What triggers the establishment of a works council?

Abstract

This paper presents the first survey evidence about the agent and associated event which triggers the establishment of a works council. We argue that the request of risk protection is a relevant trigger mechanism and show that an organisational shock causes the establishing of a works council. We argue that an organisational shock increases uncertainty of the workforce based on information asymmetries about the security of the workplaces. Furthermore, we show that the workforce alone calls for election in around two third of all cases and in the other third, the management was involved in the establishment. Here, the management values the expected productivity enhancement more than the potential rent redistribution.JEL Classification: J53, J32, J83, M54

Reciprocity and Workers’ Tastes for Representation

“…Theoretical models stress that organizations of worker representation protect workers' interest by monitoring the employer (Askildsen et al 2006, Freeman and Lazear 1995, Smith 1991 and punishing employer opportunism (Hogan 2001). Empirical research confirms that works councils are more likely to be introduced by the workforce if the employer has a strong incentive to behave opportunistically (Jirjahn 2009, Kraft and Lang 2008, Mohrenweiser et al 2011. There is also evidence that works councils play a specific role in sustaining cooperation and performance in such a situation (Jirjahn 2011, Stettes 2010 Findings by Jirjahn and Smith (2006) suggest that those establishments are more likely to use forms of direct worker participation in order to build cooperative industrial relations.…”

“…Second, risk tolerance is controlled for. Works councils may also be an 14 institution that protects workers against the risk associated with economic and organizational change (Mohrenweiser et al 2011). This suggests that risk averse workers should be more interested in works councils.…”

Non-union worker representation, foreign owners, and the performance of establishments

“…Recent studies indicate that works councils are more likely to be adopted in establishments facing a poor economic situation (Jirjahn, 2009(Jirjahn, , 2010Mohrenweiser et al, 2012;Mueller, 2012). In such situation, councils may help workers protect the quasi rents they have created by their efforts or human capital investments.…”

Active Owners and the Failure of Newly Adopted Works Councils

“…Moreover, we control for a reorganization of the establishment. The reorganization of the establishment may entail a threat to jobs leading workers to introduce a council (Mohrenweiser et al 2012). …”

“…Previous econometric studies have examined the determinants of works council incidence and the determinants of changes in works council status (e.g., Addison et al 1997, Addison et al 2013, Jirjahn 2003, Jirjahn 2009, Mohrenweiser et al 2012Oberfichtner 2013). This study is the first to investigate the survival or failure of newly adopted works councils.…”