Company Closures and the Erosion of the Political Centre: Evidence from Germany
| DOI | http://doi.org/10.1111/bjir.12292 |
| Author | Nils Braakmann |
| Published date | 01 December 2018 |
| Date | 01 December 2018 |
British Journal of Industrial Relations doi: 10.1111/bjir.12292
56:4 December 2018 0007–1080 pp. 835–858
Company Closures and the Erosion
of the Political Centre: Evidence
from Germany
Nils Braakmann
Abstract
This article investigates the link between company closures and political
preferencesusing German panel data. I first show that job loss due to a company
closure leads to similar adverse labor market outcomes as those found in other
countries. I then show that men become less likely to identify with political
parties and mainstream partiesin particular, while womenbecome less interested
in politics. Eects arestronger for individuals who see job creation and protection
as a state responsibility and for lower skilled workers, but do not vary with the
routine intensity or oshorability of the former job.
1. Introduction
Motivation
Recent years have seen a deterioration of the support for mainstream parties
and the rise of fringe parties in many Western countries. In the United
Kingdom, the UK Independence Party has increased its vote share from
0.3 per cent of the national vote in the 1997 general election to 12.6 per
cent of the national vote in 2015. At the same time, the combined vote share
of the two largest mainstream parties, Labour and the Conservative Party,
decreased from 73.9 per cent of the national vote to 65.1 per cent in 2015. In
the United States, political fringe movements within the mainstream parties,
most prominently the Tea Party movement in the Republican Party, became
more prominent, culminating in Donald Trump becoming US president on a
clear anti-establishment ticket in 2016. In Germany, the vote share of the two
largest parties, the Social Democrats and the Christian Democrats, dropped
from 76 per cent in 1998 to 61.8 per cent in 2009. At the same time, fringe
parties on the extreme left (Die Linke and its predecessor parties) and right
Nils Braakmann is at the Business School, Economics group, NewcastleUniversity
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2017 John Wiley& Sons Ltd.
836 British Journal of Industrial Relations
(Nationaldemokratische Partei Deutschlands (NPD), Deutsche Volksunion
(DVU), Republikaner and more recently the Alternative fuer Deutschland
(AfD)) have increasedtheir respective vote shares from 5.1 and 3.3 per cent in
1998 to 8.6 and 6 per cent in 2013.
Following Donald Trump’s unexpected success in the ‘Rust Belt’ states
of the American Mid-West and the high vote shares for Brexit in former
industrial towns in the United Kingdom, a particular public focushas been on
the role that fundamental changes to the labour market, in particular, plant
closures and the moving of industries abroad, have played for what is often
perceived as an anti-establishment vote. In this article, I look at this question
using German company closures as a source of plausibly exogenous source of
job losses and individual-level panel data from the German Socio-Economic
panel.
Job Losses, Labour Market Outcomes and Recent Changes in the Labour
Market
A large literature has studied the consequences of involuntary job losses on
individuals’ outcomes such as earnings or health (e.g. Black et al. 2015; Couch
and Placzek 2010; Jacobson et al. 1993; Kodrzycki2007; Ruhm 1991; Schoeni
and Dardia 2003; Stevens 1997; Topel 1990; Sullivan and von Wachter 2009;
Davisand von Wachter 2011; von Wachteret al. 2011). A typical finding is that
aected individuals suer long-lasting and large negative eects in terms of
employment probabilities, earnings or even mortality. Focusingon individuals
who were displaced because their employers closed down, I first show that —
similar to US evidence — earnings and employment opportunities of aected
individuals decline in the years following their displacement. Using the same
methodology as the more recent papers,I find similar declines, in particular in
terms of employment: Men who lose their jobs due to a plant closure initially
have a 31 per cent lower employment probability (34 per cent for women),
which partially recovers over time.
I consider how these negative eects are aected by recent changes in
labour market conditions, namely globalization and technological progress.
The automation of work and the increased use of computers have contributed
to a loss of jobs in which workers mostly engage in routine work, leading
to a polarization of labour markets, i.e. the disappearance of middle-income
jobs and increases in the number of workers employed in either ‘good’ or
‘bad’ jobs (see, e.g., Autor et al. 2003, 2006, 2015 for the United States;
Goos and Manning 2007 for the United Kingdom; Goos et al. 2009, 2014
for a range of OECD countries; Spitz-Oener 2006 and Dustmann et al.
2009 for Germany). Recent evidence also suggests that workers, at least
in the United States, faced considerable adjustments costs to increases in
international trade, leading to wage and employment losses for workers
and local labour markets particularly in manufacturing (see, e.g., Autor
et al. 2013, 2014, 2015; Acemoglu et al. 2016). Both developments suggest
the disappearance of certain types of work, namely work that is easy to
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2017 John Wiley& Sons Ltd.
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