Globalization and why the ‘time is ripe’ for the transformation of German industrial relations

Abstract

ABSTRACT Recent scholarship on globalization and industrial relations supports the full gamut of possibilities: that globalization constrains, strengthens, or has nothing to do with industrialized-country bargaining institutions and outcomes. But most empirical work focuses on direct connections between outcomes and trade and/or direct investment flows, thus discounting the role of threatened exit and competition, or of indirect links involving employers and employer organization and strategy. This paper studies the 2003 campaign for the East–West equalization of conditions in the German metal industry, and finds that globalization has affected the bargaining outcome much more than standard accounts suggest. First, the Eastern EU-enlargement—an element of globalization—created a ‘now or never’ atmosphere that helped to spark the union's initiative. Employers' vehement opposition was frequently clothed in concerns about labor costs, emphasizing losses in international competitiveness and/or jobs to low-wage countries. And employers exercised frequent exit threats that were instrumental in splitting workforces by inducing fears and in instilling an anti-union mood. Finally, the bargaining round inspired large firms to question the central bargaining institution, thereby subordinating social peace to the goal of defeating IG Metall. This and subsequent developments in West Germany point to a transformation of German industrial relations as a partial consequence of economic globalization.