German Higher Pay Boosts Higher Profits

German auto manufacturers’ high profits and high pay show why U.S. labor laws need to be stronger

German car manufacturers make more than twice as many cars as American manufacturers. German auto workers earn an average of $67.14 in wages and benefits, while American auto workers earn an average of $33.77. We’re told that American auto workers need to accept pay cuts because they earn too much for the manufacturers to be profitable, yet German manufacturers are very profitable despite paying so much more. So, how does that work?


At Remapping Debate, Kevin Brown explains that:

In addition to high trade union density supporting the power of German autoworkers’ wages, the German constitution itself includes a second mechanism for keeping employees involved in the decisions of the firm for which they work. The Works Constitution Act provides for the creation of Works Councils in each factory. The Works Councils provide a mechanism through which a company’s management must work with employees, whether they are in a union or not, on issues affecting work life, such as shop floor conditions, scheduling shifts, and other issues particular to the factory. This system, according to Mund, institutionalized “direct contact for workers’ representatives with management at various levels, from lower to middle to senior management in daily affairs. So you exercise some kind of dialogue where you don’t always wear your management pin or your union pin.”

In the United States, of course, management doesn’t have to involve workers in decision-making. They can fight to get a voice on the job by joining a union, but the deck is stacked against that happening, even in states without right to work free rider laws, and in the overwhelming majority of cases, unionizing is the only chance they have to get management to the table to talk.

In case you were in any doubt that the difference is about the laws countries have regarding workers rights and power, not about corporations in some countries just naturally being nicer to their workers than those in others, consider what happens when German auto manufacturers open up shop in the United States: They take advantage of both the cheap labor and the chance to keep their workers out of the decision-making process. They locate in free rider states and resist unions. They pay lower wages than American manufacturers.

German auto manufacturers like BMW and Volkswagen have, in other words, shown that they can be profitable while their workers make extremely good wages and benefits and have a voice in decisions that affect them. But they’ve also shown that they won’t do it if someone doesn’t make them. That’s why we need laws that level the playing field for American workers—and how we know, despite what Republicans tell us, that those laws won’t tank our economy.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

This site uses Akismet to reduce spam. Learn how your comment data is processed.