The political origin of employment protection: A comparative study of the United States, Germany, and South Korea

Why do countries have different levels of employment protection that make dismissals difficult? The recent comparative political economy literature is divided over whether labor protection is an outcome of class struggles or employers' rational choices. This dissertation provides an alternative explanation focusing on the role of counter-majoritarian political institutions. While theories and empirical evidence do not support the argument that some employers may support employment protection as government regulation, the power-of-labor-resources model is also limited because it does not explain the deviant cases where politically weak labor co-exists with strong employment protection. This study offers an analytical model in which vote-maximizing politicians respond to the popular pressure to establish employment protection that mainly comes from organized labor and/or the rising risk of middle-class job loss. It is argued that even if the popular pressure is strong, political institutions designed to limit the rule by the many---federalism and judicial review---constrain the popular demand for employment protection to become legislation. The empirical chapters examine the United States as a weak-employment protection case, Germany as a strong-employment protection case, and South Korea as a moderately strong-employment protection case. They demonstrate that the American political system where political power is dispersed to different branches and levels of government forestalled the rise of employment protection, while South Korea's highly concentrated political system responded to the public perception of declining job security by maintaining restrictions of layoff. Germany represents a distinct model of federalism where labor legislation is centralized and subnational governments rely on extensive measures of fiscal equalization. In this type of federalism voters can readily attribute the responsibility of providing job security to the central government. Therefore, the German federalism has not provided effective checks on the popular pressure for employment protection.