Due to globalization, there is intensified competition in the global markets due to the
transfer of production, investment, and jobs. European labor markets have experienced rapid
structural changes characterized by rigid human resource practices, social security and sound
industrial relations (Gilson 2001). In addition, the technological transformation has impacted
significantly to the demand for labor as well as skills and pay structures in both U.S and German
markets. For this reason, labor markets have become more flexible as employers sanction for
further deregulations of the labor market to compete successfully in the global market. In
retrospect, Germany is among European Union largest market and is characterized by large
manufacturing base mainly in the automotive sector. The United States still enjoy a larger share
of the global economy accounting to approximately $ 74.1 trillion to the total world GDP. The
critical issue is to find convergence and divergence aspects in the labor market concerning trade
negotiations, skills and governance structures in U.S and Germany markets.
The role of managers slightly differs between companies in Germany and the USA. To
untangle these differences between Germany and US managers, it is essential to consider the
manager to employee ratio. According to Michelle (2018), German firms managers supervises
an average of 26 workers while U.S firms managers oversees approximately seven employees.
Besides, US strategic human resource models focus on long term development of the employees
through training, job protection and enhancement of employer-employee relationships (Brewster,
Chung, and Sparrow 2016).
National Employment Systems Of Germany And U.S 3
Conversely, Germany HR model share some characteristics with US model such as
massive investment in training but wages and working hours are particular functions of regional
labor unions. Most of the German human resource functions are regulated and determined by the
constitutions through Works Act of 1952 and 1972 respectively (Du Plessis et al., 2017). This
legislation requires employers to maintain positive relationships with various trade unions as
well as work councils. In this context, the degree of managerial autonomy is restricted.
Thus, the main task of the HR department is to formulate standardized and formalized
working procedures. In this vein, employers are required to implement CBA with unions. Human
resources managers in Germany have to adapt to a comprehensive legislative regime which
inhibits incorporation of collaborative practices in the labor market (Carr, and Pudelko 2006).
However, this implies that HRM does not exist, but that does not mean that the HRM model is
entirely dysfunctional. Germany's human resource model has been subjected to thorough
scrutiny by work councils.
On the contrary U.S HRM model emphasizes a high degree of formalization in
performing its strategic functions. The U.S regulation controls the activities of trade unions as
opposed to Germany where trade unions dictate the functions of the HRM (Stolper 2017). In
U.S, the power of labor unions is severely regulated to cushion employers against oppressive and
coercive collective bargaining agreements (Wilkinson. and Wood 2017). However, there exist
convergence in both HRM models of Germany and United States since each model provides a
platform of finding solutions notwithstanding their dependent paths. Additionally, Germany’s
HR managers consider the Anglo Saxon model as an essential model for enhancing employees
learning and development. According to Brewster (2004), the main difference between German
HRM model and the American is the controls and influence of state regulations. There are few
National Employment Systems Of Germany And U.S 4
legal sanctions for workers in the US as compared to Germany. Alluding to Martin (2015), most
workers in U.S work for an average of 40 hours per week while in Germany, workers are
restricted to 35 hours per week. Therefore, in Europe, they are stringent measures and controls
that restrict HRM practices about minimum wages, employment contracts and hours of work.
According to Kim (2013), multinational companies in United States stimulate the convergence
and divergence on two countries HRM models. There is a divergence in the sense that labor
councils in Germany HRM model determines working hours and wages but converges in the
sense that both models emphasize on employee productivity. HRM practices in the US
emphasizes on performance appraisal. Additionally, it tends to be more autonomous and
individualistic as compared to German. In Germany, the employee's salary is negotiated by trade
unions or work councils as opposed to us model where individual employee’s performance
determined the wages.
Trade unionism in Unites States features market based industrial relations. This implies
that trade unions focus more on advocacy of narrow interests of their members as opposed to the
adoption of a broad welfare framework (Debroux 2017). Notably, the industrial relations are
weak thus explaining the reasons why it has declined over the last two decades. There is a
general trend of lesser participation and commitment among employees in the US in the trade
unionism. This is attributed to structural changes in production in particular transition from
industrialism to post-industrialism. Moreover, technological inventions have contributed
significantly to the automation of industrial processes thus creating unemployment to the older
workforce. Be that as it may, these people tend to quit unionism due to unemployment.
National Employment Systems Of Germany And U.S 5
However, industrial matters are well managed through trade unions as opposed to court
litigations. For this reason, united states consider trade unions to be an essential instrument in
addressing work-related conflicts.
In Germany there exist robust labor relations systems oriented towards integration of all
labor representatives including government, employees, and employers. In this context, unlike
the US, Germany has organized labor institutions that possess significant influence through
institutional and legalizes arrangements, their powers extend to the whole Germany labor
markets (Kaufman 2016). Additionally, industrial relations focus on policymaking in an attempt
to safeguard the interests of their members. Indeed, they advocate for better pay, working
conditions as well as broader civil, social and political rights of German societies on the
development of a welfare nation.
In retrospect, trade unions in Germany were formed from social stratification of the
society. Consequently, trade unions were dominated by male working class but have increasingly
lost conventional membership base. Employers in Germany sanctioned for flexibility in
collective bargaining agreements in the 1990s. However, this has been one of the significant
challenges for trade unions in the last two decades. Employers and organizations are not placing
trade unions in a marginal position, but instead, they consider trade unions as partners in the
labor market. According to Webster (2015), Industrial Relations professionals predict that there
will be significant changes in collective bargaining by 2025. Trade unionism is vertically and
horizontally tied between different organized employees of various companies thus making it
very strong. For this reason, company based trade unions are not common in Germany as it is in
the United States.
National Employment Systems Of Germany And U.S 6
According to Bacon (2012), education and training play a critical role in determining the
employability of individuals. However, the U.S incorporates Anglo –Saxon model that places
little emphases on the importance of the systems of training and education. According to
Susskind (2015), the U.S requires technology-related skills since it has automated most of its
production and manufacturing activities. For this reason, united states mainly focus on general
skills with no investment in organizations specific skills. This trend shows a high likelihood of
replacing the current workforce with technology (Altmann, N., Kohler and Meil 2017)
On the contrary, European model puts more emphasis on systems of education and
training. In this regard, the European model focuses on occupational training which
encompasses practical and classroom learning (Finegold, Sako, and Crouch, 1999). According to
Pischke (2001), Germany central manufacturing sector encompass automotive industries, thus,
education and training as a vital aspect of Germany's competitiveness. Notably, the German
labor market is performing exemplary with robust job growth and low unemployment rates.
Therefore, Germany has heavily invested in human capital with training directed towards firm’s
specific skills necessary for the manufacturing industry.
As noted above, there exist convergence in distinct areas of human resource management
between the United States and Germany. Germany HRM managers partially agree with Anglo-
saxon model it encourages adoption of technical skills in the wake of technological inventions.
Nevertheless, it is clear that while human resource model may be the same for both countries,
human resources practices differ due to strict regulations by the trade unions. Notably, trade
unions in Germany are powerful as compared to United States. Due to globalization and
National Employment Systems Of Germany And U.S 7
technological inventions, U.S is experiencing changing nature of work. For this reason, the
participation of Americans into trade unionism is diminishing as compared to their counterparts
in Germany. There is substantial divergence regarding employee’s involvement in trade union
activities although both countries consider trade unions to be a valuable tool for solving conflicts
in the labor market. The convergence and divergence aspects enable managers to understand the
dynamics behind the global labor market.
National Employment Systems Of Germany And U.S 8
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