ICLE on German sectoral bargaining

Wall Street Journal  – An ICLE report on the German system of sectoral bargaining was cited in a column in The Wall Street Journal about California’s plan to adopt similar rules for the fast-food sector. You can read full piece here.

Many do. German employees and employers are voting with their feet and running away from sectoral bargaining. According to a recent report from the International Center for Law and Economics (which was supported by a German law firm affiliated with Mr. Lotito’s employer), the percentage of employees covered by a sectoral agreement in western and eastern Germany has plummeted over the past quarter-century by 25 and 24 percentage points, respectively.

The ICLE authors detail some of the reasons for the contraction: Sectoral agreements are inflexible; they saddle companies with complex work rules; and they require “uniform compensation” regardless of an employee’s work performance. This means that employees and employers are avoiding union-negotiated agreements in Germany for the same reasons they are avoiding these agreements in the U.S.