A tale of two systems

Original Reporting | By Kevin C. Brown |

When asked why German firms operate so differently with respect to labor in different countries, Claude Barfield, a resident scholar at the American Enterprise Institute where he studies international trade and globalization, told Remapping Debate that they do so, in part, “because they can get away with it so far.”

Though a Volkswagen-Chattanooga spokesperson told Remapping Debate that “it is up to our production team members to decide” whether to join a union, Barfield points out that all of the German-based auto manufacturers in the U.S. located in right-to-work states are “not unhappy with the situation they have now,” citing the fact that they “have more authority, they have more power” than they would in a unionized context.

Barfield said that factors other than wages brought the German carmakers to right-to-work states. A central reason for their interest in those states, he says, “has to do with not wanting to…get involved with work rules and seniority.” They have, he continued, “a much greater flexibility just in assigning work, and to be able to have plants change as conditions change. So, they’re not unhappy with that. They would not say they are happier with this than the system they deal with in Germany, but they probably are.”


Making choices

Returning to the experience of Germany’s domestic auto industry, Mund says that, while “it is not a law of nature that you have to be non-unionized to be successful,” companies are clearly choosing not to be union where they don’t have to.

“When the Democrats were in [full control of Congress] under Obama, they promised to change” — making it easier for unions to organize through a card check system — but “that didn’t happen.” — Claude Barfield, American Enterprise Institute

Could conditions in the U.S. be changed to produce a structure that, like Germany, protects workers against declining wages and conditions?

Barfield noted that “you’d have to change major state law as well as federal law.” His prognosis is not that it is impossible as a legal matter, but that, as a practical matter, “it will never look like Germany.”

“In the U.S., there’s no prospect that we will change our laws,” he continued. “When the Democrats were in [full control of Congress] under Obama, they promised to change” — making it easier for unions to organize through a card check system — but “that didn’t happen.”

More broadly, Barfield said, “It’s a different tradition of business, government, and labor relations. Three pieces of things all together in Germany and the U.S. never had that. So I don’t think it’s just that the laws per se, it’s the attitude of corporate leaders and union leaders and governments. Not because of one specific piece of legislation.”

If he is right — and no one we spoke with disputed Barfield’s short-term political assessment —— conditions for labor in the U.S. auto industry will continue on their current path, a path described by the UAW’s Casteel as “spiraling downwards.”

On the other hand, despite Barfield’s reference to tradition, the “tradition” in the U.S. through the 1970s was having a highly unionized auto making industry, one that paid good wages. Indeed, the tradition was such that the initial forays of German automakers into the U.S. saw them accept unionization in their transplanted factories (see box below).

Casteel and Mund hope for a return to that tradition, with Casteel saying, “Corporations aren’t going to give back to the workers unless they are made to.” The UAW has said that it is renewing its efforts to organize the southern transplants, but has not released specifics on its strategy or timetable.

A different beginning

Despite the current differences in auto industry labor practices in Germany and U.S., German auto firms’ foray into manufacturing in the U.S. initially conformed to the high-wage, unionized mode of German industry. As part of a wave of foreign direct investment in the U.S. by European-based firms, in 1978, Volkswagen opened the Westmoreland Assembly Plant, 35 miles outside of Pittsburgh. At the time, most autoworkers in the United States were members of the United Auto Workers, and Westmoreland became no exception, and the plant rapidly unionized.

Volkswagen’s quick acceptance of labor organizing at its first American plant was apparently not out of the ordinary for newly arrived foreign-based firms. In 1981, two economists asked in the U.S. Labor Department’s Monthly Labor Review, “Do foreign owned U.S. firms practice unconventional labor relations?” Noting that “it is very possible that unionization may pose no great problem for foreign-owned firms, especially those with European parent companies, because they have been dealing with unions successfully for many years,” the authors’ survey of unions and firms in the U.S. concluded that “foreign owned companies do not differ from domestically owned companies in their approach to most labor relations issues.”


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