Positive effects of works councils on working conditions

Employees in companies with works councils show higher job satisfaction and have higher salaries and greater job stability than staff in companies without works councils. These study findings can be used as a strong argument for the European social model, in which representative employee participation, social partnership and high standards of working conditions play a crucial role.

It is difficult to isolate the effects of works councils – and institutionalised co-determination in general – on the economic performance of a company or on its working conditions. This has been the subject of some debate, especially in Germany, within recent years. A recent analysis of the quarterly working climate survey (Arbeitsklima-Index) in Austria focuses on the link between working conditions and subjective job satisfaction of employees, on the one hand, and the existence of works councils in companies, on the other.

Methodology and sample

To control the comparison between companies with and without works councils, the sample was restricted to employees in private companies with between 20 and 99 staff members. Among larger companies, those with works councils are overrepresented while the opposite is true among smaller companies. In the chosen company size category, however, there is a better balance between both groups of companies, which is a convenient precondition for comparison.

The analysis is based on the answers of around 3,800 respondents: 1,826 employees from companies with works councils and 1,982 employees from companies without works councils, all of which were included in the quarterly interview cycle of the Austrian working climate survey between 2000 and 2005.

Higher job satisfaction

Employees who are represented by a works council show a higher rate of satisfaction with their job. On the scale of the working climate index, they reach a value of 106 index points for overall job satisfaction, which is one point higher than staff in companies without a works council. The authors of the study identify that this difference is partly due to greater self-esteem among the former group, expressed by a higher satisfaction level with their social status as dependent employees; such satisfaction is lower in the latter group.

The employees represented by a works council are also more satisfied with their work–life balance and are required to do less overtime work; these factors are interpreted as a further indicator for the benefits of a works council. Whereas 18% of the employees surveyed in companies with works councils regularly work overtime, the proportion in the comparative group is 24% of staff.

Higher salaries

The existence of a works council has an influence on wage levels and wage control, which is corroborated by the subjective perception of the employees: satisfaction with wages is higher in companies with works councils. Some 63% of the employees in these companies are satisfied with their wages, compared with a proportion of 58% of workers in companies without a works council.

These subjective impressions correspond with the facts: the average wage level in companies without a works council is €57 (net income) below the wage level in the other group (Figure 1). Furthermore, the average internal wage differences within the company are lower in companies with works councils: the gender wage gap, for instance, is €378 in these companies, compared with €411 in the group without a works council. Likewise, the wage gap between employees with higher secondary school certification and those with a basic compulsory education level only is €470 in companies with works councils, compared with €583 in companies without such an institution.

Figure 1: Comparing average wage gaps in companies with and without works councils (in €)

Note: Companies employing 20-99 staff. Based on net income. Source: Arbeitsklima-Index, Upper Austrian Chamber of Labour (Arbeiterkammer Oberösterreich)

Lower staff turnover

Stability of employment relationships also seems to be affected by the existence of a works council. Such stability is indicated by the length of job tenure and the rate of staff turnover. In companies with works councils, more than one quarter (26%) of the employees have been working for more than 10 years in the company, compared with only 19% of workers in companies with no works council.

These results are reflected in slight differences in employees’ subjective views on job security. In companies with works councils, 14% of the staff admit a fear of job loss, compared with 17% in the other group (Figure 2). Differences regarding fear of job loss are more evident in the more vulnerable group of low-skilled white-collar workers: 10% of these workers in companies with works councils expressed this concern but the proportion rose to 23% of this group of workers in companies without works councils.

Figure 2: Subjective perception of job security

Note: % of employees reporting a rather or very insecure job in companies with between 20 and 99 staff.

Source: Arbeitsklima-Index, Upper Austrian Chamber of Labour (Arbeiterkammer Oberösterreich)

Commentary

There are very few comparisons available of companies with and without works councils. The recent analysis of the working climate survey reveals the positive effects of works councils on different aspects of working conditions. The findings can also be used as a strong argument for the European social model, in which representative employee participation, social partnership and high standards of working conditions play a crucial role.

About the survey

The Austrian working climate survey (Arbeitsklima-Index) is based on a standardised survey of 1,800 respondents questioned in two interview cycles over a half-year period. It is commissioned by the Upper Austrian Chamber of Labour (Arbeiterkammer Oberösterreich, AK Oberösterreich), and is carried out by the Institute for Empirical Social Research (Institut für empirische Sozialforschung, IFES) and the Institute for Social Research and Analysis (SORA).

Manfred Krenn, Working Life Research Centre (Forschungs- und Beratungsstelle Arbeitswelt, FORBA)