Employment relationship in the US and Germany

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An employment relation is the link between the employer and employee when work is done under the supervision and direction of the employer and the employee gets paid for the work done. These relations are governed by terms and conditions that are spelled out in agreements, both legal and collective (Boxall & Purcell, 2011). The relation further has the rights and responsibilities that both the employer and the employees are expected to fulfill. This paper will look will compare employment relations in Germany with the US by looking at the main characteristics in both countries, the role of unions, changes in employment relations and other challenges.


In Germany, the key strength of their employment relations is inclusiveness that marked by change negotiations through multiple stakeholders. This inclusiveness has been brought about by the government, and the employment community. The second aspect of the Germany employment relation is strong and stable institutional infrastructure known as framework condition that is provided by the government (Jürgens & Krzywdzinski, 2009: 4). Within these frameworks, business is offered incentives that motivate them to adopt collaborative relationships both at micro and macro levels. The third feature is the ability of the business community to exploit the stability created by the social market economy through partnership-oriented labor movements and the government offered support framework.

The harnessing of work and manager’s skills based on functional specialties and technical qualification is the fourth feature of the Germany employment relation. The fifth characteristic of the Germany labor market is the countries labor union role in technological change that is meant to enhance productivity and skill development (Boxall & Purcell, 2011). Also, the unions work closely with the various work councils in negotiating terms for specific companies and allow for wage modification where economic situations demand such modification. The sixth characteristic is the several levels of negotiations that are interconnected (Bamber, Lansbury, & Wailes, 2004). The Germany collective bargaining contracts are negotiated both at the regional and industry levels. The regional level agreements that spell out wage, working hours and conditions are used to as the baseline for further negations with individual companies. The difference in approaches used by various labor union in Germany makes the seventh characteristic of their employment relations. Other unions have been said to be more aggressive than others. However, the overall employment relation in Germany is considered to be constructive and cooperative.

The United States

The first and main character of the United States employment relationship is freedom of innovation, production, training collaboration among other functions that are made possible by lack of institutional constraints on such undertakings (David, Katz, Kearney, 2006: 189). The second characteristic is the institutional framework that created by the government to streamline employment relations. These frameworks cover two areas, the union-management relation that deals with the sector of the economy that has unionized employees and the proliferation laws that cover individual employee’s rights. The third characteristic is the constant and effective attacks on the union movements by employers who accusing them of increasing the labor cost in the country. The union movement also faces impediments from the law that severely strict their functions.  The third characteristic of the United States employment relation is the one level of bargaining which is done at the company level.  Variation in the union contract, difficulty in negotiations, conflict in representation, lack of coordination among members employer which has resulted in lack of standardized employment relation is the fourth characteristic of the United States Market (Jürgens & Krzywdzinski, 2009: 4). The fifth characteristic is the lack of works councils which constitutes the second level of representation among workers. This has created an environment of hostility between unions and most of the employers in the country.

Comparison between Germany and the United States

It’s evident from the literature review conducted in the Germany and United States markets that there are several similarities as well as difference. The first similarity between the two economies is the establishment of the institutional framework that governs and guides the different sectors of the economy namely the unionized segment and the individual works relations (David, Katz, Kearney, 2006: 196). The two countries understand the need of protecting all categories of workers to ensure that there is fairness in the labor market and also to eliminate instances of exploitation.  Both countries also have in place framework that promotes the development of skills that enhance performance. In the United States, this achieved through training that is allowed under the law while in Germany it’s achieved through technical development which constitutes an important part of a skill set development in the economy.

However, there are several differences between the two economies. In the United States, workers representation is done at one level which is the union level. In Germany representation is at two levels, the union level and the work council level.  This has created better engagement between the representatives and the employees. In the United States, the one level representation at the Union level only has created animosity between the employers and the unions. The other difference is the manner in which employment relations are implemented in the two counties (Boxall & Purcell, 2011). In Germany the relationship between unions and employers is well structured and organized unlike in the United States where it is characterized by hostility and animosity. Further, in Germany, collective bargaining is done at two level with the regional negotiations forming the basis of individual negotiations that are done by the work councils. In the United States, there is no standard for negotiations making them difficult and lengthy. The lack of an all-inclusive framework that brings together all stakeholders and clearly stipulates the negotiation guideline that is present in Germany makes employment relations easy on their part than the United States that lacks such frameworks. This lack of inclusiveness has different parties working towards their own interest that creates the various conflicts and animosity that have been witnessed between employers and unions.

Changes and challenges in employment Relations in Germany and United States

The employment relations systems of both the United States and Germany are undergoing various changed occasioned by the different challenges that they are facing.


The first challenge that the Germany employment relation faces is the virtuous circle. The economy promotes exports based on its goods that are high quality, high labor with value addition produced by a skilled and cooperative workforce (Streeck & Thelen, 2005). These qualities have promoted diversification of quality modes based on long-term consensus reached by the various social partners. This consensus has made German unions to accept wage modification during recession so that what is forfeited during this time is regained when there is a boom. The second challenge is the institutional and traditional framework of employment relations in Germany makes change slow. In addition to slow decision making at the organizational level, the Germany economy is also facing high labor costs. However to change the factors that are contributing to these problems, there must be a change in regulations (Streeck &Thelen, 2005).  A process that might result in social unrests, the move might also affect the labor peace in the country as well as overall skills levels. The third challenge that the German Employment relation faces is the dilemma faced by both the employers and the unions. The employer wants lower labor costs and cannot get out of employers association to protect themselves from sectoral contracts. The unions on the other hand are unwilling to allow for individual negotiations.

The United States is facing the low road problem. All efforts are being made to substitute labor with technology, and cut cost associated with labor to the lowest level possible even though this is often met with resistance. The aim is to give employers more power and weaken organized labor. To achieve this objective employers are moving operations to locations that have no or weak unions and labor organizations so that they can exploit low wages (Streeck & Thelen, 2005). The American market is pursuing the low road model of low labor without giving consideration to skill development. In short, the American employers dread Unions are doing all they can to get rid of them or simply avoid them. The other challenge that the American employment relation system faces is lack of institutional structures that help in negotiation skills improvement and workplace transformation skills. Unions are interested in preserving their jurisdictional mandate than ensuring that workers get the right skills development.


Since the employment relation in Germany is characterized by high and average wages supported by partnership relation between firms and workplaces, attempts are being made to establish a new strategy of labor management. Attempts are being made to reevaluate sectoral agreements, works councils roles and the policy of co-determination (David, Katz, Kearney, 2006: 194). While there are conflicting opinions among the different stakeholders, on how to achieve the proposed changes, there is continued dialogue to come up with the best way that will be beneficial to all the parties involved and the Germany economy too.

The United States employment Relations is also undergoing changes.  The U. S workplace still remains high hierarchical and authoritarian with many organization seeing employees as replaceable part of the production line that should operate as directed(David, Katz, Kearney, 2006:191). However, many organizations have realized the need to embrace employee participation and labor management strategies that are collaborative in nature.


Employment relations are an important aspect of any economy and should be managed prudently. The Germany and United States economies show how different economic models approach the issue of employment relations and the effects. The United States which is liberal economy prefers an employment relation that favors technological innovation over skill development. This is because the economic system seeks to lower labor costs at the expense of other characteristics. The result has been animosity between the employers and the unions which they see as a threat to their objectives.  On the other hand, the Germany economy favors union the system that seeks to develop skills over other characteristics of the relationship.


Bamber, G.J., Lansbury, R.D. and Wailes, N. eds., 2004. International and comparative employment relations. Sage.

Boxall, P. and Purcell, J., 2011. Strategy and human resource management. Palgrave Macmillan.

David, H., Katz, L.F. and Kearney, M.S., 2006. The polarization of the US labor market. American economic review, 96(2), pp.189-194.

Jürgens, U. and Krzywdzinski, M., 2009. Changing east–west division of labor in the European automotive industry. European Urban and Regional Studies, 16(1), pp.27-42.

Kalleberg, A.L., 2009. Precarious work, insecure workers: Employment relations in transition. American sociological review, 74(1), pp.1-22.

Streeck, W. and Thelen, K.A. eds., 2005. Beyond continuity: Institutional change in advanced political economies. Oxford University Press.

January 19, 2024
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