Labor Relations in the U .S. and Germany

Robert Coe

Robert Coe is a full-time intern at AICGS during Spring 2014, where his duties include writing the AICGS Notizen Daily, assisting with the contact database, summarizing AICGS events, and contributing to the AICGS Notizen Blog. He is particularly interested in the Foreign and Domestic Policy Program at AICGS.

Mr. Coe double majored in Political Science and German Linguistics at Michigan State University, recently graduating with a bachelor’s degree in the fall of 2013. Mr. Coe spent his junior year studying abroad in Freiburg im Breisgau, taking classes at Albert-Ludwigs Universität. A bilingual speaker, he hopes to channel his education into the field of international relations.

The recent vote by workers in a Volkswagen plant in Chattanooga, Tennessee to decline representation by the United Auto Workers union (UAW) highlights the differences in labor policies between the United States and Germany. With American union membership on the decline, this was the first time that the UAW attempted to represent workers in a foreign company in over a decade, and its failure sets a precedent for the future of unions in the American South.

What Happened in Chattanooga?

Looking to its successes in Germany and elsewhere, Volkswagen was in favor of creating a German-style “works council” in Chattanooga that, due to American labor laws, would require the UAW to represent workers’ interests. This was met with mixed reviews. In particular, workers worried that voting for union representation would scare away production of a new model of SUV, despite VW’s assurances that the UAW vote would have no effect on the decision to manufacture the SUV in Chattanooga. Politics also played a role in the outcome. In the politically conservative South, several Tennessee government officials, with the help of anti-union action committees, were able to lead a successful campaign against the union. Some lawmakers warned that VW might not receive new tax incentives to expand in the state if the UAW was successful at the VW plant. Furthermore, many workers were reportedly happy with current wages, felt that the company treated them well, and did not want the union to damage or muddy that dynamic. The vote has left Volkswagen still looking for a way to create a works council, even without the UAW.

To understand how this situation came to be—i.e., industrialists pushing for union integration and workers voting against it—the differences between labor laws in Germany and the United States must be highlighted.

U.S. Labor Unions vs. German Co-Determination

Franklin Delano Roosevelt’s New Deal included provisions, specifically the Wagner Act of 1935, that guaranteed the rights of unions to organize as well as the right to collective bargaining, and unions saw a rise in power and influence as a result. Specifically, unions were able to compel companies to only employ dues-paying union members. The Taft-Hartley Act of 1947, however, introduced the concept of “right-to-work.” This new legislation meant that employment could not be terminated simply because a worker did not join the union or pay union dues. The decision to adopt the practice of “right-to-work” was left to the individual states. Since then, twenty-four states—including nearly all the Southern states—have adopted right-to-work laws. As a result, private sector unions have seen a steady decline in America, with union membership peaking in the 1950s. According to the U.S. Department of Labor, 11.3 percent of workers in the combined public and private sectors belonged to unions in 2013. In 1983, it was 20.1 percent.

German labor unions are stronger than their U.S. counterparts. Following a system of co-determination (Mitbestimmung), German labor unions are cooperative by nature, intended to facilitate conflict resolution between employee and employer, and provide a more “democratic” way to run a company. Labor representatives are included in the decision-making process alongside shareholders. Workers form “works councils” on the floor level, which then choose labor representatives to put forth their interests at a managerial level. The representation of workers’ interests goes all the way up the chain of command. Such a system is beneficial for employees, and it can also be argued to be beneficial for employers, as it provides a venue for avoiding confrontation or strikes. The laws in place—specifically the Works Council Constitution Act—force collaboration between employer and employee, with the result that about 26 percent of German workers are trade union members.

Labor relations are encountering an increasingly globalized marketplace, with profits and jobs on the line. The experiences of a German automobile manufacturer in the U.S. could well shape labor relations in the future.