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Wage Determination in the Shadow of the Law: The Case of Works Councilors in Germany

Author

Listed:
  • Goerke, Laszlo

    (IAAEU, University of Trier)

  • Pannenberg, Markus

    (Bielefeld University of Applied Sciences)

Abstract
The German law on co-determination at the plant level (Betriebsverfassungsgesetz) stipulates that works councilors are neither to be financially rewarded nor penalized for their activities. This regulation contrasts with publicized instances of excessive payments. The divergence has sparked a debate about the need to reform the law. This paper provides representative evidence on wage payments to works councilors for the period 2001 to 2015. We find wage premia of 2% to 6% in OLS-specifications, which are more pronounced for long-term works councilors. Moreover, we observe no wage premia in linear fixed-effects panel data specifications, suggesting that the OLS-results capture the effect of selection into works councillorship. We obtain no evidence for a delayed compensation or a special treatment of works councilors released from work. Hence, our results indicate that payments to works councilors are broadly in line with legal regulations.

Suggested Citation

  • Goerke, Laszlo & Pannenberg, Markus, 2021. "Wage Determination in the Shadow of the Law: The Case of Works Councilors in Germany," IZA Discussion Papers 14143, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp14143
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    References listed on IDEAS

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    Cited by:

    1. Goerke, Laszlo & Huang, Yue, 2022. "Job satisfaction and trade union membership in Germany," Labour Economics, Elsevier, vol. 78(C).

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    More about this item

    Keywords

    labor law; wages; works councils; socio-economic panel (SOEP);
    All these keywords.

    JEL classification:

    • J30 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - General
    • J51 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Trade Unions: Objectives, Structure, and Effects
    • J53 - Labor and Demographic Economics - - Labor-Management Relations, Trade Unions, and Collective Bargaining - - - Labor-Management Relations; Industrial Jurisprudence
    • J83 - Labor and Demographic Economics - - Labor Standards - - - Workers' Rights
    • K31 - Law and Economics - - Other Substantive Areas of Law - - - Labor Law

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