Business Case Studies, Govenrment and Business Environment Case Study, Rigid German Labour Laws

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Case Title:

Rigid German Labour Laws: The Business Migration

Publication Year : 2004

Authors: Daksha Bhat & T. Phani Madhav

Industry: General Business

Region:Germany

Case Code: GBE0027

Teaching Note: Not Available

Structured Assignment: Not Available

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Abstract:
Due to Germany's rigid labour laws, high taxes and diminished local demand, many companies are considering moving their operations out of Germany. The industry is now demanding that unions should limit their demands for higher wages, and be prepared to work for longer hours if they want to retain their jobs. Companies like Siemens AG and DaimlerChrysler AG have successfully negotiated agreements that will allow employees to work for more than the previously sacrosanct 35 hours per week. In order to encourage companies to invest and hire in Germany, which is faced with a falling GDP (gross domestic product) and rising unemployment, the government is attempting to decrease the non-wage costs of labour and make dismissal laws more flexible.

Pedagogical Objectives:

  • To discuss the strong stance taken by the industry to combat militant unions and the government's attempts to improve the business environment in spite of growing opposition to its policies
  • To discuss how inflexible labour laws lead to a vicious cycle of increasing unemployment, a decrease in business investment and consumer spending.

Keywords : Germany, Unemployment, GDP (gross domestic product) growth, Labour unions, Labour laws,Business Environment Case Study, Worker participation, Social market economy, Lump of labour fallacy, Dismissal protection, Co-determination, Welfare state

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