Minority Representation at Work

Abstract

Recent proposals for a more inclusive capitalism call for labor and minority representation in corporate governance. We examine the joint promise of labor and minority representation in the context of German works councils. The councils are a powerful form of labor representation which grants elected delegates of shop-floor workers co-determination rights (e.g., over work conditions). Since 2001, a quota ensures that elected delegates include delegates of the gender that is in the minority in the workforce. Using detailed survey and administrative data, we find that required minority representation helps the representation of the minority gender on works councils, elevates the effort of works councils, and boosts job satisfaction and well-being of workers, irrespective of their gender. At the establishment level, we find that required minority representation reduces worker turnover and increases investment and productivity. Our findings suggest that laws ensuring labor and minority representation in corporate governance can work (i.e., benefit workers without necessarily hurting employers). The seemingly beneficial impact of the laws suggests that frictions hamper the fair representation of minorities and efficient cooperation among workers and employers.