Academic journal article The Economic and Labour Relations Review : ELRR

Trade Unionists in Parliament and Macroeconomic Performance: Evidence from Germany

Academic journal article The Economic and Labour Relations Review : ELRR

Trade Unionists in Parliament and Macroeconomic Performance: Evidence from Germany

Article excerpt

1. Introduction

The primary motive of trade unions is to achieve the common goals of their members, such as job security, good working conditions and high salaries. Unions try to reach these goals by negotiating wages, worker benefits, working rules and complaint procedures, as well as workplace safety issues, collectively on the plant, firm, industry or national level. Obviously, these negotiations are the primary instrument unions employ to reach their goals. However, workers are not solely interested in nominal wages or working conditions; they are also concerned with inflation and real wages, net wages after taxation, or the benefits of the welfare state (Hyman and Gumbrell-McCormick 2010: 317). In many countries, unions therefore do not restrain their activities to negotiating nominal wages or working conditions, but also take part in general discussion on economic and social issues. Since the rules which apply to the labour market as a whole and the role of unions in this market are shaped at the legislative level, unionists also have an incentive to run for political office. In many countries around the globe, unionists are members of parliament or hold high political positions, such as Norbert Blum (German Minister of Labour 1982-98), Rudolf Hundstorfer (Austrian Minister of Labour since 2008), Robert Hawke (Australian Prime Minister 1983-1991), Greg Combet (Australian Minister for Climate Change and Energy Efficiency since 2007) and Bill Shorten (Australian Minister for Superannuation and Financial Services since 2010). Political lobbying might thus be considered as an additional channel of influence of trade unions.

It is an intriguing but also unresolved question whether, or under which circumstances, the behaviour of trade unions has an influence on macroeconomic performance. Basically, the answer to this question depends on the unions' wage policy, which is itself dependent on a multitude of factors, such as, for example, the degree of unionisation (Nickell, Nunziata and Ochel 2005), the centralisation of the wage negotiation process (Bruno and Sachs 1985; Calmfors and Drifill 1988), the extent of product market competitiveness (McHugh 2002), or the relative bargaining power of centralised and decentralised unions (McHugh 2002).

Various empirical studies have analysed whether union power, typically measured by the degree of unionisation (union density), has an effect on macroeconomic outcomes, thereby focusing on the direct effect through the bargaining process. As an example, Lye and McDonald (2006) find union power, measured by the degree of unionisation of workers, to have had a significant effect on unemployment in Australia in the 1970s. Similarly, Nickell, Nunziata and Ochel (2005) find unemployment in 20 OECD countries to depend on labour market institutions, among them the degree of unionisation. On the other hand, Bassanini and Duval (2009) do not find union power to influence unemployment in a sample of 20 OECD countries for the period 1982-2003. The relevance of the indirect political channel through which unionists might try to reach their goals has up to now primarily been discussed on the theoretical and anecdotal level (see, for example, Hyman and Gumbrell-McCormick 2010). In a recent and quite extensive study for Germany, Honigsberger (2008) concludes that the influence of German trade unions in parliament is quite limited. He therefore denies that unionised German members of parliament could be seen as a parliamentary arm of the unions. However, even Honigsberger's study delivers no convincing empirical evidence on this issue.

This article aims at contributing to fill this gap in the empirical literature using the example of Germany. After discussing the role of unions in general along the paradigmatic lines developed by Freeman and Medoff (1984), we summarise and discuss the study by Honigsberger (2008). Employing a newly constructed dataset for Germany, we then study whether the percentage of unionised members of parliament has an influence on macroeconomic performance. …

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