Germany’s protracted crisis may manifest largely at the level of parliamentary politics, but the deeper context for these political ruptures is the transformation of the country’s economy beginning with reunification in the 1990s and accelerating in the mid-2000s with the creation of the eurozone and deregulation of the German labor market. Though the size of Germany’s economic pie grew over the last two decades, it did so at the cost of reordering the class structure, relegating millions of workers to insecure, temporary, and low-paid employment as their only long-term prospect. This has created a new working poor, the existence of which is highly lucrative for capital while also exerting moral pressure on other workers to stay productive and not rock the boat, lest economic turbulence cause the low-wage sector to expand even more.

The institutionalized class struggle eroded particularly in the sphere of collective bargaining, as many companies left the employers’ associations and generally became more aggressive in negotiations and labor disputes. Trade unions for their part refrained from forcing employers back into collective bargaining through strikes. Instead, the unions attempted to shore up their losses and prevent further erosion by clearing the way for company-level deviations from sectoral standards in the mid-1990s. The resulting contracts, which retained corporatist institutions in exchange for significant wage and working conditions concessions by organized labor, allowed business owners to implement further wage reductions particularly in sectors already plagued by low pay. Unions adopted this strategy in order to protect their strongholds in the face of a seemingly unstoppable onslaught. One could even argue that this strategic retreat is part of the reason why German unions in select industries remain so strong to this day despite significant overall losses. Ultimately, however, the decentralization of collective bargaining created large pools of low-wage labor complementing and reinforcing the country’s core productive industries, while lowering overall wage costs. The dynamic also causes friction between workers across industries and sectors and weakens organized labor’s hand over the long term, as capital successfully carves out zones of heightened exploitation largely outside of the unions’ organizational reach that in turn ensure the stability of the core economy.

[...] precarity gives German companies a means with which to reconfigure their cost structure. Many now operate a dualized employment structure consisting of a core of permanent employees reinforced by a periphery of precarious workers. This structure gives companies two significant advantages.19 Firstly, they can react more flexibly to the demands of a volatile world economy, since the “dismissal costs” of precarious workers are fairly marginal compared to permanent staff. Secondly, they produce conflicting interests within the workforce and therefore in the trade union movement. Precarious workers’ top priority is to enter the permanent workforce. In order to do so, they are often willing to accept relative wage restraint. Permanent workers, however, are interested in improving their working conditions and wages, and sometimes even accept bosses’ arguments justifying precarious employment to protect their more secure jobs. Finally, precarious work is deliberately used as a means of internal social discipline. Precarity constitutes a new form of the “reserve army” described by Marx in the first volume of Capital.20 In the past the unemployed filled the ranks of the capitalist reserve army, exerting an external structural pressure on wages and labor relations. Today, precarious employment internalizes this function within the firm. Though they may work inside the company, temporary workers always have one foot in unemployment. Their mere presence serves as a continual reminder to permanent staff that their futures may very well also become less secure should the company fail to meet its earnings targets.