Socially-Optimal Level of Co-Determination of Labor and the European Directive on Workers' Councils

13 Pages Posted: 19 Apr 2012

Date Written: April 18, 2012

Abstract

In the past employee interest and influence have been presented mainly through trade unions and collective bargaining (economic regulation). Socially optimal levels of co-determination may be prevented by the existence of high fixed costs of establishing councils. Job security can resolve the adverse selection problem and raise economic efficiency i.e. worker or agent will work efficiently or socially optimal. Co-determination reinforces well functioning social democracy, recent studies discover that consultation and participation increase than innovativeness of the company. The US and EU approach to employment are different under common and civil law, that differ in many ways. The US employment-at-will is liberal individualist model, laissez-faire approach and any regulation is considered to be potentially welfare reducing. And mandatory employment rights model; EU model that seeks it's rationale in the previously mentioned market failures (agency problems, hold-up problems) caused by asymmetric information and incomplete employment contracts, and the presence of monopolies, monopsonies that reduce workers mobility. Harmonious relations between "social partners" – labor and management are the aim of the European Work Council directive. European law continues to focus on workers and shareholders interest.

Keywords: Asymmetric informations, European model, Employee councils, Co-determination, European Work Council Directive

JEL Classification: M50

Suggested Citation

Josheski, Dushko, Socially-Optimal Level of Co-Determination of Labor and the European Directive on Workers' Councils (April 18, 2012). Available at SSRN: https://ssrn.com/abstract=2042147 or http://dx.doi.org/10.2139/ssrn.2042147

Dushko Josheski (Contact Author)

University Goce Delcev ( email )

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Macedonia
+389 32 550 000 (Phone)
+389 32 390 700 (Fax)

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