and mediate between management and workforce in digital technologies' implementation process (Genz et al 2019a). Collective bargaining can play a similar role, but both bargaining coverage and works council coverage have fallen over time in Germany (Oberfichtner and Schnabel 2019).…”

Old wine in new bottles? Revisiting employee participation in Industry 4.0

“…Consequently, and in contrast to the techno‐optimist and socio‐technical perspective, the critical perspective attaches great importance to the role of collective participation as a possible counterforce to managerial prerogative (Boreham et al, 2008). Effective employee representation bodies such as work councils are presented as a precondition for attaining fair outcomes in Industry 4.0 and their roles, strategies and impact are subject of research (Armaroli et al, 2019; Avogara, 2018; Genz et al, 2018; Krzywdzinski, 2017). Other authors stress the possible role the state could play in preventing the detrimental effects of new technology through decisions on collective rights and labour law (Dagnino & Armaroli, 2019; De Stefano, 2018).…”

Inclusivity in the Labor Market

“…©International Monetary Fund. Not for Redistribution and employment, for instance by strengthening incentives for worker training and supporting workforce reorganization (Genz et al, 2019).…”

“…Depending on the specific institutional settings, worker representatives have to be consulted in cases of restructurings, investment or layoffs, thereby reducing labor turnover and layoffs (Hirsch et al, 2010). When combined with industry-level bargaining that prevents rent seeking at the shop-floor, such works councils have been shown to raise firm-level productivity (Hübler and Jirjahn, 2003) and to speed up the introduction of new technologies (Genz et al, 2019). Nevertheless, reaping such benefits from works councils might take time and require building up trust between management and workers representatives before contributing positively to profits and wages (Mueller and Stegmaier, 2017).…”