Dualization as Destiny? The Political Economy of the German Minimum Wage Reform

Paul Marx and Peter Starke

Politics & Society, 2017, vol. 45, issue 4, 559-584

Abstract: Germany is widely seen as a “dualized†economy driven by a powerful and stable “insider†coalition in the manufacturing sectors. In this article, that picture is challenged. An examination of the political economy of the outsider-friendly 2014 Minimum Wage Act, using public opinion data, document analysis, and qualitative interviews, shows how earlier dualizing reforms led to unintended negative feedback effects: First, public opinion reacted negatively to increasing inequality in the years preceding the introduction of the minimum wage. Second, a remarkable shift is found among trade unions toward support of a minimum wage, even in manufacturing. Although the threat of low-wage competition and flexibilization did play a role, trade union solidarity was at least as important. Those endogenous dynamics came together in a self-undermining process unfolding over a relatively short period of time. Potential alternative explanations are explored, including classical partisan politics, party competition, and employer preferences.

Keywords: dualization; minimum wage; Germany; policy feedback; inequality (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:sae:polsoc:v:45:y:2017:i:4:p:559-584

DOI: 10.1177/0032329217726793

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