In the Beginning, There Was Social Policy: Developments in Social Policy in the European Union from 1972 through 2008

This paper argues that the evolution of social policy – vulgo: labor market mandates – in the European Union seems to follow a set path. Intervals of activism have been followed by challenges and checks to its development, but Treaty innovations (inter al.) have provided the impetus for further activism. The classic and first case in point was the Single European Act (1976), which presaged a new bout of legislation by widening the reach of qualified majority voting. The next was Maastricht, or the Treaty on European Union (1991) and the Agreement on Social Policy, which for the first time established a firm basis for social policy. An intermediate but instructive step was passage of the Treaty of Amsterdam (1997) which formally incorporated the latter into the main body of the treaty rather than leaving it as a Protocol appended to the treaty, The most recent instance is the Treaty Establishing a Constitution for Europe, which was to morph into the Reform (or Lisbon) Treaty of December 2007. This agreement portends more fundamental reforms for two reasons. First, it implies new legislation in the area of labor relations (issues such as pay determination, the rights to strike/lockout, and the right of association) previously expressly excluded from social policy. Second, it will test some member states applying European law, which means that theoretical opt outs may be just that. And, if history is any guide, there will be subsequent consolidation to bring the labor standards set under legislation into line with European Court of Justice decisions and a further ratcheting-up of standards.

The Performance Effects of Unions. Codetermination, and Employee Involvement: Comparing the United States and Germany (With an Addendum on the United Kingdom)

Drawing on evidence from the United States and Germany, this paper offers a survey of the effects of worker representation (in unions and works councils) and innovative work practices on firm performance. The interaction between worker representation and high performance work practices provides a practical means of peering inside the black box of the collective voice model, even if there is as yet no well-determined hierarchy for productivity performance and certainly no blue-print for the future of unions. An addendum sketches the British evidence.worker representation, unions, codetermination, employee involvement mechanisms, innovative work practices, firm/establishment performance

Unemployment Duration: Competing and Defective Risks

This paper examines the determinants of unemployment duration in the framework of a competing risks model, where the destination states are employment and inactivity. The major innovation is the use of a split-population approach to accommodate the presence of defective risks in the context of the competing risks model. Certain of the regressors that affect the conditional hazards are allowed to influence defective risks. Unobserved individual heterogeneity among the susceptible populations is also controlled for. Access to unemployment benefits and age are accorded special emphasis because of their influence on defective risks and escape rates.

How Does the Unemployment Insurance System Shape the Time Profile of Jobless Duration?

This paper examines the effects of unemployment insurance on escape rates from unemployment using data from the 1998 Displaced Worker Survey. Transitions from unemployment to employment are modeled using a flexible representation of the baseline hazard function and allowing for discrete changes through time in the effects of unemployment insurance benefits, as well as those of the other covariates. The impact of unemployment insurance is also modeled using a time-varying benefits measure, namely, time to exhaustion of benefits. Potential biases stemming from reverse causation and unobserved individual heterogeneity are accommodated. Both approaches render transparent the major disincentive effects of access to benefits on re-employment rates while also providing evidence of time-varying effects of other regressors.

Are Good Industrial Relations Good for the Economy?

Using international data, we investigate whether the quality of industrial relations matters for the macro economy. We measure industrial relations inversely by strikes Ð which proxy we cross-check with an industrial relations reputation indicator Ð and our macro performance indicator is the unemployment rate. Independent of the role of other institutions, good industrial relations do seem to matter: greater strike volume is associated with higher unemployment. But these results apply in cross section. Holding country effects constant, the sign of the strikes coefficient is abruptly reversed. Although it does not seem to be the case that the line of causation runs from unemployment to strikes once we control for the endogeneity of strikes, it is also the case that support for the strikes proxy for industrial relations quality is much eroded.strikes, industrial relations quality, unemployment, labor market institutions, cross-country data

Worker Directors: A German Product that Didn't Export?

Despite its lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU.codetermination, board-level employee representation, firm performance, Germany

Worker Directors: A German Product that Didn’t Export?

Despite its seeming lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has thus far held up fairly well. We recount the theoretical arguments for and against this form of codetermination, and survey the evolving empirical evidence as to its economic impact. Even if theory and the more recent empirical findings hold out the prospect that the apparatus of good corporate governance might include employee representation on company boards, caveats attach to the extent of representation and the composition of the worker side. But even if the entity has performed better than its external reputation might indicate, it is clearly in the process of adapting to change. In particular, the availability of alternative forms of corporate governance will increasingly shape the German institution.codetermination, worker directors, board-level employee representation, firm performance, legal arbitrage, Germany

Worker Directors: A German Product that Didn’t Export?

Despite its lack of attractiveness to other countries, the German system of quasi-parity codetermination at company level has held up remarkably well. We recount the theoretical arguments for and against codetermination and survey the empirical evidence on the effects of the institution, tracing the three phases of a still sparse literature. Recent findings hold out the prospect that good corporate governance might include employee representation by virtue of the monitoring function and the reduction in agency costs, while yet cautioning that the optimal level of representation is likely below parity. And although the German system may be better than its reputation among foreigners, it might have to adapt to globalization and the availability of alternative forms of corporate governance in the EU.codetermination, board-level employee representation, firm performance, Germany

What Have We Learned About The Employment Effects of Severance Pay? Further Iterations of Lazear et al.

In this study we examine the contribution of severance pay to employment and unemployment development using data on industrialized OECD countries. Our starting point is Lazear’s (1990) dictum that severance payment requirements adversely impact the labor market. We extend his sample period and add to his parsimonious specification a variety of fixed and time-varying labor market institutions. While the positive effect of severance pay on unemployment garners some support, there is no real indication of adverse effects for (the three) other employment outcomes identified here. Moreover, with the possible exception of collective bargaining coordination, the role of institutions is also more muted than suggested in the literature.