Advertisement

Small Business Economics

, Volume 9, Issue 5, pp 411–425 | Cite as

Firm Size and Job Quality: A Survey of the Evidence from Germany?

  • Joachim Wagner
Article

Abstract

Small firms provide and create a large proportion of jobs in Germany. Are these jobs worse than jobs in larger firms? The mosaic picture that emerges from a review of several recent empirical studies using German individual or firm level micro data shows that, all in all, wages are lower, non-wage incomes (fringes) are lower, job security is lower, work organisation is less rigid, institutionalized possibilities for workers' participation in decision making are weaker, and opportunities for skill enhancement are worse in small firms compared to large firms. The weight of evidence, therefore, indicates that, on average, small firms offer worse jobs than large firms. It is argued that there is no need for policy measures targeted to improve job quality in small firms, because higher incomes in large firms can in part be seen as compensating differentials for more rigid work organisation, and can follow from wage policies to reduce shirking and turnover that is more costly in large than in small firms. Furthermore, a lower level of remuneration, less protection against dismissals, a lower level of workers' participation, and less opportunities for further training all contribute to lower costs in small firms that might be needed to compensate for size-related cost disadvantages compared to large firms. Economic policy should concentrate on keeping barriers to entrepreneurs' entry to markets low to foster new firm formation and creative destruction.

Keywords

Income Firm Size Small Firm Large Firm Policy Measure 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Addison, John T., Kornelius Kraft and Joachim Wagner, 1993,’ German Works Councils and Firm Performance’, in Bruce E. Kaufman and Morris M. Kleiner (eds.), Employee Representation: Alternatives and Future Directions, Madison: Industrial Relations Research Association Series, pp. 305-338.Google Scholar
  2. Addison, John T. and Joachim Wagner, 1995, ‘On the Impact of German Works Councils: Some Conjectures and Evidence from Establishment-Level Data’, Arbeitsberichte des Fachbereichs Wirtschafts-und Sozialwissenschaften, Universität Lüneburg, Arbeitsbericht Nr. 142.Google Scholar
  3. Audretsch, David B., George van Leeuwen, Bert J. Menkveld and Roy Thurk, 1995, ‘Sub-Optimal Scale Firms and Compensating Factor Differentials in Dutch Manufacturing’, Wissenschaftszentrum Berlin für Sozialforschung, Discussion Paper No. FS IV 95-2.Google Scholar
  4. Bellmann, Lutz and Susanne Kohaut, 1995, ‘Betriebliche Determinanten der Lohnhöhe und der übertariflichen Bezahlung - Eine empirische Analyse auf der Basis des IAB-Betriebspanels’, Institut für Arbeitsmarkt-und Berufsforschung der Bundesanstalt für Arbeit, Nürnberg, mimeo.Google Scholar
  5. Berney, Robert E. and Bruce D. Phillips, 1995, ‘Small Business and Job Creation: An Update’, Paper presented at the conference on ‘Dynamics of Employment and Industry Evolution’, University of Mannheim/Germany, January 19-21, 1995.Google Scholar
  6. Büchel, Felix and Markus Pannenberg, 1994, ‘On-the-Job Training, innerbetriebliche Karrierepfade und Einkommensentwicklung’, Jahrbücher für Nationalökonomie und Statistik 213, 278-291.Google Scholar
  7. Buechtemann, Christoph F., 1993a, ‘Introduction: Employment Security and Labor Markets’, in Christoph F. Buechtemann (ed.), Employment Security and Labor Firm Size and Job Quality Market Behavior - Interdisciplinary Approaches and International Evidence, Ithaca, NY: ILR Press, pp. 3-66.Google Scholar
  8. Buechtemann, Christoph F., 1993b, ‘Employment Security and Deregulation: The West German Experience’, in Christoph F. Buechtemann (ed.), Employment Security and Labor Market Behavior - Interdisciplinary Approaches and International Evidence, Ithaca, NY: ILR Press, pp. 272-296.Google Scholar
  9. Buttler, F. et al., 1992, ‘Flexibility and Job Security in the Federal Republic of Germany’, Arbeitspapiere aus dem Arbeitskreis SAMF - Sozialwissenschaftliche Arbeitsmarktforschung, Arbeitspapier 1992-1, Gelsenkirchen: SAMF.Google Scholar
  10. Carruth, Alan and Claus Schnabel, 1993, ‘The Determination of Contract Wages in West Germany’, Scandinavian Journal of Economics 95, 297-310.Google Scholar
  11. Carstensen, Vivian, Knut Gerlach and Olaf Hübler, 1995, ‘Profit Sharing in German Firms: Institutional Framework, Participation, Microeconomic Effects, and Comparisons with the United States’, in Friedrich Buttler et al. (eds.), Institutional Frameworks and Labor Market Performance - Comparative Views on the U.S. and German Economies, London and New York: Routledge, pp. 168-207.Google Scholar
  12. Davis, Steven J., John Haltiwanger and Scott Schuh, 1993, ‘Small Business and Job Creation: Dissecting the Myth and Reassessing the Facts’, National Bureau of Economic Research Working Paper No. 4492.Google Scholar
  13. European Commission, 1994, Enterprises in Europe, Third Report, Volume I - Descriptive Analysis. Luxembourg: Office for Official Publications of the European Communities.Google Scholar
  14. FitzRoy, Felix and Kornelius Kraft, 1987a, ‘Cooperation, Productivity, and Profit Sharing’, Quarterly Journal of Economics 102, 23-35.Google Scholar
  15. FitzRoy, Felix and Kornelius Kraft, 1987b, ‘Efficiency and Internal Organization: Works Councils in West German Firms’, Economica 54, 493-504.Google Scholar
  16. Franz, Wolfgang and David Soskice, 1995, ‘The German Apprenticeship System’, in Friedrich Buttler et al. (eds.), Institutional Frameworks and Labor Market Performance - Comparative Views on the U.S. and German Economies, London and New York: Routledge, pp. 208-234.Google Scholar
  17. Frick, Bernd, 1994, ‘Codetermination and Personnel Turnover: The German Experience’, Paper presented at the Sixth Annual Conference of the European Association of Labour Economists, Warshaw, September 22-25, 1994.Google Scholar
  18. Frick, Bernd and Dieter Sadowski, 1995, ‘Works Councils, Unions, and Firm Performance: The Impact of Workers' Participation in Germany’, in Friedrich Buttler et al. (eds.), Institutional Frameworks and Labor Market Performance - Comparative Views on the U.S. and German Economies, London and New York: Routledge, pp. 46-81.Google Scholar
  19. Gerlach, Knut and Ulrich Schasse, 1990, ‘On-the-Job Training Differences by Sex and Firm Size’, Zeitschrift für Wirtschafts-und Sozialwissenschaften 110, 261-271.Google Scholar
  20. Gerlach, Knut and Elke Maria Schmidt, 1989, ‘Unternehmensgröße und Entlohnung’, Mitteilungen aus der Arbeitsmarkt-und Berufsforschung 22, 355-373.Google Scholar
  21. Gerlach, Knut et al., 1995, ‘Erfolgsbeteiligung und Partizipation: Mitwirkung von Mitarbeitern und betriebliche Leistungsfähigkeit’, Abschlußbericht, Universität Hannover, mimeo.Google Scholar
  22. Hart, Robert A. and Olaf Hübler, 1991, ‘Are Profit Shares and Wages Substitute or Complementary Forms of Compensation?’, KYKLOS 44, 221-231.Google Scholar
  23. Heppt, Ehrenfried, 1995, ‘Betriebliche Altersversorgung 1990 im früheren Bundesgebiet’, Wirtschaft und Statistik, No. 2, 155-165.Google Scholar
  24. Infratest Sozialforschung, 1995, Das Hannoveraner Firmenpanel - Tabellenband,München: Infratest Sozialforschung.Google Scholar
  25. Kaukewitsch, Peter, 1990, ‘Arbeitskosten im Produzierenden Gewerbe 1988’, Wirtschaft und Statistik, No. 7, 466-475 and 287-289.Google Scholar
  26. Kirchhoff, Bruce A., 1994, Entrepreneurship and Dynamic Capitalism, Westport and London: Praeger.Google Scholar
  27. Meyer, Wolfgang, 1994, ‘übertarifliche Bezahlung als Anreizinstrument’, in: Uwe Hochmuth and Joachim Wagner (eds.), Firmenpanelstudien in Deutschland - Konzeptionelle überlegungen und empirische Analysen, Tübingen and Basel: Francke, pp. 219-235.Google Scholar
  28. Meyer, Wolfgang, 1995, ‘Analyse der Bestimmungsfaktoren der “übertariflichen Entlohnung” auf der Basis von Firmendaten’, in Knut Gerlach and Ronald Schettkat (eds.), Determinanten der Lohnbildung - Theoretische und empirische Untersuchungen, Berlin: Ed. Sigma, pp. 50-71.Google Scholar
  29. Niedenhoff, Horst-Udo, 1994, Die Kosten der Anwendung des Betriebsverfassungsgesetzes, Köln: Deutscher Instituts-Verlag.Google Scholar
  30. Oi, Walter Y., 1990, ‘Employment Relations in Dual Labor Markets (”It's nice work if you can get it”)’, Journal of Labor Economics 9, S125-S149.Google Scholar
  31. Organisation for Economic Co-operation and Development, 1993, Employment Outlook 1993, Paris: OECD.Google Scholar
  32. Projektgruppe “IAB-Betriebspanel”, 1994, Beschäftigungstrends - Informationsdienst für Betriebe Nr. 2/Mai 1994, Nürnberg: Institut für Arbeitsmarkt- und Berufsforschung der Bundesanstalt für Arbeit.Google Scholar
  33. Schasse, Ulrich, 1991, Betriebszugehörigkeitsdauer und Mobilität - Eine empirische Untersuchung zur Stabilität von Beschäftigungsverhältnissen, Frankfurt/New York: Campus.Google Scholar
  34. Schmidt, Elke Maria, 1994, Betriebsgröße, Beschäftigtenentwicklung und Entlohnung, Frankfurt/New York: Campus.Google Scholar
  35. Schnabel, Claus, 1994, Die übertarifliche Bezahlung - Ausmaß, Entwicklung und Bestimmungsgründe, Köln: Deutscher Instituts-Verlag.Google Scholar
  36. Soskice, David and Ronald Schettkat, 1993, ‘West German Labor Market Institutions and East German Transformation’, in Lloyd Ulman, Barry Eichengreen, and William T. Dickens (eds.), Labor and an Integrated Europe, Washington, D.C.: Brookings, pp. 102-127.Google Scholar
  37. Stockmann, Reinhard and René Leicht, 1994, ‘The Pattern of Changes in the Long-Term Development of Establishment Size’, Small Business Economics 6, 451-463.Google Scholar
  38. Wagner, Joachim and Wilhelm Lorenz, 1988, ‘The Earnings Function Under Test’, Economics Letters 27, 95-99.Google Scholar
  39. Wagner, Joachim, 1991, ‘Sektorlohndifferentiale in der Bundesrepublik Deutschland’, Jahrbuch für Sozialwissenschaft 42, 70-102.Google Scholar
  40. Wagner, Joachim, 1992, ‘A Note on the Robust Estimation of Earnings Functions’, Allgemeines Statistisches Archiv 76, 286-294.Google Scholar
  41. Wagner, Joachim, 1994, ‘Job Duration, Firm Size, and Firm Age: Evidence From German Firm Panel Data’, Arbeitsberichte des Fachbereichs Wirtschafts-und Sozialwissenschaften, Universität Lüneburg, Arbeitsbericht Nr. 133 (forthcoming, Review of Industrial Organization).Google Scholar
  42. Wagner, Joachim (1995), ‘Firm Size and Job Creation in Germany’, Small Business Economics 7, 469-474.Google Scholar

Copyright information

© Kluwer Academic Publishers 1997

Authors and Affiliations

  • Joachim Wagner
    • 1
  1. 1.Universität LüneburgLüneburgGermany

Personalised recommendations