Technologisation: Companies Can Benefit from Works Councils
ResearchZEW Study Investigates Impact of Automation on Workforce
Introducing robots in a company often goes hand in hand with job cuts – works councils prevent this. These are the findings of a study by ZEW Mannheim. Older employees aged 55 and above, who have poorer employment prospects on the labor market, benefit in particular from higher retention despite automation. However, there are also advantages for the companies themselves. In plants with works council, productivity gains in the wake of automation are larger than in those without shop-floor worker representation. The ZEW study is based on survey and social insurance data from the Institute for Employment Research (IAB) in Nuremberg and covers around 18,000 employees and their establishments.
“Works councils play a decisive role in mitigating the negative consequences of automation. Especially older employees benefit, as those find it more difficult to transition to new jobs. Works councils improve the chances of continued employment for the workforce, particularly when there is a large number of job seekers relative to the number of vacancies,” explains Oliver Schlenker, researcher in ZEW’s Research Unit “Labour Markets and Social Insurance” and co-author of the study.
Automation can lead to lower wages when employees are displaced into lower-skilled and lower-paid jobs. “For blue-collar workers in easily automatable occupations, wages fall by about three and a half percent due to robotization. Works councils prevent this.”
Why Productivity Increases
Firms can also benefit more from automation, according to Schlenker. “We show for the first time that productivity gains through robotization are higher in plants with a works council.” He explains: “On the one hand, works councils ensure that suitable robots are installed and, on the other hand, that the workforce is adequately trained. In combination, this can lead to higher productivity.”
Data Basis
For the study, the researchers linked survey data from the IAB Establishment Panel on robot adaptation for the period 2015–2018 and the presence of works councils with the employment biographies of the employees in the surveyed establishments. The study focuses on the workforce, i.e. all employees who were already employed prior to robot adoption. The researchers compare the employment and wage trajectories following robotic automation for statistically similar employees – individuals with the same personal and job characteristics in comparable establishments (e.g., similar size, wage level, and industry) – but differing in whether their establishments have a works council or not.
