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Labor market policies

The United States and Germany differ in their labor market policies as well as their collective bargaining strategies. In the United States for example, there is a rigid labor market as compared to a flexible labor market of Germany’s. A rigid labor market means that there is no balance between the demand and supply of labor in the economy. Normally, the price does not reflect the patterns of demand and supply. A rigid labor and bargaining power economy results to either a shortage or unsatisfied demand of labor or the opposite of unused or wasted supply. On the other hand, in Germany, collective bargaining and labour markets are flexible. This means that there is a balance between the demand and supply of labor. Equally, it means that the price valued on labor matches the patterns of demand and supply in the market.Additionally, it suggests that there is a healthy collective bargaining principle in place where the value of labor is allocated dependent on the economic times. In the United States, collective bargaining is centralized since it is designated between different employers to negotiate with the unions on the working conditions. In Germany, they employ a decentralized system where bargaining takes place on a work to work basis which gets input from the workers themselves. In Germany, where liberal market economies are employed, vocational training or education is publicly funded by the unions or the government. In contrast, in the United States, coordinated market economies employ a privatized nature of educational or vocational training.As a result, liberal market economies are characterized by lower levels of unemployment but equally post a higher inequality level of labor valuation due to the power of bargaining accorded to all parties. At the same time, there is a higher degree of financialization     towards education but equally coupled with a lower rate of manufacturing. Nevertheless, this labor market is prone to crisis and has more risk associated to it. Workers living in a coordinated labor market suffer from higher unemployment rates, dualism or duplication of duties, lower levels of inequality and financialization, relatively higher levels of manufacturing but still retain a much stable economy.

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