Skill-Biased Liberalization: Germany’s Transition to the Knowledge Economy

Abstract

This article conceptualizes the evolution of the German political economy as the codevelopment of technological and institutional change. The notion of skill-biased liberalization is introduced to capture this process and contrasted with the two dominant theoretical frameworks employed in contemporary comparative political economy scholarship—dualization and liberalization. Integrating theories from labor economics, the article argues that the increasing centrality of high skills complementary in production to information and communications technology has weakened the traditional complementarity among specific skills, regulated industrial relations, and generous social protection in core sectors. The liberalization of industrial relations and social protection is shown in fact to be instrumental for high-end exporting firms to concentrate wages and benefits on increasingly important high-skilled workers. Strong evidence based on descriptive statistics, union and industry documents, and twenty-one elite interviews is found in support of the article’s alternative perspective.

Collective regulation and the future of work in the digital economy: Insights from comparative employment relations

“…Exclusive reliance on markets for education or employer investments is not only inefficient but also has distributive consequences, shifting risk and cost onto employees. While employers may increasingly coordinate with states to meet their training and skills needs (Diessner et al, 2022), these are likely to have a short-term time horizon and deepen rather than address social inequalities (Carstensen and Ibsen, 2021).…”

“…Several studies have focussed on union responses to the challenge described by Diessner et al (2022) above: the growing importance of white-collar knowledge workers in both the growing tech industries of national economies and the production strategies of traditional firms. A study by Haipeter (2016: p. 304) examined the initiatives of worker representatives in German manufacturing firms to ‘attract, mobilise, and organize white-collar workers’ as their numbers grow relative to blue-collar workers.…”

“…A growing number of studies suggest that technological change is often a tool for employers to standardize work or escape existing national and industry-level institutions, even in coordinated economies. Diessner et al (2022) describe the process of 'skill-biased liberalization' in Germany as high-skilled workers with tertiary science, technology, engineering, and mathematicsbased education become more central to firms' production strategies, particularly in advanced manufacturing. Employers seek to cut labour costs for other groups of production or low-skilled workers to fund wage and nonwage benefit increases for highly skilled workers who complement their information and communication technology investments.…”

The North and South Divide: A Drag on the Italian Economy

“…In Germany's industrial reform, they have weakened the corporate structure and strengthened corporate cooperation, focusing on the development of highly skilled functions and the introduction of ICP to improve efficiency [19]. As a large number of jobs are replaced by computers and machinery, Germany will focus on developing workers who can make choices with interdisciplinary thinking skills [20]. Additionally, for enterprise reform, Germany has chosen a strong work system to ensure the efficiency of the company's operation, which can also be learned by Italy [21].…”

Social inclusion and collective skill formation systems: policy and politics

“…As structural conditions changed, however, so did the ability of collective skill formation systems to perform a socially inclusive function. Two twin trends stood out in this respect: (i) the expansion of service sector employment vis-à-vis the manufacturing sector (Iversen and Wren, 1998;Wren, 2013) and (ii) the rise of knowledge economies (Diessner et al, 2021;Durazzi, 2019). The former took a toll on the sheer quantity of available apprenticeships, the latter heightened the skills requirements of apprenticeship seekers.…”