Universität zu Köln

Di Carlo, Donato ORCID: 0000-0002-4406-7739 (2019). Together we rule, divided we stand: public employers as semisovereign state actors and the political economy of public sector wage restraint in Germany. PhD thesis, Universität zu Köln.

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Abstract

Germany’s political economy has undergone a substantial transformation. After having been held up as the “sick man of Europe” at the turn of the century, it is now considered, depending on the point of view, either an “economic superstar” or a bulky elephant in the European Economic and Monetary Union (EMU). At the core of Germany’s transformation there lies a prolonged trajectory of wage restraint. The observation from which this dissertation takes off is that, since the mid-1990s, the most pronounced trajectory of wage restraint can be observed in the German public sector rather than the export sector. Yet very little is known about the political economy of public sector wage setting. What explains Germany’s trajectory of public sector wage restraint vis-à-vis its EMU peers? Through a triangulation of interviews with key policy actors, archival and secondary sources, the dissertation shows historically and analytically that Germany’s trajectory is the result of the public employers’ necessity to pursue consolidation in the face of an ever tighter fiscal space. This necessity was/is not homogeneously distributed among the German public employers. It is mediated by the institutional structures of the German semisovereign state. Germany is a fragmented polity characterized by an asymmetric fiscal federalism system. Tax legislation is centralized within the Federation’s remits while administrative expenditures are mostly a prerogative of sub-national governments. Public employers’ revenues are thus constrained by the lack of fiscal autonomy. The incapacity to manipulate revenues at will urges them to rein in the fiscal costs of public sector wage setting. Within this constellation, the public employers are semisovereign state actors in that they share the political authority to adopt public sector wage policies with other centres of power over which they have no control. But the structure of the politico-administrative system is such that the bulk of the public sector wage bill is footed by sub-national employers. This creates conflicts of interest among the public employers. “Together we rule divided we stand” tells the story of a political misalignment within the public employers’ historical coalition. For forty years, public employers’ unity had ensured centralized and encompassing wage bargaining in the German public sector. The deficits caused by reunification first, slow growth and the Red-Green’s tax reform later dealt a blow to the finances of public employers. Before acceding EMU, in 1996, the public employers united had to push for public sector wage restraint to bring the deficit below the Maastricht’s 3% vincolo esterno. Had the employers not pursued restraint fiercely before the 1997 fiscal year, Germany would have most likely not qualified for EMU. In the 2000s the public employers grew politically divided and took different paths. Given their disproportional personnel costs, the Länder pulled out of the public employers’ bargaining coalition and opted for the institutionalization of their own Länder-level collective bargaining. Simultaneously, in the fiscal federalism reform they successfully claimed back the legislative competence to regulate their civil servants’ pay and careers. The federal and municipal employers remained together within a new joint collective bargaining framework. The double process of institutional and constitutional reforms has now led to the institutionalization of a low-wage equilibrium characterized by consensus-based joint decision making. This is, however, an institutional equilibrium in which public wages can only be set as a lowest common denominator taking into consideration the poorer employers’ ability to pay. These state institutional structures, I claim, currently hamper Germany’s capacity to inflate its economy via public sector wage/fiscal inflation in order to ensure a more symmetric adjustment in the post-crisis EMU. The dissertation shows that restraint is not the result of a state capture by a dominant export sector’s elite. Nor is it imposed via export-led pattern bargaining. The public employers were the protagonists and their interests were primarily fiscal in nature. In hoping to bring the public employers within the radar of CPE scholars, the dissertation suggests that the state matters but it is not a monolithic bloc capable of unitary action. What characterizes governments in their function of public employers is rather their internal dividedness, with which they must come to terms in order to “act” as wage setters.

Item Type:	Thesis (PhD thesis)
Translated abstract:	Abstract Language Germany’s political economy has undergone a substantial transformation. After having been held up as the “sick man of Europe” at the turn of the century, it is now considered, depending on the point of view, either an “economic superstar” or a bulky elephant in the European Economic and Monetary Union (EMU). At the core of Germany’s transformation there lies a prolonged trajectory of wage restraint. The observation from which this dissertation takes off is that, since the mid-1990s, the most pronounced trajectory of wage restraint can be observed in the German public sector rather than the export sector. Yet very little is known about the political economy of public sector wage setting. What explains Germany’s trajectory of public sector wage restraint vis-à-vis its EMU peers? Through a triangulation of interviews with key policy actors, archival and secondary sources, the dissertation shows historically and analytically that Germany’s trajectory is the result of the public employers’ necessity to pursue consolidation in the face of an ever tighter fiscal space. This necessity was/is not homogeneously distributed among the German public employers. It is mediated by the institutional structures of the German semisovereign state. Germany is a fragmented polity characterized by an asymmetric fiscal federalism system. Tax legislation is centralized within the Federation’s remits while administrative expenditures are mostly a prerogative of sub-national governments. Public employers’ revenues are thus constrained by the lack of fiscal autonomy. The incapacity to manipulate revenues at will urges them to rein in the fiscal costs of public sector wage setting. Within this constellation, the public employers are semisovereign state actors in that they share the political authority to adopt public sector wage policies with other centres of power over which they have no control. But the structure of the politico-administrative system is such that the bulk of the public sector wage bill is footed by sub-national employers. This creates conflicts of interest among the public employers. “Together we rule divided we stand” tells the story of a political misalignment within the public employers’ historical coalition. For forty years, public employers’ unity had ensured centralized and encompassing wage bargaining in the German public sector. The deficits caused by reunification first, slow growth and the Red-Green’s tax reform later dealt a blow to the finances of public employers. Before acceding EMU, in 1996, the public employers united had to push for public sector wage restraint to bring the deficit below the Maastricht’s 3% vincolo esterno. Had the employers not pursued restraint fiercely before the 1997 fiscal year, Germany would have most likely not qualified for EMU. In the 2000s the public employers grew politically divided and took different paths. Given their disproportional personnel costs, the Länder pulled out of the public employers’ bargaining coalition and opted for the institutionalization of their own Länder-level collective bargaining. Simultaneously, in the fiscal federalism reform they successfully claimed back the legislative competence to regulate their civil servants’ pay and careers. The federal and municipal employers remained together within a new joint collective bargaining framework. The double process of institutional and constitutional reforms has now led to the institutionalization of a low-wage equilibrium characterized by consensus-based joint decision making. This is, however, an institutional equilibrium in which public wages can only be set as a lowest common denominator taking into consideration the poorer employers’ ability to pay. These state institutional structures, I claim, currently hamper Germany’s capacity to inflate its economy via public sector wage/fiscal inflation in order to ensure a more symmetric adjustment in the post-crisis EMU. The dissertation shows that restraint is not the result of a state capture by a dominant export sector’s elite. Nor is it imposed via export-led pattern bargaining. The public employers were the protagonists and their interests were primarily fiscal in nature. In hoping to bring the public employers within the radar of CPE scholars, the dissertation suggests that the state matters but it is not a monolithic bloc capable of unitary action. What characterizes governments in their function of public employers is rather their internal dividedness, with which they must come to terms in order to “act” as wage setters. English
Creators:	Creators Email ORCID ORCID Put Code Di Carlo, Donato dicarlo@mpifg.de orcid.org/0000-0002-4406-7739 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-112059
Date:	26 June 2019
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Faculty of Management, Economics and Social Sciences > Social Sciences > Political Science > Cologne Center for Comparative Politics
Subjects:	Political science Public administration
Uncontrolled Keywords:	Keywords Language Public Sector; Sectoral Wage Bargaining; Germany; Wage Restraint; EMU; Public Employers English
Date of oral exam:	26 June 2019
Referee:	Name Academic Title Hoepner, Martin Apl. Prof. Dr. Trampusch, Christine Prof. Dr.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/11205