German-U.S. labor economics. - Labor, Business and Change in Germany and the United States - book review

Labor, Business and Change in Germany and the United States. By Kristen S. Wever, ed. Kalamazoo, MI, W.E. Upjohn Institute for Employment Research, 2001, 177 pp., softcover.

This collection of articles explores the feasibility of mutual learning `on the ground' between two nations competing in a global market. It is the result of a 2-year German-American project.

The lead article by Bart and Darbishire on telecommunications furnishes an excellent lesson. They argue, like new institutionalists, that failure to place economics within a sociopolitical setting is a barrier to cross-national learning, thus giving overdue consideration for values other than those of the market. For example, they demonstrate that, in order to protect jobs, German work councils' participation in industry decisions slowed adaptation to the point of never fully implementing new telecommunications technology. They contrast this to the U.S. abandonment of the implicit labor contract for which AT&T had been the prototype. Consequently, in lieu of cost-cutting technology, German market strategy focused on revenue-enhancing, high-end products.

In both countries, technological evolution was challenging regulated monopolies. In Germany, telecommunications was an official state monopoly. Prior to its breakup, AT&T had functioned as a quasi-official monopoly that subsidized local phone service through its higher charges to business and long-distance customers. No less a market decision, local rates depended on political goodwill. Innovations allowed MCI and others to sell profitably, in the spread between AT&T'S long-distance and local service, technologically advancing long-distance service. The U.S. setting required legal challenges to AT&T'S monopoly, which were successful.

The new era of competition following the AT&T breakup had implications for organized labor. The authors contrast labor weakness as a social institution in the United States with the strong position of the aforementioned German worker representatives by pointing out the willingness of the Communications Workers of America (CWA) to bargain on the effects only of management decisions.

Consistently noting the welfare costs of downsizing in their analysis, the authors assess the cost to post-breakup AT&T, in the loss of skilled workers to the new industry and the lowered cooperation of those who remained. The losses, consequently, involved substantial investment in hiring and retraining.

In another article, Finegold and Keltner provide a full inventory of training and educational resources for management development in the United States and Germany. They do not address the corporatist structure of German institutional constraints. In attributing rigidity to the State, for example, they might have discovered a more nuanced story in the fate of the adaptive comprehensive university, the Gesamthochschulen. The university establishment opposed this State response to changing educational needs.

Casper's substantive article describes in telling detail the competitively driven response of the U.S. and German automobile manufacturers to the challenge of Japanese just-in-time (JIT) inventory models. The problem was one of apportioning the high-cost risks of defective deliveries. Summaries cannot do justice to the wealth of information provided by Casper. German assemblers faced a law intended to protect the weaker small-business suppliers. They needed creative legal solutions. American manufacturers faced a lack of qualified plant employees whose counterparts in Japan and Germany could inspect deliveries. The solution forced them to cooperate in developing a cross-industry quality control statistical standard, which they found in a Defense Department model. In each case, the institutions that served as instruments of adaptation were modified by their application to an economic challenge.

The chapter by the editor of the volume, Kirsten Wever, together with Fichter and Turner, sums up implications for industrial relations in the two countries. Competitive disadvantages of a higher average living standard on the German "high road" are contrasted to competitive advantages resulting from a more widely dispersed income distribution on the American "low road." They foresee trouble along the high road from the liberalizing effects of the EU on the German economy, while they hope for a more equitable solution in the United States from a strengthening union movement. The Bureau of Labor Statistics 2001 report on union membership, however, gainsays their optimism.

The collection breaks new ground in its integration of indepth research with masterly theoretical argument. The reader has the impression of being plunged into the midst of change while being guided by a firm hand.